RSI

Relative Strength Index Indicator.

Overview

The Relative Strength Index (RSI) is a momentum oscillator. It measures the speed and change of price movements. The RSI oscillates between zero and 100 and is typically used to identify overbought or oversold conditions in a market.

Interpretation

The RSI is interpreted as follows:

• An RSI value of 70 or above indicates that a security is becoming overbought or overvalued and may be primed for a trend reversal or corrective pullback in price.

• An RSI value of 30 or below indicates an oversold or undervalued condition.

Indicator Triggers:

RSI is in zone

When the RSI on the 1 hour timeframe is between the level 0 and 30, a long signal is triggered.

As soon as the RSI enters the [0;30] zone, a long signal is triggered at 18 853$. It will be activated (by default) until the RSI leaves the zone (green area).

RSI cross the level

When the RSI on the 1 hour timeframe cross down the level 80, a short signal is triggered.

As soon as the RSI cross up the level 28, a long signal is triggered at 18 804$. By default, his duration will be 1 hour (selected timeframe), however you can parameter this with the "Add a new signal duration rule".

Divergences

We are looking to detect Overbuy divergences on ETHUSDT 1 hour to short, with a divergence above the RSI level 75.

If you are looking for an overbuy divergence, the divergence has to happen above the RSI trigger line level. For an oversell divergence, it has to happen below the trigger line. In this example, the trigger line is 75, and the divergence on the RSI happens near the level 85.

You can chose a maximum distance/number of candle between the 2 peaks. In this example, we don't want more than 30 candles between both of the peaks, and we only have 6 candles distance here.

You can also decide the minimum RSI value difference between the 2 peaks of the divergence. In this example, we want a minimum of 5 RSI value and we have a difference of 9.62.

The divergence must not cross the RSI line between the 2 peaks, otherwise it will not be validated. In this example, we want the RSI NOT CROSS the 50 ligne to confirm the divergence, which did not happen.

There is also a possibility to consider the wicks of the candle or ignore it and only pick the body to calculate the divergence. In this example, we consider the wicks of the candle to detect the divergence.

Notes :

• Setting Levels: Traditionally, RSI readings above 70 are considered overbought, while readings below 30 are considered oversold. In an intraday context, these levels can indicate potential reversal points where the price might start to pull back or rally, respectively. Depending on the volatility of the asset you're trading, you might adjust these thresholds to better fit the asset’s price behavior. For instance, settings might be tightened to 65 for overbought and 35 for oversold in less volatile markets.

• Support/Resistance: Combine RSI readings with support and resistance levels to confirm potential buy or sell signals. For example, if the RSI indicates an oversold condition and the price is at a strong support level, this could be a strong signal to enter a long position.

• Strategy Implementation: Use divergence as a confirmation tool rather than a standalone signal, especially in algorithmic settings where confirmation reduces the likelihood of false positives. Implementing a check for divergence can help filter out trades that might otherwise look promising based solely on overbought or oversold conditions.