Mastering RSI: A Practical Guide to the Relative Strength Index

1. What is RSI?

The Relative Strength Index (RSI) is a momentum oscillator that measures the speed and change of price movements.

Its values range from 0 to 100, typically used to identify overbought and oversold conditions.

Default RSI Setting: 14 periods

2. How to Read RSI?

RSI > 70 → Overbought
RSI < 30 → Oversold
RSI = 50 → Neutral, market long and short forces are balanced

But please note: RSI overbought ≠ immediate decline, RSI oversold ≠ immediate rise

3. Common RSI Trading Strategies

Strategy 1: Overbought/Oversold Zones

Buy Signal: RSI crosses up from below 30
Sell Signal: RSI crosses down from above 70
Suitable for volatile markets, especially box-shaped oscillations.

Strategy 2: RSI Divergence

Bullish Divergence: Price makes lower lows, RSI makes higher lows → Possible reversal upwards
Bearish Divergence: Price makes higher highs, RSI makes lower highs → Possible reversal downwards
Although divergence signals are uncommon, they are more reliable.

Strategy 3: RSI with Trend Filter

Combining trend judgment is more robust.
For example: in an upward trend, only look for buying opportunities when RSI is below 30, and do not short easily.

4. Practical Tips for Traders

RSI performs best in a volatile market and may fail in a strong unilateral trend
Can be used with indicators such as moving averages and MACD to build a trading system
Use multi-period RSI (such as daily + hourly) to find better trading opportunities
Set RSI alerts to help monitor the market (TradingView and other tools are available)