Many people tend to make a common mistake when using RSI: they focus only on the indicator itself and ignore the contradictions between price movements and the indicator. This phenomenon is known as divergence, especially negative RSI divergence, which can often provide key trading signals.

As a relative strength index, RSI's core function is to help us determine whether an asset is overbought or oversold. Its values fluctuate between 0 and 100, with the 30 and 70 levels being the most important reference points. When RSI breaks above 70, it indicates potential upward pressure; falling below 30 suggests a possible rebound. But this is just a superficial understanding.

What’s truly interesting is the divergence phenomenon. I’ve noticed that many traders tend to overlook this. Negative RSI divergence occurs when the price hits a new high, but RSI fails to follow suit and even declines. It sounds counterintuitive, but this contradiction often signals that the price is about to fall. Conversely, if the price hits a new low but RSI remains high, this positive divergence suggests a potential rebound.

The appearance of negative RSI divergence indicates that buying momentum is waning. Although the price is still making new highs, the trading volume is diminishing, which often foreshadows a reversal. However, it’s important to note that divergence signals, while valuable, should not be used as the sole basis for buy or sell decisions. The best approach is to combine them with other technical tools and the overall market situation.

If you want to trade more smoothly, you can observe some mainstream cryptocurrencies’ charts on Gate, compare price movements with RSI indicators, especially looking for obvious divergence cases. Repeated practice like this will deepen your market understanding significantly.