RSI: measuring momentum, and why oversold can stay oversold
After this lesson you can explain how RSI is calculated from average gains and losses, read 70 and 30 in context, spot a divergence, and avoid buying just because a chart looks 'oversold'.
RSI: momentum ka paimana, aur oversold ka oversold rehna
RSI pichle 14 periods ki average gain ko average loss se compare karta hai. RS = average gain / average loss, aur RSI = 100 - 100 / (1 + RS). Agar gains losses se do guna hon to RSI 66.7 hota hai; barabar hon to 50; losses teen guna hon to 25. Pehli reading ke baad averages smooth hoti hain, is liye RSI aahista chalta hai, lekin ek bhaari din bhi usay 10 points hila sakta hai.
70 se ooper ko overbought aur 30 se neeche ko oversold kehte hain, lekin yeh sirf yeh batate hain ke momentum ek taraf jhuka hua hai. Mazboot downtrend mein RSI hafton 30 se neeche reh sakta hai, jaise Zainab ke coin mein hua. Divergence (price lower low, RSI higher low) par nazar rakhein, lekin amal tab karein jab price ka structure bhi toote.
Quran 5:90 jue (maysir) se bachne ka hukm deta hai. Jua sirf casino nahi, woh soch bhi hai ke 'ab to bounce hona hi hai'. RSI ka formula koi wada nahi karta. Saboot, pehle se tay exit aur itna size jitna nuqsan aap bardasht kar sakein, yeh jaiz mehnat hai. In ke baghair behtareen indicator bhi lottery ka ticket ban jata hai.
- RSI average gain aur average loss ka taqabul hai.
- Oversold ka matlab 'ab girna band' nahi; trend mein RSI hafton extreme reh sakta hai.
- Divergence dekh kar intezar karein aur price structure ka confirmation lein.
Poora sabaq neeche English mein hai. Quiz English mein hai; asaan alfaaz mein.
Zainab, a pharmacist in Multan, read that 'RSI below 30 means oversold, time to buy'. When a coin's daily RSI touched 27, she bought Rs 60,000 worth. RSI slid to 22, then 18. Price kept falling for three more weeks. By the time RSI climbed back above 30, her position was down 24%, a loss of Rs 14,400. The indicator had not lied: selling momentum really was extreme. What it never said was that the selling was about to stop.
How RSI is built
The Relative Strength Index compares the size of recent up moves with recent down moves, usually over 14 periods. First, take each period's gain (if the close rose) or loss (if it fell). Then find the average gain and the average loss over 14 periods. RS = average gain / average loss. RSI = 100 - 100 / (1 + RS). The result always sits between 0 and 100.
When average gains are twice average losses, RS is 2 and RSI is 66.7. When they are equal, RSI is 50. When losses are three times gains, RSI is 25. After the first reading, each average is smoothed: new average = (previous average x 13 + today's value) / 14. That is why RSI usually moves gradually, and why one heavy day can still shift it a lot.
70 and 30 are zones, not triggers
Above 70 is often called overbought and below 30 oversold. These words mislead beginners. They only mean that recent momentum is unusually one-sided. In a strong uptrend RSI can stay above 70 for weeks while price keeps rising, and in a strong downtrend it can stay under 30 while price keeps falling. Many analysts observe that in healthy uptrends RSI tends to hold above about 40, and in downtrends it often fails to rise above about 60.
- RSI above 50 and rising: momentum favours buyers.
- RSI held above 70 in an uptrend: strength, not automatically a top.
- RSI held below 30 in a downtrend: weakness, not automatically a bottom.
- RSI back above 30 after a long fall: a first clue that still needs structure.
Divergence, and why it fails
A bullish divergence appears when price makes a lower low but RSI makes a higher low: selling pushed price lower, but with less force. A bearish divergence is a higher high in price with a lower high in RSI. Divergences are worth noticing, but they can repeat two or three times before anything changes, and many never lead to a turn. Treat a divergence as a reason to watch closely, then wait for price itself to break structure, such as a daily close above the last lower high.
Worked example: calculating RSI
Suppose over 14 days a coin had 8 up days totalling $2,800 of gains and 6 down days totalling $1,400 of losses. Average gain = $2,800 / 14 = $200. Average loss = $1,400 / 14 = $100. Both divide by 14, not by 8 and 6. RS = 200 / 100 = 2. RSI = 100 - 100 / 3 = 66.7.
The next day the coin falls $700. New average gain = ($200 x 13 + $0) / 14 = $185.71. New average loss = ($100 x 13 + $700) / 14 = $142.86. RS = 185.71 / 142.86 = 1.30. RSI = 100 - 100 / 2.30 = 56.5. One heavy day pulled RSI down by about 10 points.
Quran 5:90 calls gambling (maysir) filth from Satan's work and tells believers to avoid it. Maysir is not only a casino. It is also the mindset of placing money on an outcome because you feel it is 'due'. 'RSI is 22, it has to bounce' is that mindset in a technical costume, because nothing in the formula promises a bounce. Analysis stays permissible effort when it rests on evidence, a defined exit and a size you can afford to lose. Without those, even a clever indicator becomes a lottery ticket.
Education, not a fatwa. Where scholars differ, we say so. See what scholars say.
Buying because RSI says 'oversold'. In strong downtrends RSI can sit below 30 for weeks, and every early purchase adds to a losing position. The mirror mistake is selling a strong long-term holding just because RSI touched 70 during a healthy uptrend, then watching it rise without you.
Open the ETH daily chart with RSI and start Chart Replay. Each time RSI drops below 30, pause and write what you would do and why. Step forward 20 bars and record what happened. After five cases, count how often 'oversold' led to a bounce within 20 bars and how often price kept falling. Then repeat for RSI above 70. Your own count is the real lesson.
Practise RSI in Replay →Key takeaways
- RSI compares average gains with average losses: RSI = 100 - 100 / (1 + RS).
- 70 and 30 describe one-sided momentum; in strong trends RSI can stay beyond them for weeks.
- Divergence is a reason to watch, not to act; wait for price structure to confirm.
Check yourself
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Barqish is an educational platform. Nothing here is financial advice or an instruction to buy or sell, and screening is not a fatwa. Spot ownership only: no leverage, no short selling. Updated 30 September 2026.