1. What Is RSI?
RSI, the Relative Strength Index, is a momentum indicator that measures the speed and magnitude of price changes. Its values range from 0 to 100.
Interpreting RSI:
0–30 → Oversold; a buying opportunity
30–70 → Neutral zone
70–100 → Overbought; a selling opportunity
Calculation: RSI = 100 - (100 / (1 + RS))
RS = average gain / average loss, usually over 14 days
2. Basic RSI Trading
- Enter at RSI 30 or below → Buy an oversold rebound.
- Enter at RSI 70 or above → Sell an overbought decline.
- In a strong uptrend, overbought conditions can persist up to RSI 80.
- In a strong downtrend, oversold conditions can persist down to RSI 20.
3. RSI Divergence
📊 Strong Reversal Signals
Bullish divergence — Price forms lower lows while RSI forms higher lows → buy signal.
Bearish divergence — Price forms higher highs while RSI forms lower highs → sell signal.
4. RSI with Other Indicators
- RSI + moving average — RSI rebounds from 30 while price is above the EMA = buy in the trend's direction.
- RSI + Bollinger Bands — Lower band + RSI 30 = a buy with two confirmations.
- RSI + MACD — Simultaneous signals from three indicators = a high-probability entry.
5. How AI Uses RSI
AI analyzes dozens of indicators, including RSI, at once to calculate optimal entry and exit timing.