Of the dozens of indicators available on any crypto charting platform, two are worth learning well before reaching for any others: moving averages and RSI. Both are covered briefly in how to read crypto charts — this guide goes deeper into what each one actually measures and how to read them without overreacting to every signal they produce.
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What a moving average actually tells you
A moving average takes the average price over a chosen number of past periods and plots it as a smooth line, updating as new candles form. It exists to filter out candle-to-candle noise so the underlying trend direction is easier to see. A simple moving average (SMA) weights every period in its window equally; an exponential moving average (EMA) weights recent periods more heavily, so it reacts faster to new price action.
The 50-period and 200-period moving averages are commonly referenced for a longer-term trend read on higher timeframes. When a shorter moving average crosses above a longer one, it’s often read as a bullish signal (sometimes called a “golden cross” for the 50/200 combination); the reverse crossover is read as bearish (a “death cross”). It’s worth remembering that a crossover confirms a trend shift that’s usually already been underway for a while, rather than predicting one about to begin.
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What RSI actually measures
RSI (Relative Strength Index) is an oscillator, typically calculated over 14 periods, that measures the speed and size of recent price changes on a scale from 0 to 100. It doesn’t measure price directly — it measures how fast and how far price has moved recently relative to its own recent history.
Readings above 70 are conventionally read as overbought, and below 30 as oversold. This means the recent move has been unusually fast in one direction, not that a reversal is guaranteed to happen immediately — in a strong trend, RSI can stay above 70 or below 30 for an extended stretch. RSI crossing above or below its own 50 midline is sometimes read as a shorter-term momentum shift, independent of the overbought/oversold extremes.
Reading overbought/oversold without overreacting to them
The most common beginner mistake with RSI is treating “overbought” as an automatic sell signal and “oversold” as an automatic buy signal. In a strong uptrend, an asset can stay technically overbought for a long stretch while price keeps climbing — selling purely because RSI crossed 70 would have meant exiting a still-strong trend early. RSI works best combined with trend context and volume, the same way candlestick patterns do, rather than read in isolation as a standalone trigger.
One pattern worth knowing: a divergence, where price makes a new high but RSI does not make a corresponding new high, is a commonly cited early warning that upward momentum may be weakening — though like every signal covered here, it’s a piece of evidence to weigh, not a certainty.
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Combining RSI and moving averages together
Used together, these two indicators check different things: a moving average shows where the trend is heading, and RSI shows how fast price is moving relative to its own recent history. An RSI reading of 75 during a strong uptrend (price above a rising 50-period moving average) is read differently than the same RSI reading of 75 in a market that’s been range-bound for weeks — the first is consistent with strong ongoing momentum, while the second is more likely a sign the range’s upper edge has been reached again, the same range-bound situation covered in support and resistance. Neither indicator alone tells you which situation you’re in; reading them together, alongside the trend and volume covered elsewhere on this site, is what makes the combination more useful than either indicator in isolation.
| Indicator | What it measures | Common beginner mistake |
|---|---|---|
| Simple Moving Average (SMA) | Trend direction, equal weight to each period | Expecting it to react quickly to sudden price changes |
| Exponential Moving Average (EMA) | Trend direction, more weight to recent periods | Treating every crossover as an immediate trade signal |
| RSI | Speed/size of recent price change (0–100) | Treating overbought/oversold as an automatic reversal trigger |