Publish Date
March 12, 2025
.svg)
Crypto traders use the Relative Strength Index (RSI) to anticipate price reversals., but with so many possible settings, what’s the best RSI setting for a 1-hour crypto chart?
This guide simplifies everything you need to know about optimizing RSI settings at the 1-hour chart, comparing different strategies.
By default, RSI uses a 14-period setting, meaning it calculates average price gains and losses over the last 14 hours on a 1-hour chart (i.e., if Bitcoin's price rose steadily over the past 14 hours, the RSI would likely show an “overbought” reading). This 14-period RSI is typically deemed effective because it balances quick reactions with fewer false signals. However, if you want quicker alerts, you can shorten the period to 7, but this increases the risk of false signals. Alternatively, increasing the period (like 21 hours) smooths out the RSI but reduces how quickly it alerts you to market shifts.
RSI 14 simply means the indicator calculates price momentum based on the last 14 periods (or candles on a chart). On a 1-hour chart, this equates to roughly half a day’s price action. It’s popular because it’s balanced: not too reactive (avoiding false alarms) but still quick enough to catch meaningful trends or reversals.
Example: In late February 2025, Bitcoin dropped sharply by over 20%, entering bear market territory, and its RSI fell into oversold levels. Traders using RSI 14 would have seen this as a buy signal because historically, extreme oversold readings often precede price rebounds.
Some traders (like Timothy Sykes) prefer shorter RSI periods, such as 7 — 9 hours, for a more sensitive and quicker indicator. This approach can work well if you’re actively trading and want frequent signals. For instance, during quick market swings, RSI-7 might quickly signal oversold, prompting you to buy sooner than RSI-14 would. However, shorter RSI settings also produce more false signals.
Example: In March 2024, Bitcoin experienced a sharp decline, dropping from $60,000 to $55,000 within hours. Traders using a 7-period RSI observed the indicator dipping below 30, signaling an oversold condition and prompting them to buy. However, the price continued to fall to $50,000, resulting in losses for those traders.
Extensive research indicates that the default 14-period Relative Strength Index (RSI) with standard 70/30 thresholds does not consistently perform well across all markets. For instance, a study titled “An Investigation of the Relative Strength Index” found that using the standard RSI configuration resulted in small losses rather than profits. Similarly, another study, “INVESTIGATING THE EFFICACY OF RSI IN THE NIFTY 50 INDEX,” reported negative returns when applying the industry's popular RSI(14,30/70) strategy.
💡 RSI (14, 70/30) helps traders spot potential reversals. An RSI above 70 means the asset is overbought and may drop soon, while below 30 signals oversold conditions, suggesting a possible rebound. Traders use these levels to time entries and exits.
Also, The paper “Effectiveness of the Relative Strength Index Signals in Timing the Cryptocurrency Market” explored the RSI’s performance within the cryptocurrency sector. The research concluded that employing the RSI as a momentum indicator in this market entails significant risk. Nonetheless, alternative applications of the RSI, like identifying divergences between the RSI and price movements, could provide traders with a competitive edge.
In the fast-moving crypto market, standard RSI thresholds (70 for overbought, 30 for oversold) may not always provide the best signals, especially on shorter timeframes like the 1-hour chart. Due to high volatility, traders often adjust these levels to 80/20 or even 75/25 to reduce false signals and improve accuracy.
For instance, an RSI of 30 might frequently appear oversold in crypto but fail to trigger a meaningful price reversal. By lowering the oversold threshold to 20, traders can filter out premature entries and wait for a stronger confirmation of price exhaustion. Similarly, raising the overbought level to 80 helps avoid early exits in strong trends.
Adapting RSI thresholds based on market conditions can improve trading precision, especially when combined with other indicators like moving averages or volume analysis.
On a 1-hour crypto chart, combining RSI with trend analysis provides more reliable trading signals. For instance, first confirm a bullish trend by observing whether the price remains above a significant moving average like the 50-period EMA or 200-period EMA, clearly indicating upward momentum. Once the trend is bullish, wait for short-term pullbacks when RSI dips below 30, signaling oversold conditions, to enter buy positions at favorable prices.
Conversely, during a strong bull trend, be cautious with RSI "overbought" readings (70+); instead of immediately selling, confirm potential reversals by looking for resistance levels, bearish candlestick patterns, or divergences (price making higher highs while RSI makes lower highs) to validate a possible downturn before exiting or taking profits.
RSI is a powerful yet simple tool for crypto trading on the 1-hour chart. While no single setting guarantees success, starting with the default 14-period and 70/30 thresholds provides a solid foundation. As you refine your strategy, adjusting these settings based on market conditions and combining RSI with other indicators can improve accuracy.
To take your trading further, explore tools that help you analyze, discuss, and optimize your strategies. Platforms like MC² Finance provide real-time insights and data-driven approaches to enhance your decision-making.
💡 Do check out the best crypto indicators of 2025 and how to use them.
The best RSI stretch commonly used is between levels 70 (overbought) and 30 (oversold). When RSI crosses above 70, it's typically a sign the asset is overpriced and might soon fall; when it dips below 30, it signals the asset might be undervalued and ready to rise.
For day trading on a 1-minute chart, the optimal RSI setting is typically shorter than the default (14 periods). Common settings include RSI periods of 5, 7, or 9, allowing traders to respond quickly to rapid price movements while reducing lag.
“RSI 16, 24, 24” likely refers to using three separate RSI indicators set to periods of 16, 24, and a middle value (like 12 or 24). Using multiple RSI settings helps traders confirm signals—shorter periods (e.g., 12 or 16) give faster signals, while longer periods (e.g., 24) provide more reliable, less frequent signals.
RSI with multiple settings (such as 12, 16, and 24) means you’re comparing short-term (12), medium-term (16), and longer-term (24) RSI indicators. Shorter RSI periods (12) help identify immediate trading opportunities, medium periods (16) balance responsiveness, and longer periods (24) confirm major trend direction, together providing a clearer overall picture of the market.
The RSI 2 strategy is a short-term trading approach developed by trader Larry Connors, using the Relative Strength Index (RSI) indicator set to a very short period (2 periods instead of the standard 14). This strategy works by identifying extremely oversold and overbought conditions: you buy when the RSI(2) is below a very low threshold (typically below 10), indicating extreme oversold conditions, and sell when RSI moves back above a higher threshold (commonly above 70 or 80), signaling short-term overbought conditions. It’s designed to capitalize quickly on sharp price reversals after short-term extremes, making it popular among day traders and swing traders.
#DeFi #NonCustodial #Crosschain
