RSI Oversold Bounce
A mean-reversion rule that buys when RSI(14) drops below 30 (oversold) and sells when it recovers above 50.
Entry Logic
Buy when the 14-day RSI falls below 30, i.e. recent losses are dominating recent gains.
Exit Logic
Sell when RSI recovers above 50, i.e. gains start dominating again.
How Rules Combine
RSI scales the ratio of average up-moves to average down-moves into a 0-100 band. Below 30 means selling has been unusually heavy; the strategy bets that pressure will fade.
When It Works (Market Edge)
Sideways or mean-reverting markets, where oversold dips reliably bounce.
When It Fails
Strong downtrends: RSI can sit below 30 for weeks while price keeps falling. 'Oversold' is a condition, not a timing signal.
Common Myths
Myth: RSI below 30 means the market must bounce.
Truth: In crashes RSI stays below 30 for long stretches. Buying every oversold print in a downtrend is catching falling knives.
Myth: This rule is safe because it only buys near the bottom.
Truth: It only buys after a big drop — and the drop can continue. Mean reversion keeps working until the trend stops reverting.
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