RSI 14: The Tool Every Trader Must Master to Detect Reversal Points

The Relative Strength Index (RSI 14) is one of the most widely used technical indicators in cryptocurrency and financial market analysis. But do we really know how to interpret it correctly?

What does RSI 14 really tell you?

RSI 14 is an oscillator that fluctuates between 0 and 100, designed to measure momentum and the speed of price movements. Essentially, it shows you whether an asset has been overbought or oversold over the last 14 periods (whether days, hours, or candles, depending on your timeframe).

The key is to identify three critical zones:

Overbought zone (above 70): When RSI rises above 70, it indicates that the asset has experienced massive buying. In theory, this suggests that the price could be ready for a correction or pullback. However, in strong bullish markets, RSI can remain in this zone for extended periods, so it’s not an automatic reversal signal.

Oversold zone (below 30): When RSI falls below 30, it means that selling has been excessive. This can present a potential buying opportunity, as the price might recover quickly. Many traders look for this level to seek bullish entries.

The midline (50): This level acts as a dividing line. When RSI is above 50, the trend tends to be bullish; below 50, downward pressure dominates. It’s an indicator of the overall direction of momentum.

RSI 14 + Other Tools = Better Decisions

Here’s the secret that experienced traders know: RSI 14 works best when combined with other indicators. Moving averages, trend lines, or volume can confirm what RSI is suggesting. Using RSI alone is like navigating without a compass; you can get results, but the risk increases significantly.

For example, if RSI enters oversold territory while a moving average provides support, the likelihood of a bullish rebound strengthens. That’s how a solid technical analysis is built.

The Timeframe Factor

An important detail: RSI 14 behaves differently depending on the timeframe you use. On 4-hour charts, a reading of 75 in RSI can hold for hours. On daily charts, extreme levels tend to revert more quickly. Adapt your strategy to the period you are analyzing.

If you use RSI 14 correctly as part of your technical arsenal, combining it with other indicators and respecting the market context, you will have a powerful tool to identify more precise entry and exit points.

What is your experience with RSI 14? Do you combine it with other indicators or have a specific strategy?