📖Relative Oversold | Overbought

Determine oversold and overbought on a relative basis -- a true edge most traders miss!

Overview

• [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.

RSI Bollinger Bands & Basis

• 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.

Menu: RSI Bollinger Bands and Basis

Example: RSI Bollinger Bands

TradingView: RSI Bollinger Bands; click image to enlarge

Relative Oversold | Overbought Dots

• [E] Relative Oversold | Overbought Dots flag whenever an asset is oversold or overbought on a relative basis.

Menu: Oversold | Overbought [Dots]

• 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.

Relative Oversold | Overbought signals [i.e., dots] provide the Advanced RSI trader with the means to identify trend reversal or continuation opportunities that most traders will miss.

Example: Advanced RSI Bollinger Bands with Oversold | Overbought Dots

TradingView: Relative RSI Oversold | Overbought [Dots]; click image to enlarge