How to Read RSI: What 70 and 30 Mean and What Real Data Says About Overbought

What RSI measures: the share of gains

The RSI (Relative Strength Index) compares how much the close rose and how much it fell over recent bars and expresses the result as a number from 0 to 100. The formula is RSI = 100 − 100/(1+RS), where RS is the average gain divided by the average loss. Rearranged, this becomes RSI = 100 × average gain ÷ (average gain + average loss). In other words, an RSI of 70 means that 70% of the average recent movement was to the upside. It uses only closes, not highs or lows.

The calculation, step by step, with Wilder's smoothing

J. Welles Wilder introduced the RSI in a 1978 book, and the averages are taken the way he did it (Wilder's smoothing, also called RMA). TradingView's default RSI(14) and this site's RSI tools use the same calculation. Only the first average is a simple average; after that, the previous average gets a weight of 13 and the new value a weight of 1. This is an exponential average with α = 1/14, the same weighting as an EMA with a period of 27. So RSI(14) keeps a faint memory of a longer past than its name suggests, and its value differs slightly depending on where the calculation started.

• Gain = how much the close rose from the previous bar (0 if it fell)
• Loss = how much the close fell from the previous bar (0 if it rose)
• First average = the simple average of the first 14 values
• Each later average = (previous average × 13 + current value) ÷ 14

70, 30 and the 50 line

Wilder treated readings above 70 as overbought and below 30 as oversold, and most charts still draw these two lines by default. 50 is the point where the average gain equals the average loss, so an RSI above 50 means recent gains were larger than recent losses. That is why some people use the 50 line to gauge the direction of the move, and in markets with large swings some use 80 and 20 as the thresholds instead. Overbought and oversold are just names attached to reference lines; they say nothing about the direction ahead.

In a strong trend, RSI stays above 70 for a long time

In an uptrend that keeps pausing briefly and then climbing again, the average gain stays larger than the average loss. The RSI then stays above 70 for long stretches, and even on pullbacks it tends to turn back up from the 60s. In the figure below, price rose about 31% further after the RSI first went above 70. Anyone who read that move above 70 as a sign of an imminent fall would have been out of step with most of the rise that followed. Being above 70 is a summary saying the upward push has been strong so far, not a verdict that it is exhausted.

In a range, RSI moves between 30 and 70

When price moves up and down within a set range, the RSI also travels between 30 and 70, rising near the top of the range and falling near the bottom. In stretches like this, reading the area around 70 as a top and the area around 30 as a bottom appears to work well. The problem is that the RSI does not tell you when the range will break. If price breaks out of the range to the upside, the RSI can stay above 70 for a long time, as in the previous figure, and the reading that worked inside the range goes most badly wrong (see the article on sideways markets).

Measured: what actually happened after overbought readings

Measured on the daily bars of 10 coins on Binance (each from its Binance listing date to September 2026, 29,946 bars in all), the share of bars with RSI(14) above 70 whose close was higher 20 bars later was 58.0%, above the 50.4% baseline measured over all bars. The median, at +3.52%, was also larger than the baseline's +0.15%, and after bars below 30 the share was 56.3%, also above the baseline. For BTC daily bars alone, the share after the 369 bars above 70 was 71.8% (baseline 53.7%). In this period, overbought readings marked stretches where a strong move carried on rather than foreshadowing a decline.

• Baseline (all bars, 20 bars later): up 50.4%, median +0.15%
• 2,294 bars with RSI above 70: 58.0%, +3.52%
• 577 bars where RSI dropped from above 70 to below it: 56.3%, +2.75%
• 1,087 bars with RSI below 30: 56.3%, +2.24%

Bar length, divergence and tools

The 14 in RSI(14) is a number of bars, not days. On 1-minute bars it covers 14 minutes and on daily bars two weeks, so the same reading of 70 contains completely different spans of time (see the article on timeframes). RSI Radar shows the 1-minute RSI(14) of 20 coins on Binance, so its values can swing between 30 and 70 within minutes. When price and RSI disagree, for example when price makes higher highs while the RSI makes lower highs, it is called a divergence; this is covered separately in the divergence article in Part 6. The RSI Divergence Finder detects these and draws them on the chart as lines.

What these numbers do not say

The measurements above are a record of one period, not a rule. Bars with RSI above 70 come in runs during uptrends, so the 2,294 are not independent cases, and because coins rose sharply over this period, even the average 20-bar return across all bars (+4.62%) is positive. Changing the bar length and the horizon also changes the gap. On BTC 4-hour bars, the share higher after bars above 70 was 53.1% 6 bars (one day) later, almost the same as the 52.0% baseline, and 58.2% (baseline 52.8%) 30 bars (5 days) later. All that can be said here is that, in this data, 'overbought means a fall is coming' was not confirmed. How to use the moments RSI crosses 70 or 30 in trading is not something this article can decide.