Indicators · 6 min read
RSI explained
The Relative Strength Index turns the balance of recent gains and losses into a single number between 0 and 100. It is one of the most popular oscillators and one of the most misunderstood.
What it measures
RSI compares the average size of up-moves with the average size of down-moves over a window, usually 14 candles. If recent gains have been much larger than recent losses, RSI is high; if losses dominated, it is low; if they balanced, it sits near 50.
It does not measure strength against other assets, despite the name, and it does not measure how far price is from any “fair” value.
Live chart · Binance spot data. Drag to pan.
The calculation in words
Split each candle’s change into a gain (if it closed higher) or a loss (if lower). Smooth the gains and the losses with Wilder’s average, which is similar to an EMA. Divide the average gain by the average loss to get RS, then rescale: RSI = 100 − 100 ÷ (1 + RS).
70 and 30 are conventions
Readings above 70 are often called “overbought” and below 30 “oversold”. Those labels are shorthand for “gains have strongly dominated recently”, not predictions. In a persistent trend RSI can stay above 70 for a long time while price keeps rising.
You can move the levels in the indicator settings. Some analysts use 80/20 on volatile symbols or watch the 50 line as a simple “more up than down” marker.
Divergence
When price makes a higher high but RSI makes a lower high, the move is said to diverge: price went further, but with less momentum behind it. The reverse at lows is also possible. Divergence describes a change in pace; it can last a long time, and it does not require price to reverse.
The RSI divergence study finds a real example in recent history and marks it with lines on both panes.
Velqorena articles explain how tools work using past price data. They are not investment advice and do not suggest any trade.