In simple and crude terms: It's a "mood thermometer" that tells you if the market is now excited to the point of exploding or fearful to the point of slashing wrists.

Most veteran investors open their eyes every day and the first thing they do is glance at the RSI. Below 30, they desperately buy; above 70, they start selling; in the middle, they just sip tea and watch the show. The awesome part is that it can smell the scent of a reversal in advance, much better than staring at K-lines and straining your eyes.

Who invented this thing?

In 1978, a guy named Wilder created it. This person originally built houses, then got badly beaten in stock trading, so he simply turned all his loss lessons into formulas, and RSI is the most popular one among them. Now, global traders, crypto all-in gamblers, and A-share old wizards all use his set.

How is RSI calculated?

Take the past 14 K-lines (can be 14 days, 14 hours, 14 minutes, whatever you like), add up all the upward movements and divide by all the downward movements, then apply a simple formula to spit out a number between 0-100.

The larger the number, the fiercer the buying; the smaller the number, the harsher the selling. That's it, simple.

Let me sort out all the classic uses for you:

  • Below 30 oversold → Floor price, others sell you buy, basically stable.
  • Above 70 overbought → Ceiling, others chase high you run, high probability of profit.
  • For short-term coin trading, even harsher, change oversold overbought lines to 20 and 80, false signals reduced by half.
  • Adjust period: For more sensitivity, change to 7-day RSI; for stability, 21-day RSI, try a few times to find the feel.

The most awesome play: Divergence

This is the soul of RSI!
 

Price makes new low, but RSI doesn't → Bullish divergence, someone is secretly accumulating below, rebound is coming!

  • Price makes new high, but RSI doesn't → Bearish divergence, the takers above are running out, smash down is coming!
Note: In bull or bear markets, divergence can fool you multiple times in a row, so it's most accurate in oscillating markets; in one-sided markets, honestly follow the trend, don't fight it.

Finally, a word of truth

RSI is not a god, using it alone will still get you harvested.

Smart people use it together with MACD, Bollinger Bands, volume, etc. When several indicators shout "run" you run, "get on board" you charge, hit rate directly takes off.

One-sentence summary:

RSI is the magnifying glass of market sentiment,

Below 30 boldly greedy, above 70 learn to fear, divergence appears wake up quickly.

If used well, you are the one who runs away early and boards early;

If not? Then continue being the bag holder.

Which one to choose, up to you.