Relative Strength Index, RSI for short, is a momentum-based indicator that is commonly used for range trading. RSI looks at the speed and extent of cryptocurrency price changes and based on it, calculates if crypto is overbought or oversold. When using this indicator, it looks at cryptocurrency prices and compares two important factors of the crypto. It looks at the cryptocurrency's strength when prices went up and strength when prices went down. With a comparison of these two factors, RSI can predict how crypto is expected to perform based on how it performed on previous occasions. 

When applied to the charts, the RSI indicator sits below the chart as an oscillator. There the RSI moves as a line between the ranges of 0 to 100. If we see RSI go over 70, it means that crypto is most likely overbought and prices might start falling, while if RSI falls below 30, it means the asset is oversold and the price might start to rise once again. This is not guaranteed and there are cases when crypto is in the overbought range and the uptrend is still continuous for extended periods of time, and the same is true for the oversold range. Because of this, it is best to use the RSI indicator in combination with other indicators as it will make analysis much more effective and accurate. 

When it comes to trading crypto with the RSI indicators there are many ways one can do it. One of the most common ways is to trade the range. Since the RSI indicator has two values of 70 and 30 to identify an overbought and oversold state, traders can simply purchase cryptocurrencies when RSI reaches 30 and then sell when it goes to 70. After this, traders can open short positions and close them when RSI reaches 30 again. This is a simple and straightforward method of trading with RSI, but it also has its own risks. Since cryptocurrencies are speculative assets and they tend to be highly volatile, even after reaching 70, tokens can continue gaining value for extended periods of time, or they can continue losing value long after reaching 30. 

Another way of using the RSI indicator is trend trading. Since cryptocurrencies are highly volatile, trend directions change quite frequently and we can use the RSI indicator to identify these trend reversals. But when doing so, it is important to understand that not every cryptocurrency will have the same trend reversal mark, meaning that if 70 and 30 works for one cryptocurrency, it might not work for another and as traders it is our goal to identify these trend reversal points and only after this use RSI as a trend reversal indicator. 

To better understand how we can trade cryptocurrencies with the RSI indicator let’s look at an example. In this case, we are trading with the BTC/USD trading pair using the RSI indicator. Looking at the chart we can see that the first instance RSI goes over the 70 mark there is a big spike in value, but then it starts to lose value and prices drop. During this time, we could have opened a short position since RSI indicated that BTC was overbought. Then we enter a volatile state which grows into a downtrend, but once the RSI goes below the 30 mark, the price starts to recover and starts to go up again. Once the RSI went below the 30 mark, we could have opened a long position, as BTC was oversold and prices were expected to rise. 

Looking at this, it seems a very simple and straightforward way to trade cryptocurrencies, but if we take a better look, we can see that the RSI indicator only shows the potential movement of the following 1-2 candles and simply it going over the oversold or overbought mark does not mean that the trend reversal will be strong enough to make good profits. Because of this, we need to be cautious when trading with the RSI indicators and always have other supporting tools that will help us better understand the market conditions.