// 01 What is the RSI Indicator?
RSI measures the speed and magnitude of recent price changes on a scale of 0 to 100. Values above 70 indicate overbought conditions (price rose too fast, likely to pull back). Values below 30 indicate oversold conditions (price fell too fast, likely to bounce).
It was developed by J. Welles Wilder and remains one of the most widely used technical indicators on NSE. The standard period is 14 bars.
// 02 The RSI Oversold Bounce Strategy
Entry (BUY): RSI crosses above 30 from below — meaning it was oversold and is now recovering. This signals that selling pressure is exhausting and buyers are stepping in.
Exit: RSI rises above 70 (overbought) — the bounce is complete. Exit at market close.
Stop Loss: Fixed ₹ stop (e.g. ₹200 per 100 shares) placed below the recent low when entry was triggered.
// 03 Best RSI Settings for NSE
- Period 14, Oversold 30, Overbought 70 — The standard. Best starting point for any NSE stock on 5-minute or 15-minute charts.
- Period 9, Oversold 35, Overbought 65 — Faster signals, more trades, higher noise. Use only on highly liquid stocks.
- Period 21, Oversold 25, Overbought 75 — Fewer, higher quality signals. Better for 15-minute timeframes.
Always backtest before changing defaults. On MyAlgoKart you can customise RSI period, oversold and overbought levels and see the impact on your results instantly.
// 04 Combining RSI With Other Signals
RSI alone generates false signals during strong trends (RSI can stay below 30 for days on a falling stock). Combining it with other indicators improves quality:
- RSI + MACD: Only take RSI buy signal if MACD histogram is also rising — confirms momentum shift.
- RSI + VWAP: Only buy above VWAP — ensures you are not fighting institutional order flow.
- RSI + Bollinger Bands: RSI oversold + price at lower Bollinger Band = very high probability bounce setup.
// 05 Limitations of RSI Strategy
RSI is a mean-reversion strategy — it works best when markets are ranging. During strong trending periods (like a major bull run or market crash), RSI can stay overbought/oversold for extended periods and generate losing trades repeatedly.
This is why it is essential to backtest over at least 60–90 days of NSE data that includes both trending and sideways periods before going live.