📊 Hands-On: Use RSI to Spot Overbought and Oversold Levels — Advanced 168

📊 Hands-On: Use RSI to Spot Overbought and Oversold Levels — Advanced 168

In the world of trading, timing is everything. You need to know when prices are too high (overbought) or too low (oversold) — and that’s exactly what the RSI (Relative Strength Index) helps you identify.

At AI Computer Classes – Indore, students learn practically how to use RSI to predict potential price reversals and make smarter trading decisions. Let’s break it down step-by-step.

⚙️ Step 1: What Is RSI and Why It Matters

RSI (Relative Strength Index) is a momentum indicator that measures how quickly and strongly prices move. It helps traders spot potential reversal points.

📈 Formula:

RSI = 100 – [100 / (1 + RS)]

Where RS = Average Gain / Average Loss over a set period (usually 14 days).

Typical RSI values:

• Above 70: Overbought (price might fall soon)
• Below 30: Oversold (price might rise soon)

💡 Example:

If a stock’s RSI hits 75, it may indicate the asset is overbought — suggesting a correction might come soon.

🧠 Step 2: Understanding RSI Behavior

RSI doesn’t just show numbers — it reflects trader emotions.

RSI RangeMarket EmotionPossible Action70–100Greed (Overbought)Watch for selling opportunities50NeutralWait and observe0–30Fear (Oversold)Watch for buying opportunities

📊 RSI helps you see where traders are too excited or too fearful, allowing you to plan trades calmly.

💻 Step 3: Setting Up RSI in TradingView or Excel

At AI Computer Classes – Indore, students learn how to use both TradingView and Excel to analyze RSI practically.

🖥️ In TradingView:

1. Open a stock chart.
2. Click Indicators → Relative Strength Index (RSI).
3. Keep the default period of 14.
4. Observe when RSI crosses 70 (Sell) or 30 (Buy) zones.

📊 In Excel:

1. Import historical price data.
2. Calculate daily price change.
3. Find average gains/losses over 14 periods.
4. Use the RSI formula to compute values.
5. Create a line chart — visualize RSI fluctuations over time.

🧩 Step 4: Combine RSI with Price Action

RSI works best when combined with price action or candlestick patterns.

👉 Examples:

• Bullish divergence: Price makes a lower low, RSI makes a higher low → Potential buy signal.
• Bearish divergence: Price makes a higher high, RSI makes a lower high → Potential sell signal.

💬 Pro Tip: Never rely on RSI alone. Use it alongside support/resistance or moving averages for confirmation.

🔍 Step 5: Identify Strong and Weak Momentum

• RSI above 50 indicates bullish momentum.
• RSI below 50 indicates bearish momentum.

When RSI stays above 50 for a long period → Strong uptrend.

When RSI stays below 50 → Persistent downtrend.

🎯 Practical tip taught at AI Computer Classes: Use RSI to track trend strength — not just reversal points.

📉 Step 6: Practical Example — Hands-On Analysis

Let’s take an example from NIFTY 50 or TCS stock:

1. Open TCS chart in TradingView.
2. Apply RSI indicator (14 period).
3. Observe the RSI touching 28 on a specific date.
4. Within days, price starts to rise — a sign that the oversold signal worked.

🧩 In class exercises, students test this logic across multiple stocks to understand reliability and exceptions.

🧮 Step 7: Advanced RSI Techniques

At AI Computer Classes – Indore, students also explore advanced RSI usage like:

• RSI Divergence Strategy (detecting hidden trends)
• RSI with Moving Averages for smoother entry signals
• Multi-timeframe RSI (using 1D + 1H charts together)

💡 Example:

A bullish divergence on 1-hour and daily charts together is a strong signal to enter early in a trend reversal.

🧠 Step 8: Common Mistakes to Avoid

❌ Trading solely on RSI levels without confirmation

❌ Ignoring market context (e.g., RSI can stay overbought in strong uptrends)

❌ Using too short a timeframe (creates noise)

At AI Computer Classes, students learn risk management alongside indicators to avoid emotional trades.

🎓 Step 9: Practice Task for Students

Try this exercise:

1. Pick any 3 stocks (e.g., Reliance, Infosys, HDFC Bank).
2. Plot RSI on TradingView.
3. Identify when RSI crossed 30 or 70.
4. Record the following in Excel:

• Date
• RSI Value
• Price Movement (Next 5 days)
• Profit or Loss (if traded)

📘 Outcome: You’ll start noticing patterns — RSI often gives strong early signals when combined with volume and support/resistance.

🌟 Conclusion: Master RSI for Smarter Trades

RSI is more than just an indicator — it’s a window into market psychology.

When used correctly, it helps traders:

✅ Time entries and exits better

✅ Avoid emotional trades

✅ Spot reversals early

At AI Computer Classes – Indore, students master RSI hands-on through Excel and TradingView — combining theory, logic, and data-driven decision-making.

📞 Contact AI Computer Classes – Indore

✉ Email: hello@aicomputerclasses.com

📱 Phone: +91 91113 33255

📍 Address: 208, Captain CS Naidu Building, near Greater Kailash Road, opposite School of Excellence For Eye, Opposite Grotto Arcade, Old Palasia, Indore, Madhya Pradesh 452018

🌐 Website: www.aicomputerclasses.com