I have some people asking me about RSI, so let me try to explain from my perspective.

RSI, or Relative Strength Index, is actually a pretty simple concept. We use it to see if an asset is overbought or oversold recently. It moves between 0 and 100 and measures the recent momentum of the price. Most traders see the 30 and 70 levels as critical points — when it exceeds 70, a correction is expected; when it drops below 30, an upward move is anticipated.

But the interesting part starts here. RSI doesn’t always move in the same direction as the price, and this divergence can give us important signals. When negative divergence occurs, the price makes a new high but RSI stays at a lower level. This indicates that a price decline could be on the horizon.

On the other hand, positive RSI divergence is the opposite. The price makes a new low, but RSI remains at a higher level. This scenario suggests potential upward movement, and many traders see it as a strong signal.

Of course, there’s an important point here — RSI divergence or any divergence alone isn’t enough. You need to consider market conditions, other technical indicators, formations, and patterns. Relying on a single indicator is risky. For a more reliable analysis, you should combine RSI with other tools like MACD, Stochastic, and moving averages.

Detecting and correctly interpreting these divergences is a skill that develops over time. Practice, analyze charts, observe how it behaves under different market conditions. You can test these patterns on various assets on Gate and develop your own strategy.