What is RSI? The overbought/oversold indicator explained

The relative strength index is one of the most widely used momentum oscillators in crypto trading, but most traders misread what it actually measures. This guide breaks down the RSI formula, explains how overbought and oversold signals work in practice, and covers the mistakes that turn a useful indicator into a losing strategy. Summary RSI is a momentum oscillator that measures the speed and magnitude of recent price changes on a scale of 0 to 100, with readings above 70 considered overbought and below 30 considered oversold. The standard RSI calculation uses 14 periods and compares average gains to average losses, producing a ratio that reflects buying or selling pressure rather than absolute price direction. Blindly selling when RSI hits 70 or buying when it hits 30 is one of the most common trading mistakes, because strong trends can keep RSI elevated or depressed for extended periods. RSI divergence, where price makes a new high or low but RSI does not, can signal weakening momentum, though false divergence signals are frequent in volatile crypto markets. Pairing RSI with trend context, volume confirmation, and appropriate timeframes turns it from a standalone guessing tool in...