Most of us have heard of RSI and likely used it too. In technical analysis, it is one of the most well-known indicators worldwide. A key use of RSI is identifying overbought and oversold conditions. Oversold is generally seen as a buying opportunity, and overbought as a selling opportunity. This doesn’t mean you should always buy at oversold and sell only when it reaches overbought; rather, overbought simply signals a general selling zone.

When we look at RSI on a chart, we often observe that once it dips below a certain threshold—commonly 30 or 35 in stock markets—it tends to reverse and return back above that level. While this sounds simple, in reality, predicting exactly where the oversold price will be, how much further it will drop, and where to enter a trade is extremely difficult. Similarly, it’s hard to know how far a price will rise in overbought territory and when it might start reversing. So the questions remain: where to buy in oversold conditions, and where to sell in overbought?

The function presented here aims to tackle this complex challenge. Given the volatility of the crypto market, we’ve set RSI thresholds at 20 for oversold and 80 for overbought. The function first estimates what price levels correspond to these RSI thresholds. Then, using historical data, it calculates how much further the price typically drops below oversold or rises above overbought. From there, it evaluates how far the price tends to rebound based on previous behavior. After compiling these analyses, the function identifies the expected price levels for future movements.

RSI is commonly calculated using 7 or 14 candles. In our function, we’ve used 7 candles. One of the most important features of this system is that it also searches for strong support or resistance levels around the expected price. These levels are ranked by strength, starting with higher timeframes first—so if a 1-hour chart detects a support level from the 1-day timeframe, it gives it higher priority. The system looks for price points that have been touched three or more times, which indicates strong support or resistance.

Each row in the table, and the live price of each coin, is color-coded—fading green for prices closer to oversold, and fading red for prices closer to overbought. This helps users quickly assess a coin’s condition at a glance. The live price updates every minute. Below each coin is a historical report showing how well this strategy has performed for that coin in the past. Coins are being added gradually to test the stability of the function. For now, only Binance-listed coins are being considered.

Based on our experience, this strategy is nearly failproof on the daily timeframe for quality coins. However, we plan to strengthen it further by incorporating Bollinger Bands in the future. Since all data is automatically fetched and analyzed, errors are always possible. Therefore, make your trades based on your own research. Botslash neither provides financial advice nor assumes responsibility for any trading risk.

— Owais Paracha
Botslash Team