RSI Oversold Overbought

1. Compute the 14-bar RSI of the close.
2. Buy when the RSI drops below 30 — selling has been so one-sided the market is called oversold.
3. Hold until the RSI rises above 70 — buying has become just as one-sided (overbought) — then sell into that strength.

Worked example. After a two-week slide the 14-bar RSI prints 27 — under the 30 oversold line — and the strategy buys. The recovery carries the RSI up through 70, where the position is sold.

Everything runs on closing prices of the traded timeframe: P is a close, P_t today's close, and N counts bars — one bar is one candle of that timeframe, so 20 bars on a 1h chart is 20 hours.

Relative Strength Index (RSI)

A 0–100 gauge of how one-sided recent moves have been. It compares G, the average size of up-moves, to L, the average size of down-moves, over the last N bars (using Wilder's smoothed averages): near 100 almost every recent bar went up, near 0 almost every bar went down, 50 is balanced.

RSI_N = 100 - 100 / (1 + G/L)

Example: If over the last 14 bars up-moves averaged 2.0 and down-moves averaged 1.0, then G/L = 2 and RSI = 100 − 100 / 3 ≈ 67. Readings below 30 are called oversold, above 70 overbought.