RSI: overbought and oversold

RSI turns the last 14 candles into a number from 0 to 100. You'll work it out by hand and see why a low reading doesn't mean the fall is over.

RSI (Relative Strength Index) looks at the last 14 candles and asks one question: how much of the movement was up?

If every candle closed higher than the one before, RSI is 100. If every one closed lower, it's 0. Half up and half down gives 50.

Press play and watch RSI follow a rise and then a fall.

Each bar is the move from one close to the next, over the last 14 candles. Up moves are chartreuse, down moves hollow.

Add up the gains, add up the losses, and divide: RSI = 100 × gains ÷ (gains + losses). Bots here use this same calculation. Some charting sites smooth the sums over time, so their RSI can differ a little.

Tap a bar to flip it between up and down.

Traders usually mark two lines on RSI. Above 70 is called overbought: the price rose a lot, fast. Below 30 is oversold: it fell a lot, fast.

Both words are about how the price moved over the last 14 candles. Oversold doesn't mean cheap, and overbought doesn't mean expensive.

Drag through the day to read the zone at each moment.

In a steady decline, RSI can stay under 30 for hours while the price keeps falling. A bot that sent a Signal on every one of those candles would flood you.

So a bot fires once when its condition becomes true, then re-arms only after the condition stops being true. Change the threshold and compare the candles under the line with the Signals sent.

RSI has two settings. The period is how many candles it looks back over, and 14 is the usual default. A shorter period reacts faster and reaches 30 and 70 more often; a longer one moves slowly.

The timeframe is the size of each candle. RSI 14 on 5m candles covers about an hour, while on 1h candles it covers 14 hours.

Try the combinations and count the crossings.

The Oversold template combines what you've seen: RSI 15m at or below 30, price change 1h at or below −3%, and volume at least 2× its recent average.

Each condition fills one segment of the meter. When all three are true at the same moment, the bot fires, saves every value that caused it and sends you a Signal.

The meter runs live on BTCUSDT Perpetual.

Three quick questions, then a bot to build.

Read the strategy and set up a bot that follows it, with the direction and the conditions it names and no others. The strategy borrows two metrics from earlier lessons: the price change and relative volume. Passing depends on the build alone. Once it's right, the bot fires and you see what the market did next, which won't always go your way.