Introduction to the CTA-RSI bot

1. What is RSI?

The Relative Strength Index (RSI) is a momentum indicator that measures the magnitude of recent price gains against overall price changes to analyze the overbought and oversold levels of an asset, reflecting the market sentiment in a certain period of time.

The formula is as follows:

Where,

A = sum of closing price gains in N day(s)

B = sum of closing price losses in N day(s) (absolute value)

RSI is between [0, 100]. High RSI levels suggest that the asset is overbought or overvalued. Low RSI levels indicate an oversold or undervalued condition.

The old Chinese philosophical saying of “things will develop in the opposite direction when they become extreme,” also applies to trading. When RSI approaches 100, we believe that the asset is overbought and the markes lacks the upward momentum, which means it is a good time to go short. When RSI is close to 0, it is a good time to go long as the asset is oversold and the market is bearish.

2. RSI bot

RSI is well-suited for oscillating markets. First, we set the upper band (usually higher than 70) and the lower band (usually lower than 30). When the RSI value crosses above the upper band, the asset is overbought and we should go short. When the RSI value crosses below the lower band, the asset is oversold and we should go long.

• Long bot: When the RSI value crosses below RSI lower band

• Short bot: When the RSI value crosses above RSI upper band

3. Introduction to the AI-RSI bots

A RSI bot is configured with three parameters: K, Buy_threshold, and Sell_threshold. When RSI (K) crosses below Buy_threshold, the asset is oversold and we go long. When RSI (K) crosses above Sell_threshold, the asset is overbought and we go short. RSI is suitable for oscillating markets, automatically buying low and selling high. The profitability of a bot is closely related to the index parameters. Bitget launches the AI-RSI bot recommendation feature to simplify the process of setting parameters by making automatic suggestions.

The bot parameters provided in the recommendation cards are based on recent market data backtesting. Each recommendation card corresponds to a different candlestick chart period and strategy parameter combination, allowing users to choose the appropriate bot settings according to their current market expectations.

4. Applicable markets of the Relative Strength Index (RSI) bot

Overbought and oversold areas are important because a reversal is highly likely to happen. RSI is the foundation of buy and sell signals.

• Overbought RSI value: 70–100.

• Oversold RSI value: 0–30.

• Long/short and bull/bear borderline: 50

• An RSI value above 50 indicates bullish, and an RSI value below 50 indicates bearish.

Orders are placed in the overbought and oversold. A reversal appears when the market is overheated and the number of buy orders and sell orders loses balance. When the RSI value is above 70, we should not buy the asset. When the RSI value is below 30, we should not sell the asset.

Disclaimer

Cryptocurrencies are subject to high market risk and volatility despite high growth potential. Users should conduct their own research and invest at their own discretion. Bitget shall not be liable for any investment losses.