How to Leverage RSI (Relative Strength Index) for Trade Alerts

Understanding the Simple Moving Average (SMA)

The Relative Strength Index (RSI) is a momentum oscillator developed by J. Welles Wilder. It measures the speed and magnitude of price changes to evaluate whether an asset is overbought or oversold.

RSI values range from 0 to 100. By default, a 14-period setting is used, which analyzes the average gains and losses over that period. The RSI doesn't just show whether price is high or low — it gives insight into how strong or weak recent momentum is.

In crypto trading, RSI is especially valuable because it helps:

• Identify when assets are potentially about to reverse
• Spot weakening trends before price reacts
• Time entries during overextensions

Overbought and Oversold Levels Explained

• Overbought (above 70): Suggests a crypto asset may be overextended to the upside and could correct. It doesn’t mean price will fall immediately but signals caution.
• Oversold (below 30): Indicates an asset may be undervalued or oversold, a potential buy zone if momentum starts shifting upward.

Some traders adjust these levels to 80/20 for more volatile assets, especially in crypto markets where price swings are more extreme.

How to Use RSI in Crypto Trading

Entry Timing

Traders often enter long positions when RSI dips below 30 and starts rising, or exit when RSI exceeds 70 and begins to decline. These are signs of potential exhaustion and reversal.

Trend Confirmation

In trending markets, RSI can stay in overbought/oversold zones for extended periods. For example:

• In a strong uptrend, RSI may hover between 40–80
• In a downtrend, RSI may stay between 20–60

This behavior helps traders confirm whether a pullback is temporary or a trend change.

RSI Divergence

When price makes a new high, but RSI doesn’t (or makes a lower high), it’s called bearish divergence. It can signal weakening bullish momentum.

The opposite, bullish divergence, occurs when price makes a lower low but RSI forms a higher low.

Powerful RSI Signals to Watch

• Classic Reversal Signals: RSI entering oversold territory (<30), then climbing above 30 again.
• Breakout Confirmation: Use RSI to confirm price breaking resistance or support — if momentum supports the move.
• Swing Rejections: RSI drops below 30, rebounds, and then forms a higher low above 30 — a potential bullish signal.

These signals are most reliable when combined with price action or other indicators like SMA or MACD.

Best Practices When Using RSI

• Use RSI with other indicators or support/resistance levels for confirmation.
• Combine with multi-timeframe analysis: e.g., confirm a 1h signal with a 4h or daily trend.
• Don't act on RSI alone — it's a guide, not a standalone signal.
• Backtest RSI settings and signals on the specific crypto assets you trade.

How to Automate RSI Alerts with Phalerta

Manually tracking RSI across multiple coins and timeframes is time-consuming. With Phalerta, you can set smart RSI alerts so you're notified instantly when market conditions match your strategy.

What You Can Do with RSI Alerts in Phalerta:

• Customize RSI length (default is 14, but you can change it)
• Set overbought/oversold thresholds (e.g., 70/30 or 80/20)
• Choose specific timeframes (1h, 4h, daily)
• Get real-time alerts via Telegram, Discord, Email, or in-app

Example: You’re monitoring ETH on the 4h chart. You create an alert to notify you when RSI drops below 30 and then re-enters above it. Phalerta triggers your alert instantly so you can evaluate a long setup.

Phalerta simplifies your workflow and lets you focus on execution instead of monitoring.