Relative Oversold | Overbought
Determine oversold and overbought on a relative basis -- a true edge most traders miss!
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Determine oversold and overbought on a relative basis -- a true edge most traders miss!
Last updated
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[D] Like Bollinger Bands for price action, RSI Bollinger Bands can be used as moving oversold and overbought thresholds, which adjust with the oscillator based on its volatility.
Relative Oversold | Overbought signals [i.e., dots] reflect an adaptive approach that normalizes RSI data relative to the trend using RSI Bollinger Bands.
Use the color selector boxes to change the upper and lower Bollinger Bands zone colors.
Toggle [RSI Bollinger Basis] to turn on the basis [i.e., mean] line of the RSI Bollinger Bands.
The basis line can also be used as a support line when RSI values are above it or as a resistance line when RSI values are below it.
When RSI is riding the upper or lower Bollinger Bands and breaks towards the middle, this reversion to the mean [i.e., basis line] can signal that the trend may be reversing.
[E] Relative Oversold | Overbought Dots flag whenever an asset is oversold or overbought on a relative basis.
Evaluating RSI on a relative basis is more reliable than evaluating RSI on an absolute basis with fixed 30/70 thresholds for oversold/overbought, which traditional RSI analysis relies on.
Signals may appear even when the standard RSI line may be far away from the generally accepted oversold and overbought thresholds [i.e., 30 and 70, respectively].
This is because rigid 30/70 thresholds are arbitrary rules of thumb that may [or may not] be relevant to current market conditions.
When RSI breaks out below the lower RSI Bollinger Band, the asset is oversold on a relative basis, given its price history, and a Relative Oversold Dot will show on the chart underneath the RSI.
When RSI breaks out above the upper RSI Bollinger Band, the asset is overbought on a relative basis, given its price history, and a Relative Overbought Dot will show on the chart above the RSI.
