Relative Strength Index (RSI) is one of the most popular momentum indicators in technical analysis. In simple terms: it measures whether an asset is being overbought or oversold by comparing recent price gains against losses. Think of it as a speedometer for price momentum—when it’s high (above 70), the asset is moving up fast; when it’s low (below 30), it’s moving down hard.
The indicator was created back in 1978 by J. Welles Wilder, an engineer-turned-trader who wanted a reliable tool to spot price patterns. He packaged his research into mathematical formulas that traders could actually use—and RSI became one of his most influential creations.
How RSI Actually Works
The Default Setup:
RSI measures price movement over 14 periods (14 days on daily charts, 14 hours on hourly charts, etc.)
It divides average gains by average losses, then scales everything between 0-100
Simple: the higher the number, the stronger the upward momentum
The Key Levels:
RSI > 70 = Overbought territory (sellers may jump in soon)
RSI < 30 = Oversold territory (buyers may accumulate soon)
RSI 30-70 = Normal, less actionable
Pro Tip: You can adjust the period setting (try 7 days for faster signals, 21 days for slower ones) or change the thresholds (20/80 instead of 30/70) to reduce false signals in choppy markets.
RSI Divergences: The Real Money Maker
Here’s where RSI gets interesting—divergences. These happen when price and RSI move in opposite directions:
Bullish Divergence:
Price keeps dropping (lower lows)
But RSI starts rising (higher lows)
Signal: Momentum is shifting—a bounce might be coming
Bearish Divergence:
Price keeps rising (higher highs)
But RSI starts falling (lower highs)
Signal: The uptrend is losing steam—a pullback might be brewing
Catch: Divergences suck in strong trending markets. You might see dozens of bullish divergences during a bear run before the actual bottom. They work best in choppy, sideways markets.
How Pro Traders Use RSI
Spot oversold bounces: When RSI dips below 30, it’s often a good time to hunt for entries
Confirm breakouts: If price breaks a resistance level AND RSI crosses above 70, the signal is stronger
Find reversal zones: Divergences can tip you off to trend changes, but don’t bet your house on them
Avoid fakeouts: RSI alone triggers lots of false signals—always combine it with other indicators (moving averages, support/resistance, volume)
The Bottom Line
RSI is powerful but not foolproof. Like any single indicator, it’s prone to lying to you—especially in volatile markets. Use it as part of a toolkit, not as your only reason to trade. Layer it with price action, other indicators, and risk management. That’s how you actually make money.
RSIインジケーター:トレーダーのための市場転換を見極めるガイド
What is RSI and Why Should You Care?
Relative Strength Index (RSI) is one of the most popular momentum indicators in technical analysis. In simple terms: it measures whether an asset is being overbought or oversold by comparing recent price gains against losses. Think of it as a speedometer for price momentum—when it’s high (above 70), the asset is moving up fast; when it’s low (below 30), it’s moving down hard.
The indicator was created back in 1978 by J. Welles Wilder, an engineer-turned-trader who wanted a reliable tool to spot price patterns. He packaged his research into mathematical formulas that traders could actually use—and RSI became one of his most influential creations.
How RSI Actually Works
The Default Setup:
The Key Levels:
Pro Tip: You can adjust the period setting (try 7 days for faster signals, 21 days for slower ones) or change the thresholds (20/80 instead of 30/70) to reduce false signals in choppy markets.
RSI Divergences: The Real Money Maker
Here’s where RSI gets interesting—divergences. These happen when price and RSI move in opposite directions:
Bullish Divergence:
Bearish Divergence:
Catch: Divergences suck in strong trending markets. You might see dozens of bullish divergences during a bear run before the actual bottom. They work best in choppy, sideways markets.
How Pro Traders Use RSI
The Bottom Line
RSI is powerful but not foolproof. Like any single indicator, it’s prone to lying to you—especially in volatile markets. Use it as part of a toolkit, not as your only reason to trade. Layer it with price action, other indicators, and risk management. That’s how you actually make money.