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RSI Strategy

Buy when RSI indicates oversold, sell when overbought

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What Is This Strategy?

The RSI (Relative Strength Index) measures the speed and magnitude of recent price changes to identify overbought or oversold conditions. Values range from 0 to 100.

How It Works

  1. RSI is calculated based on average gains and losses over a period (typically 14 days)
  2. RSI above 70 = Overbought (potential sell signal)
  3. RSI below 30 = Oversold (potential buy signal)
  4. Enter when RSI crosses back from extreme levels

RSI Strategy - Decision Flow

Visual representation of the strategy logic

Price Update
Condition

Calculate RSI (14 period)

RSI < 30?

NoYes
Entry

BUY Signal

Oversold condition

RSI > 70?

NoYes
Exit

SELL Signal

Overbought condition

Action

Hold current position

Press enter or space to select a node. You can then use the arrow keys to move the node around. Press delete to remove it and escape to cancel.
Press enter or space to select an edge. You can then press delete to remove it or escape to cancel.
Condition Check
Buy Signal
Sell Signal
Action

Key Parameters

RSI Period
Number of periods for RSI calculation
14
Overbought Level
Threshold for overbought condition
70
Oversold Level
Threshold for oversold condition
30

When to Use

check_circle

Best For

  • • Range-bound markets
  • • Finding reversal points
  • • Mean-reversion strategies
cancel

Avoid When

  • • Strong trending markets
  • • Breakout scenarios
  • • During major news events

Risks & Limitations

warning

Be Aware

  • • RSI can stay overbought/oversold for extended periods in trends
  • • False signals during strong momentum moves
  • • Needs confirmation from other indicators

Example Trade

Scenario

TSLA drops 15% in a week. RSI falls to 25, then starts rising back above 30.

BUY
Reasoning

The stock was oversold and is now showing signs of recovery. The extreme selling may have been overdone.

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