What is RSI? The relative strength index explained simply

By the Ezetrad team · Updated 13 November 2026 · 2 min read

RSI is one of the most popular chart indicators. It squeezes the recent speed of price moves into one number between 0 and 100.

The idea

The relative strength index (RSI), created by J. Welles Wilder in 1978, compares the size of recent up-days with recent down-days, usually over the last 14 periods. If most of the recent movement was up, RSI is high. If most was down, RSI is low.

How it is calculated

1. For each of the last 14 periods, note the gain (if the close went up) or the loss (if it went down).
2. Average the gains and average the losses, using Wilder's smoothing so recent periods count a bit more.
3. Divide the average gain by the average loss. That is the relative strength, RS.
4. RSI = 100 − 100 ÷ (1 + RS).

If there were only gains, RSI is 100. Only losses: 0. Equal gains and losses: 50.

Overbought and oversold

By convention, an RSI above 70 is called overbought and below 30 oversold. These words are misleading: they only mean the price moved fast in one direction. A coin can stay "oversold" while it keeps falling for weeks, and a strong trend can keep RSI above 70 for a long time.

How traders use it

• Bounce watching: some traders wait for RSI to drop below 30 and then rise back above it before considering a buy. Our scanner calls this an "oversold bounce".
• Trend confirmation: RSI staying above 50 suggests buyers are in control; below 50, sellers.
• Divergence: the price makes a new high but RSI does not. Some read this as fading momentum.

Limits

RSI is calculated only from past prices, so it cannot know about news, hacks or listings. It works differently on different coins and timeframes. Treat it as one description of recent movement, never as a buy or sell signal on its own.

This guide is educational and is not financial advice.

Keep learning

• How to read candlestick charts
• Stop loss and take profit
• Position sizing and the 1% rule
• Moving averages explained