What is RSI and How to Use It for Trading

RSI (Relative Strength Index) measures the speed and magnitude of price changes on a scale from 0 to 100. Developed by J. Welles Wilder in 1978, it remains one of the most widely used momentum indicators in trading.

How RSI Works

RSI compares the average gain to the average loss over a 14-period window (the standard setting). When gains outpace losses, RSI moves higher. When losses dominate, RSI drops.

The formula produces a number between 0 and 100: - Above 70 — the asset is considered overbought - Below 30 — the asset is considered oversold - Between 40-60 — neutral territory

What Overbought and Oversold Actually Mean

A common mistake is treating RSI 70+ as an automatic sell signal. In strong uptrends, assets can stay overbought for weeks. Similarly, RSI below 30 doesn't guarantee a bounce — in a downtrend, an asset can remain oversold for extended periods.

The key is context: - RSI 70+ at resistance = stronger sell signal - RSI 30- at support = stronger buy signal - RSI 70+ in a strong uptrend with volume = momentum, not necessarily a top

RSI Divergence

One of the most powerful RSI signals is divergence — when price makes a new high but RSI makes a lower high (bearish divergence), or price makes a new low but RSI makes a higher low (bullish divergence). This often precedes reversals.

Using RSI with Other Indicators

RSI works best when combined with: - Support/Resistance levels — RSI extremes at key price levels are more significant - Volume — high volume confirms the signal; low volume weakens it - MACD — when both RSI and MACD agree, confidence increases - Trend direction — RSI oversold in an uptrend = potential buy; RSI oversold in a downtrend = potential trap

How AiTradely Uses RSI

AiTradely pre-calculates RSI for all 42 assets on your watchlist and feeds it directly to the AI analyst alongside support/resistance levels, volume, correlations, and news. When you ask "how's Bitcoin looking?", the AI already knows the RSI, what it means in context, and whether it conflicts with other indicators — no manual lookup required.

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RSI, MACD, support/resistance, correlations, and news — already loaded.