Use RSI to Spot Overbought and Oversold Levels — Workflow

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📈 Use RSI to Spot Overbought and Oversold Levels — Workflow

In trading, understanding market momentum is essential to make informed decisions. The Relative Strength Index (RSI) is one of the most popular momentum indicators used to identify overbought and oversold conditions, helping traders spot potential trend reversals.

At AI Computer Classes – Indore, students learn to apply RSI in real-world scenarios using hands-on exercises with Excel, Python, and visualization tools like Power BI and Figma. This workflow guide breaks down the process into actionable steps for beginners and working professionals.

🧠 What is RSI?

RSI is a momentum oscillator that measures the speed and change of price movements:

• Values range from 0 to 100
• Above 70: Overbought conditions (potential sell signals)
• Below 30: Oversold conditions (potential buy signals)

RSI helps traders gauge market strength and avoid entering positions at extreme points, improving timing and risk management.

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⚙️ Step 1: Calculate RSI

RSI is calculated using the formula:

RSI=100−1001+RSRSI = 100 - \frac{100}{1 + RS}RSI=100−1+RS100​Where RS (Relative Strength) = Average Gain ÷ Average Loss over a specified period (usually 14 days).

Example in Python:

import pandas as pd

def calculate_rsi(data, period=14):
    delta = data['Close'].diff()
    gain = delta.clip(lower=0)
    loss = -delta.clip(upper=0)
    avg_gain = gain.rolling(window=period).mean()
    avg_loss = loss.rolling(window=period).mean()
    rs = avg_gain / avg_loss
    rsi = 100 - (100 / (1 + rs))
    return rsi

# Example usage
data['RSI'] = calculate_rsi(data)

📊 Step 2: Identify Overbought and Oversold Levels

• Overbought (RSI > 70): Price may be too high, possible reversal or pullback
• Oversold (RSI < 30): Price may be too low, potential buying opportunity

Traders can combine RSI with other indicators (moving averages, trendlines, or volume) for stronger confirmation.

🧩 Step 3: Visualize RSI in Excel or Power BI

Excel Workflow:

1. Import stock price data
2. Calculate RSI using formulas or Python-generated values
3. Create a line chart for price and RSI
4. Add horizontal lines at 30 and 70 to highlight oversold and overbought levels

Power BI Workflow:

• Import data and calculate RSI in Power Query
• Build interactive dashboards with price and RSI charts
• Use color coding to mark overbought (red) and oversold (green) zones

💡 Hands-on practice at AI Computer Classes – Indore helps students visualize market trends effectively.

🔧 Step 4: Implement a Trading Workflow

1. Monitor RSI daily for your chosen stock or asset
2. Check for overbought/oversold signals
3. Confirm with other indicators:

• Trendlines
• Moving averages
• Volume spikes

1. Decide action: Buy on oversold confirmation, sell on overbought confirmation
2. Set stop-loss to manage risk

Example:

• Stock XYZ RSI = 28 → Oversold → Check trend and volume → Potential Buy signal
• Stock ABC RSI = 75 → Overbought → Check resistance levels → Potential Sell signal

🧠 Step 5: Automate RSI Analysis with AI

ChatGPT and Python can assist in:

• Generating alerts for overbought/oversold levels
• Writing scripts to calculate RSI automatically for multiple stocks
• Suggesting trading actions based on historical patterns
• Creating visual dashboards for easy monitoring

Example ChatGPT prompt:

“Generate Python code to calculate RSI for multiple stocks and highlight overbought and oversold signals in a table.”

🌟 Benefits of Learning RSI at AI Computer Classes – Indore

• Understand momentum trading and technical analysis
• Learn to combine indicators and AI tools for better decisions
• Gain practical skills in Python, Excel, and Power BI for financial analysis
• Build visual dashboards to track RSI signals efficiently
• Prepare for real-world trading scenarios with hands-on exercises

💻 Students learn not just theory, but actionable trading workflows.

🎯 Conclusion

The Relative Strength Index (RSI) is a powerful tool to spot market extremes, guide trading decisions, and manage risks effectively. Combining RSI with visualization tools and AI-assisted analysis enhances accuracy and efficiency.

At AI Computer Classes – Indore, you can master RSI, build automated workflows, and gain confidence in trading & stock market strategies.

🚀 Learn smarter, trade smarter, and visualize market momentum like a pro!

📞 Contact AI Computer Classes – Indore

✉ Email: hello@aicomputerclasses.com

📱 Phone: +91 91113 33255

📍 Address: 208, Captain CS Naidu Building, near Greater Kailash Road, opposite School of Excellence For Eye, Opposite Grotto Arcade, Old Palasia, Indore, Madhya Pradesh 452018

🌐 Website: www.aicomputerclasses.com