{"id":37753,"date":"2022-09-05T19:27:52","date_gmt":"2022-09-05T16:27:52","guid":{"rendered":"https:\/\/forklog.com\/en\/?p=37753"},"modified":"2025-08-29T20:50:34","modified_gmt":"2025-08-29T17:50:34","slug":"what-the-rsi-is-for-and-whether-it-suits-cryptocurrencies","status":"publish","type":"post","link":"https:\/\/forklog.com\/en\/what-the-rsi-is-for-and-whether-it-suits-cryptocurrencies\/","title":{"rendered":"What the RSI is for\u2014and whether it suits cryptocurrencies"},"content":{"rendered":"<div class=\"wp-block-text-wrappers-cards single_card\">\n<h2 class=\"card_label\">Key points<\/h2>\n<ul class=\"wp-block-list\">\n<li>The Relative Strength Index (RSI) is a technical-analysis tool that measures the speed and magnitude of an asset\u2019s price moves, including cryptocurrencies.<\/li>\n<li>RSI\u2019s main purpose is to gauge momentum and help identify whether an asset is overbought or oversold.<\/li>\n<li>RSI appears on charts as an oscillator ranging from 0 to 100. Conventionally, readings above 70 indicate overbought conditions, and below 30 oversold.<\/li>\n<\/ul>\n<\/div>\n<div class=\"wp-block-text-wrappers-cards single_card\">\n<h2 class=\"card_label\">Who created the RSI<\/h2>\n<p>The RSI was devised by American mechanical engineer and technical analyst Welles Wilder, who first presented it in his 1978 book, \u201cNew Concepts in Technical Trading Systems\u201d.<\/p>\n<p>Wilder is a <a href=\"https:\/\/www.forbes.com\/2008\/03\/25\/volatility-insurance-bargains-pf-benefits-in_mc_0325investopedia_inl.html\" target=\"_blank\" rel=\"noreferrer noopener\">recognised<\/a> specialist and innovator in price analysis and forecasting. He also created other popular tools, including the Average Directional Movement Index (ADX), Average True Range (ATR) and Parabolic SAR.<\/p>\n<\/div>\n<div class=\"wp-block-text-wrappers-cards single_card\">\n<h2 class=\"card_label\">RSI calculation and settings<\/h2>\n<p>The RSI \u201cweighs\u201d the strength of upward and downward price moves. It is computed as follows:<\/p>\n<p><em>RSI = 100 \u2014 100 \/ (1+RS)<\/em><\/p>\n<p>RS is the <a href=\"https:\/\/forklog.com\/en\/news\/what-is-a-moving-average-and-how-is-it-used-in-crypto\">exponential average<\/a> of the price when the asset rose over the period under review, divided by the exponential average of the price when the asset fell over the same period.<\/p>\n<p>Most modern trading services and exchanges have a built-in RSI with precise customisation for traders\u2019 needs. Many use the default 14-day period. Depending on preference, other common choices include:<\/p>\n<ul class=\"wp-block-list\">\n<li>for intraday trading, a 7\u201311 day time frame;<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>traders operating on a medium-term horizon apply a 14-day period;<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>for long-term trading, a 21\u201330 day period.<\/li>\n<\/ul>\n<p>Initially used on the stock market, it is now applied to cryptocurrencies too, including analysis of bitcoin and other crypto-asset instruments.<\/p>\n<\/div>\n<div class=\"wp-block-text-wrappers-cards single_card\">\n<h2 class=\"card_label\">Using the RSI<\/h2>\n<p>As an oscillator, the RSI lends itself to drawing chart patterns, support and resistance levels, and to spotting overbought or oversold conditions.<\/p>\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"506\" src=\"https:\/\/forklog.com\/wp-content\/uploads\/rsi-fl-2-1024x506.png\" alt=\"What is the RSI indicator and does it suit cryptocurrencies?\" class=\"wp-image-183924\" srcset=\"https:\/\/forklog.com\/wp-content\/uploads\/rsi-fl-2-1024x506.png 1024w, https:\/\/forklog.com\/wp-content\/uploads\/rsi-fl-2-300x148.png 300w, https:\/\/forklog.com\/wp-content\/uploads\/rsi-fl-2-768x380.png 768w, https:\/\/forklog.com\/wp-content\/uploads\/rsi-fl-2-1536x760.png 1536w, https:\/\/forklog.com\/wp-content\/uploads\/rsi-fl-2.png 1834w\" sizes=\"auto, (max-width: 1024px) 100vw, 1024px\" \/><figcaption class=\"wp-element-caption\">Example of RSI on the ETH\/BTC chart. Source: TradingView<\/figcaption><\/figure>\n<p>When the RSI rises, bullish momentum outweighs bearish momentum\u2014typically read as a sign of a bull trend. When the RSI falls, bearish sentiment is assumed to dominate.<\/p>\n<p>The RSI ranges from 0 to 100. Readings above 70 are commonly taken as overbought; below 30 as oversold. In intraday trading the RSI is more sensitive to price changes, so traders often widen the bands to above 80 and below 20.<\/p>\n<\/div>\n<div class=\"wp-block-text-wrappers-cards single_card\">\n<h2 class=\"card_label\">What is divergence<\/h2>\n<p>The RSI is often used to analyse and identify trend reversals. When price and RSI move in opposite directions, the situation is called divergence.<\/p>\n<p>A bearish divergence forms when an asset\u2019s price sets a new local high while the RSI peaks below its previous local high. Price is trending up; the RSI is trending down. Markets read this as a potential turn to a downtrend and fading upside momentum.<\/p>\n<figure class=\"wp-block-image size-large is-resized\"><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/forklog.com\/wp-content\/uploads\/rsi-fl-1-1-1024x506.png\" alt=\"RSI indicator: how to use it and does it suit cryptocurrencies?\" class=\"wp-image-183762\" width=\"820\" height=\"405\" srcset=\"https:\/\/forklog.com\/wp-content\/uploads\/rsi-fl-1-1-1024x506.png 1024w, https:\/\/forklog.com\/wp-content\/uploads\/rsi-fl-1-1-300x148.png 300w, https:\/\/forklog.com\/wp-content\/uploads\/rsi-fl-1-1-768x380.png 768w, https:\/\/forklog.com\/wp-content\/uploads\/rsi-fl-1-1-1536x760.png 1536w, https:\/\/forklog.com\/wp-content\/uploads\/rsi-fl-1-1.png 1834w\" sizes=\"auto, (max-width: 820px) 100vw, 820px\" \/><figcaption class=\"wp-element-caption\">\u201cBullish convergence\u201d on the daily BTC\/USD chart in October\u2013November 2021. Source: TradingView<\/figcaption><\/figure>\n<p>Conversely, a bullish divergence means the asset\u2019s price is trending down while the RSI is rising. Markets read this as a possible shift to an uptrend and a waning of downside momentum.<\/p>\n<\/div>\n<div class=\"wp-block-text-wrappers-cards single_card\">\n<h2 class=\"card_label\">Pros and cons of the RSI<\/h2>\n<p>The RSI is popular for its simple calculation and straightforward interpretation. It has become a go-to tool for analysing longer-term crypto price moves: the higher the averaging period, the fewer false signals the indicator tends to produce. <\/p>\n<p>The indicator is used not only to find \u201cgood\u201d entry and exit points; it also helps avoid trading situations such as <a href=\"https:\/\/forklog.com\/en\/news\/what-is-a-bull-trap-in-trading-and-how-to-avoid-one\">bull and <\/a><a href=\"https:\/\/forklog.com\/en\/news\/what-is-a-bull-trap-in-trading-and-how-to-avoid-one\">bear traps<\/a>.\u00a0<\/p>\n<p>Despite these advantages, the RSI has well-known drawbacks. Chief among them is its lagging nature: by the time the reading appears on the chart, market conditions may already have changed. Like any other technical-analysis tool, the RSI is best used alongside other methods.<\/p>\n<\/div>\n<div class=\"wp-block-text-wrappers-cards single_card\">\n<h2 class=\"card_label\">Further reading<\/h2>\n<p><a href=\"https:\/\/forklog.com\/en\/news\/what-is-the-puell-multiple-and-how-is-it-used\">What is the Puell Multiple and how is it used?<\/a><\/p>\n<p><a href=\"https:\/\/forklog.com\/en\/news\/what-is-on-chain-analysis-and-how-to-use-it\">What is on-chain analysis and how do you use it?<\/a><\/p>\n<p><a href=\"https:\/\/forklog.com\/en\/news\/what-is-a-moving-average-and-how-is-it-used-in-crypto\">What is a moving average and how is it applied to cryptocurrencies?<\/a><\/p>\n<p><a href=\"https:\/\/forklog.com\/en\/news\/what-is-the-hash-ribbons-indicator\">What is the Hash Ribbons indicator?<\/a><\/p>\n<p><a href=\"https:\/\/forklog.com\/en\/news\/what-is-dollar-cost-averaging\">What is dollar-cost averaging?<\/a><\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>What is the RSI? What is it used for in crypto technical analysis? What are its pros and cons? Explained in cards.<\/p>\n","protected":false},"author":1,"featured_media":37754,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"select":"1","news_style_id":"1","cryptorium_level":"3","_short_excerpt_text":"","creation_source":"","_metatest_mainpost_news_update":false,"footnotes":""},"categories":[2113],"tags":[2118,1268,1253],"class_list":["post-37753","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-cryptorium","tag-101-trading-and-investing","tag-on-chain-analysis","tag-technical-analysis"],"aioseo_notices":[],"amp_enabled":true,"views":"102","promo_type":"1","layout_type":"1","short_excerpt":"","is_update":"","_links":{"self":[{"href":"https:\/\/forklog.com\/en\/wp-json\/wp\/v2\/posts\/37753","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forklog.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forklog.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forklog.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/forklog.com\/en\/wp-json\/wp\/v2\/comments?post=37753"}],"version-history":[{"count":1,"href":"https:\/\/forklog.com\/en\/wp-json\/wp\/v2\/posts\/37753\/revisions"}],"predecessor-version":[{"id":37755,"href":"https:\/\/forklog.com\/en\/wp-json\/wp\/v2\/posts\/37753\/revisions\/37755"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/forklog.com\/en\/wp-json\/wp\/v2\/media\/37754"}],"wp:attachment":[{"href":"https:\/\/forklog.com\/en\/wp-json\/wp\/v2\/media?parent=37753"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forklog.com\/en\/wp-json\/wp\/v2\/categories?post=37753"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forklog.com\/en\/wp-json\/wp\/v2\/tags?post=37753"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}