RSI Overbought/Oversold (Impulse Reversal) Setup & Indicator RSI: Period 14, Levels: 30 (oversold), 70 (overbought) Timeframe: M15–H1 for swing and day trading Confirmation: Bullish/bearish candlestick pattern (e.g. Hammer, Shooting Star) Entry Long: RSI drops below 30, forms a divergence (e.g. rising RSI lows vs. falling price lows) and turns back above 30. Short: RSI exceeds 70, confirmed by a reversal candle, and falls back below 70. Exit Stop-Loss: 5–10 pips outside the last local low/high Take-Profit: 50% of the stop distance (conservative) or RSI returning to the neutral zone (40–60) Risk Management Only trade in clear sideways markets or slowly trending phases Maximum 1% risk per trade, otherwise skip the setup Example chart: RSI Impulse Reversal Setup Upper panel (Price): A simulated price line with markers for long (▲) and short (▼) entries. Lower panel (RSI 14): The RSI with the levels 30 (oversold) and 70 (overbought). Long signal: RSI falls below 30 and then crosses back upward. Short signal: RSI rises above 70 and then crosses back downward. This allows you to visually confirm the entry before adding a candlestick reversal formation as confirmation.
