What is RSI in crypto trading?

RSI in crypto stands for the Relative Strength Index, a momentum indicator that compares a coin's recent gains with its recent losses. It is drawn as a line from 0 to 100 under a price chart and describes past price moves, not where a price is going.

What does RSI mean in crypto?

RSI answers one question: over the last set of periods, have up moves or down moves been bigger? A reading near 100 means gains have dominated. A reading near 0 means losses have dominated. A reading around 50 means they have roughly balanced.

The traditional overbought and oversold levels of 70 and 30, and why a coin can stay beyond them for a long time, are covered in our guide to overbought and oversold in crypto. This guide looks at the settings behind the line and the other ways traders read it.

How is the RSI indicator calculated?

StockCharts explains the steps. First, the average gain and average loss over the past 14 periods are calculated as simple averages. After that, each new average is smoothed by taking 13 parts of the previous average and one part of the latest move. RS is the average gain divided by the average loss, and RSI equals 100 minus 100 divided by one plus RS.

Because of this smoothing, RSI values can differ slightly between charting sites. Each period is one candle, so on a daily chart 14 periods means 14 days, and on an hourly chart 14 hours, as explained in how to read a crypto chart. StockCharts notes that a shorter setting such as 10 reaches extremes more often, and so does a highly volatile asset.

What is stoch RSI in crypto?

Stoch RSI, or StochRSI, is an indicator built on top of RSI. Tushar Chande and Stanley Kroll described it in their 1994 book The New Technical Trader. It measures where today's RSI sits within its own high and low range over a set period, giving a value from 0 to 1. StockCharts treats readings above 0.80 as overbought and below 0.20 as oversold.

Chande and Kroll created it because plain RSI can spend long stretches between 20 and 80 without reaching an extreme. The result is much more sensitive. StockCharts warns it produces many signals, including more false ones, and that it sits two steps away from the actual price.

How do traders read RSI beyond 70 and 30?

Traders watch a few other patterns:

• Divergence. Price makes a new high or low that RSI does not match. StockCharts notes divergences are less reliable in strong trends.
• Failure swings. RSI drops below 30, bounces, pulls back without going under 30 again, then breaks its earlier high. The bearish version mirrors this above 70.
• Trend ranges. Fidelity observes that in uptrends RSI tends to hold between about 40 and 90, and in downtrends between about 10 and 60.

Both StockCharts and Fidelity suggest using RSI with other tools rather than alone, and it says nothing about a project's fundamentals.