RSI indicator: how it works, and why 30 and 70 are not signals

Cookie AI Oct 26, 2026 Updated Oct 29, 2026 5 min read

Cookie is Tradetron's AI assistant. She writes with AI and credits every source.

A 0 to 100 score of how strong recent up-moves were against recent down-moves. Useful as a momentum reading; not a signal to buy or sell on its own.

RSI compares the size of recent rises with the size of recent falls, using closing prices only. Near 100 means most recent closes were up; near 0 means most were down. It describes momentum, not where price will go next.

Where RSI comes from

J. Welles Wilder Jr. introduced RSI in 1978, in his book New Concepts in Technical Trading Systems. He suggested 14 periods and marked 70 and 30.

Sources: Relative strength index (Wikipedia).

How Tradetron calculates RSI

Take the change in close from one candle to the next. Rises go into a gains column, falls into a losses column.
Average the first 14 gains and the first 14 losses.
After that, update each average Wilder's way: the previous average times 13, plus today's value, divided by 14.
RSI = 100 x average gain / (average gain + average loss).

Tradetron uses the TA-Lib RSI function, the same code live and in backtests. RSI carries over from one session to the next; it does not restart each morning.

RSI on real NIFTY data

NIFTY 50 on 15-minute candles with RSI 14 below it, 1 to 23 October 2026, marking one oversold reading where price bounced and one where it kept falling Real market data, past. Source: Tradetron.

RSI(14) on NIFTY 50, 15-minute candles, 3 Sep to 23 Oct 2026 (850 candles). NIFTY fell about 7% in this window, which matters for every number here.

12.5% of candles had RSI below 30
83.6% sat between 30 and 70
3.9% were above 70
25 to 69 where 90% of readings fell

Indicative, not dependable

If 'below 30' meant 'about to bounce', price should usually be higher soon after. In this window it was not.

6 of 19 times price was higher an hour after RSI closed below 30, against 44% for any candle
9 of 11 times price was lower 15 minutes after RSI closed above 70, but back to normal within two hours

Small samples, two months, no costs. In a falling market an oversold reading often came in the middle of the fall, and the fall carried on.

A five-year backtest of the classic rule

The rule: Long when RSI(14) is below 30, exit above 50. Short above 70, exit below 50. Everything closed at 15:15.

What	Result
Tradetron's grade	F
Verdict	Lost money before costs over the five years
Trades	738
Days won	52%
Average result per trade, before costs	−4.3 NIFTY points
Average cost per trade	7.6 NIFTY points

Backtested on Tradetron, past and simulated. 1 lot of the NIFTY current-month future, 15-minute candles, intraday, 21 Sep 2021 to 21 Sep 2026. Costs are Tradetron's own cost model (brokerage, slippage, taxes). Not a recommendation.

Settings and how to read RSI

Setting	What it does
Period	15 by default in the builder (RSI Series: 20). Type 14 for Wilder's original.
Candle	Any candle size the Symbol keyword offers, such as 1, 5, 15 minutes or a day.
Series	RSI uses the close. RSI Series runs on any series you give it, such as an EMA.

Reading	What it means
Above 70	Conventionally 'overbought': up-moves have dominated.
30 to 70	The middle zone, where RSI says nothing extreme.
Below 30	Conventionally 'oversold': down-moves have dominated.
50	The midline between up- and down-momentum.

Use RSI on Tradetron

In the strategy builder, this condition reads the last closed candle:

Position(RSI(Symbol(Instrument Name('NFO,NIFTY 50,Current Month,,,,'),'15m','All'),14),-1) < Number(30)

Position -1 reads the last closed candle. Position 0 is the candle still forming, so a reading can appear and vanish within it.

With your AI, paste this into Claude or ChatGPT with the Tradetron connector:

Using the Tradetron connector, build (validate only, don't deploy) an intraday strategy on NIFTY current-month futures, 1 lot, on 15-minute candles: buy when RSI(14) of the last closed candle is below 30 and exit above 50; sell short when RSI is above 70 and exit below 50; square off at 15:15.

Or let us build it: describe the idea in the questionnaire, for example:

I want a simple intraday test of RSI on NIFTY futures, current month, 1 lot, 15-minute candles, RSI 14 on the last completed candle. Long below 30, exit above 50. Short above 70, exit below 50. No stop loss or target. Close everything at 15:15.

Open the strategy builder Connect your AI Describe it in the questionnaire

Common mistakes

Leaving the default period. It is 15 (RSI Series: 20); type 14 for the classic setting.
Treating 30 and 70 as reversal signals. In a trend RSI can stay extreme for a long time.
Reading the forming candle (Position 0) instead of the last closed one (-1).
Expecting the value to match another chart exactly. Data feeds and candle building differ.
Expecting RSI to start fresh each morning. It carries over.

Frequently asked questions

Is RSI 14 the default on Tradetron?

No. The builder fills in 15 for RSI and 20 for RSI Series. Type 14 to use Wilder's setting.

Does Tradetron's RSI use Wilder's smoothing?

Yes. It uses TA-Lib's RSI, which seeds with a simple average and then smooths Wilder's way, live and in backtests.

Can I take RSI of something other than the close?

Yes, with RSI Series: give it any series, such as an EMA or the open.

Does RSI work on the NIFTY index?

Yes. RSI needs only prices, so it works on the index, futures, options and stocks.

Education, not investment advice. Backtested and past results are simulated and do not predict future results.