Using RSI to Find Entry Points

The Relative Strength Index, commonly known as RSI, is one of the most fundamental and widely used technical indicators in financial markets. For beginners looking to time their entries into the Spot market or manage positions using derivatives like Futures contracts, understanding how to use the RSI effectively is crucial. This guide will explain the basics of the RSI, how to combine it with other tools, and how to use it to balance your holdings.

What is the Relative Strength Index (RSI)?

The RSI is a momentum oscillator that measures the speed and change of price movements. It oscillates between 0 and 100. The standard setting for the RSI period is 14, meaning it calculates the average gains versus average losses over the last 14 price periods (e.g., 14 hours, 14 days).

The primary signals derived from the RSI relate to overbought and oversold conditions:

**Overbought (Typically above 70):** When the RSI rises above 70, it suggests that an asset has been bought too aggressively and might be due for a price correction or reversal downwards.
**Oversold (Typically below 30):** When the RSI drops below 30, it suggests the asset has been sold too aggressively and might be poised for a bounce or reversal upwards.

While these levels are the starting point, relying solely on them can lead to poor timing, especially in strong trending markets. This is why we combine the RSI with other analysis techniques, such as looking at the MACD or Bollinger Bands.

Timing Entries with RSI

Finding an optimal entry point is the goal of every trader. For someone holding assets in the Spot market, using the RSI can help determine when to buy more or when to initiate a new position.

1. 1. 1. 1. Buying the Oversold Condition

The most straightforward use of the RSI for an entry signal is when the indicator drops into the oversold territory (below 30).

**Action:** If the price has been falling and the RSI dips below 30, it suggests selling pressure might be exhausted. This can signal a potential buying opportunity.
**Caution:** In a very strong downtrend, the RSI can remain oversold for extended periods. Simply buying when it hits 30 might mean buying too early. A better approach often involves waiting for the RSI to cross back *above* 30, confirming momentum is shifting upward.

1. 1. 1. 2. Combining RSI with Trend Indicators

To improve entry accuracy, traders often look for confluence—when multiple indicators give the same signal.

**Bollinger Bands:** If the RSI shows an oversold condition (below 30) at the same time the price touches or breaks below the lower line of the Bollinger Bands, this confluence can provide a stronger signal for a potential upward reversal. You can find more detailed strategies in (Chart analysis and entry/exit strategies).
**MACD Crossover:** If the RSI is moving up from oversold territory, and simultaneously, the MACD line crosses above its signal line (a bullish crossover), this dual confirmation significantly increases the probability of a successful entry. Learning about this specific timing tool is covered in detail in MACD Crossover for Trade Timing.

1. 1. 1. 3. Divergence: A Powerful Entry Signal

Divergence occurs when the price action and the RSI indicator move in opposite directions. This is often a leading indicator of a trend reversal.

**Bullish Divergence (Entry Signal):** The price makes a lower low, but the RSI makes a higher low. This means that even though the price dropped further, the selling momentum was actually weaker than the previous drop. This often signals a good time to look for an entry. For more on how to interpret these signals, see Indikator RSI.

Balancing Spot Holdings with Simple Futures Use Cases

For traders who own assets in the Spot market but are concerned about short-term price drops, Futures contracts offer tools for risk management without selling their underlying assets. This concept is central to Balancing Risk Spot Versus Futures.

One simple application is partial hedging. If you own 1 BTC on the spot market and are worried about a 10% drop next week, you can use futures to offset that potential loss.

- Example of Partial Hedging Using RSI Timing:**

Suppose you believe a short-term dip is coming because the RSI is signaling overbought (above 70) on a daily chart. You decide to hedge 50% of your spot position using a short futures contract.

By entering a short futures position when the RSI suggests overbought conditions, you are attempting to lock in a profit (or minimize a loss) on the futures side that offsets the loss on your spot holdings. When the RSI reverses, signaling a potential bottom, you close the hedge and are ready to hold your spot asset for the next upward move. This requires understanding How to Trade Futures Using Price Action.

Common Psychology Pitfalls and Risk Management

Technical indicators like the RSI are tools, not crystal balls. Successful trading requires managing your own behavior. Recognizing Common Trader Psychology Errors is as important as reading the chart correctly.

1. 1. 1. 1. Over-reliance on Overbought/Oversold Signals

The biggest mistake beginners make is assuming a trade *must* happen as soon as the RSI hits 70 or 30.

**The Trend is Your Friend:** In a powerful bull market, the RSI can stay above 70 for weeks. If you short every time it hits 70, you will be repeatedly stopped out. Conversely, in a strong bear market, buying every time it hits 30 will lead to continuous losses. Always check the overall market trend before interpreting the RSI extreme levels.

1. 1. 1. 2. Ignoring Position Sizing and Stop Losses

Even with excellent timing based on the RSI, poor position sizing can wipe out an account. When entering a trade based on an RSI bounce, you must define your risk.

**Stop Loss Placement:** If you enter long because the RSI crossed back above 30, your stop loss should typically be placed just below the absolute low point that caused the RSI to dip into oversold territory. This respects the idea that if the price breaks that low, the bearish momentum is stronger than the indicator suggested. Proper risk management is covered in Essential Tools for Crypto Futures Trading: RSI, MACD, and Risk Management.

1. 1. 1. 3. Confirmation Bias

If you *want* the price to go up, you might only look for bullish divergence signals on the RSI and ignore bearish signals. Always seek to disprove your trade idea. For further reading on analytical approaches, consult How to Trade Futures Using Trend Lines.

1. 1. Summary of RSI Entry Rules

To use the RSI effectively for entries, focus on these key actionable steps:

1. **Identify the Trend:** Is the market generally moving up, down, or sideways? 2. **Wait for Extremes:** Look for the RSI to reach or exceed 70 (overbought) or 30 (oversold). 3. **Seek Confirmation:** Do not trade solely on the extreme reading. Wait for the RSI to turn back towards the middle (e.g., crossing back above 30 for a buy, or below 70 for a sell). 4. **Look for Divergence:** Bullish divergence (price lower low, RSI higher low) is a strong candidate for a spot entry or a long futures position. 5. **Combine Indicators:** Confirm RSI signals with tools like the MACD or Bollinger Bands for higher probability trades.

By integrating the momentum insights from the RSI with risk management techniques, you can significantly improve the timing of your entries and better manage your overall portfolio exposure using both spot and futures markets.

Recommended Futures Trading Platforms

Platform	Futures perks & welcome offers	Register / Offer
Binance Futures	Up to 125× leverage, USDⓈ-M contracts; new users can receive up to 100 USD in welcome vouchers, plus lifetime 20% fee discount on spot and 10% off futures fees for the first 30 days	Sign up on Binance
Bybit Futures	Inverse & USDT perpetuals; welcome bundle up to 5,100 USD in rewards, including instant coupons and tiered bonuses up to 30,000 USD after completing tasks	Start on Bybit
BingX Futures	Copy trading & social features; new users can get up to 7,700 USD in rewards plus 50% trading fee discount	Join BingX
WEEX Futures	Welcome package up to 30,000 USDT; deposit bonus from 50–500 USD; futures bonus usable for trading and paying fees	Register at WEEX
MEXC Futures	Futures bonus usable as margin or to pay fees; campaigns include deposit bonuses (e.g., deposit 100 USDT → get 10 USD)	Join MEXC

Join Our Community

Follow @startfuturestrading for signals and analysis.

📈 Premium Crypto Signals – 100% Free

🚀 Get trading signals from high-ticket private channels of experienced traders — absolutely free.

✅ No fees, no subscriptions, no spam — just register via our BingX partner link.

🔓 No KYC required unless you deposit over 50,000 USDT.

💡 Why is it free? Because when you earn, we earn. You become our referral — your profit is our motivation.

🎯 Winrate: 70.59% — real results from real trades.

We’re not selling signals — we’re helping you win.

Join @refobibobot on Telegram

Using RSI to Find Entry Points

Contents