Momentum: RSI & MACD
Trend indicators say which way; momentum oscillators say how hard — and, crucially, when the push is fading even though price is still rising. They oscillate in a fixed band under the chart.
RSI — Relative Strength Index
RSI compares recent up-moves to recent down-moves (default: 14 candles) on a 0–100 scale. Convention: above 70 = overbought, below 30 = oversold.
"Overbought" does not mean sell now. In a strong crypto trend, RSI can sit above 70 for weeks while price doubles. Overbought means stretched — a reason to tighten stops or skip fresh entries, not a signal to fade a freight train. RSI behaves best in ranging markets, where the 70/30 touches align with the range's edges.
MACD — Moving Average Convergence Divergence
MACD is momentum built from moving averages: the MACD line (12-EMA minus 26-EMA), a signal line (its 9-EMA), and a histogram of the gap between them. Readings: MACD above zero = bullish regime; line crossing above signal = momentum turning up; a shrinking histogram = the move is decelerating before it reverses. Because it is EMA-based, MACD suits trending markets better than RSI does — the two complement rather than duplicate each other.
Divergence — the shared power-move
The highest-value signal any oscillator produces:
- Bearish divergence — price makes a higher high, the oscillator makes a lower high. The new high has less force behind it.
- Bullish divergence — price makes a lower low, the oscillator makes a higher low. Selling is exhausting.
Divergence is a warning, not a trigger — it can persist through several more highs. Combine it with a level (support/resistance) and a confirming candle before acting.
Stochastic and Williams %R
Both ask "where is the close relative to the recent range?" and produce faster, twitchier overbought/oversold readings (80/20 bands). Treat them as short-timeframe variations of the RSI idea — learn RSI properly first; the others come free.
Oscillators measure the force behind price. Their bands mean "stretched", not "reverse now" — their divergences are the signal worth waiting for, and they always need a trend-context check first.