Recently, someone asked me what RSI actually means. In fact, this is a question many new traders encounter. RSI in Chinese is called the Relative Strength Index, and it is one of the most commonly used momentum oscillators in technical analysis, helping traders determine whether an asset is overbought or oversold.

Simply put, RSI is a tool used to measure the speed and strength of price movements. It is expressed as a number between 0 and 100. When RSI exceeds 70, it usually indicates that the asset may be overbought, and a price correction might occur; when RSI drops below 30, it suggests the asset may be oversold, potentially signaling a rebound opportunity. This is the core use of RSI.

Many people ask how RSI is calculated. Actually, you don't need to do the math yourself. Most trading platforms have this indicator built-in, and the system automatically calculates the average gains and losses, then converts them into a value between 0 and 100 using a formula. You just need to know how to read it.

In practical trading, the application of RSI is quite straightforward. When you see RSI above 70, it might be time to consider selling or at least waiting, because the asset may have already risen too high. Conversely, if RSI is below 30, it’s often a good buy signal, as the price might be undervalued. Another technique is divergence, which occurs when the price and RSI move in opposite directions, potentially indicating a trend reversal.

However, I want to say that using RSI alone is not enough. My personal experience is that combining it with other indicators yields the best results. For example, combining Bollinger Bands—if RSI shows oversold conditions and the price touches the lower band, that’s a strong buy signal. Or pairing it with moving averages (SMA or EMA) to confirm trend direction; such combined signals tend to be more reliable.

In short, RSI helps you find better entry and exit points in the cryptocurrency market. But remember, no single indicator is perfect. The best approach is to use multiple indicators for confirmation, so you can make more informed trading decisions. If you want to learn more advanced technical analysis techniques, I will share more practical methods later.