Cryptoracle Data Analysis Team

A relative strength indicator that measures the intensity of price increases and decreases over a specific period. As a method to determine the critical point of unilateral price movement, RSI serves as a criterion for stock trading signals.

Default parameter: Commonly uses a 14-day period, which can also be adjusted according to trading styles (e.g., a short-term 7-day period or a long-term 21-day period).

When RSI approaches 0 and up ≪ down: The downward force of the stock price over a recent period far exceeds the upward force. However, if it is too low (typically < 30), it may indicate an "oversold" condition. When RSI is less than 20, an oversold signal occurs—selling pressure is excessively high and likely to normalize in the future, suggesting the stock price may rise. Investors can go long at this time and sell after the price increases.

When RSI approaches 100 and up ≫ down: The upward momentum of the stock price far exceeds the downward momentum, with the market in an extremely optimistic/strong bullish state. However, if it is too high (typically > 70), it may indicate an "overbought" condition. When RSI is greater than 80, an overbought signal occurs—buying pressure is excessively high and likely to decrease in the future, suggesting the stock price may fall. Investors can sell at this time and buy back after the price drops to earn the price difference. RSI = 50 (where up = down) is set as the "central line," indicating that buying and selling forces are equal.

RSI Overbought/Oversold Strategy Logic

1.

The time span N is a critical factor for RSI values. A larger N (long-term RSI) has stronger trend awareness and relatively smaller fluctuations, acting as a slow line; a smaller N (short-term RSI) is more sensitive to price changes with larger fluctuations, acting as a fast line. Therefore, compare the fast line with the slow line:

2.1 When the short-term RSI line crosses above the long-term RSI line, it is a bullish market. Recent buying pressure is strong, and upward momentum is significant, releasing a strong buy signal known as the "Golden Cross."

2.2 When the short-term RSI line breaks below the long-term RSI line, it is a bearish market. Recent selling pressure is strong, and downward momentum is significant, releasing a strong sell signal known as the "Death Cross."

RSI is a momentum indicator. When prices make new highs/lows but RSI does not follow, it implies "distorted upward/downward movement." M-shape/W-shape are typically kinetic inflection points before reversals, visualizing divergence signals.

3.1 M-shape structure: Corresponding to bearish divergence (bearish)

• Prices make new highs, but RSI does not.

• RSI trend: Forms an M-shape.

• Signal: Indicates a top—current prices are near a phased peak，likely to stop rising and start falling, with overheating/buying momentum fading.

• Example: A stock rises from 80 to 100, with RSI exceeding 70 and showing divergence, meaning "it may struggle to rise further." Investors can consider taking profits or reducing positions.

• Prices make new lows, but RSI does not.

• RSI trend: Forms a W-shape (the second bottom is higher than the first).

• Signal: Indicates a bottom—current prices are near a phased low, likely to stop falling and start rebounding, with excessive selling/selling pressure weakening.

• Example: A stock falls from 100 to 60, with RSI dropping to 25 without making a new low, and prices stabilizing. This may "indicate a bottom," and investors can consider buying at low prices or establishing positions.