In this blog, we\u2019ll break down what RSI is, how to use it on Nifty 50 stocks, and how to avoid common traps to safeguard your investment.<\/p>\n
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What Is RSI?<\/span><\/h3>\n![\"\"](\"https:\/\/www.gwcindia.in\/blog\/wp-content\/uploads\/sites\/2\/2025\/06\/ChatGPT-Image-Jun-5-2025-04_48_03-PM-300x200.png\")
<\/p>\n
RSI (Relative Strength Index) is a momentum oscillator that measures the speed and change of price movements. It moves between 0 and 100.<\/p>\n
\ud83d\udd0d Basic RSI Levels:
\n\u2022 Above 70 = Overbought (price may correct)
\n\u2022 Below 30 = Oversold (price may bounce) Developed by J. Welles Wilder, RSI is one of the most popular indicators for short-term traders and swing traders looking to optimize their investment<\/a> timing.<\/p>\n
\nRSI Formula (Simplified)<\/span><\/h3>\nRSI = 100 – (100 \/ (1 + RS))
\nWhere RS = Average gain over X periods \/ Average loss over X periods
\n(Default period is 14 days)<\/p>\n
Luckily, you don\u2019t have to calculate it manually\u2014most trading platforms provide RSI on the chart by default.<\/p>\n
\nHow to Use RSI Strategy for Nifty Stock Reversals<\/span><\/h3>\n![\"\"](\"https:\/\/www.gwcindia.in\/blog\/wp-content\/uploads\/sites\/2\/2025\/06\/03-FEB-2025xx-300x169.png\")
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\u2705 1. Look for Overbought\/Oversold Zones<\/h5>\n
\u2022 RSI > 70: Stock may be overheated. Consider booking profits or waiting for a dip to protect your investment.
\n\u2022 RSI < 30: Stock may be undervalued short term. A bounce could be near, potentially signaling a good investment<\/a> entry point.<\/p>\n\ud83d\udd01 Use this with support\/resistance zones for better accuracy.<\/p>\n
\n\u2705 2. Spot RSI Divergences<\/h5>\n
![\"\"](\"https:\/\/www.gwcindia.in\/blog\/wp-content\/uploads\/sites\/2\/2025\/06\/03-FEB-2025ftr-300x169.png\")
<\/p>\n
<\/p>\n
\u2734\ufe0f Bullish Divergence:<\/p>\n
Price makes a lower low, but RSI makes a higher low
\n\ud83d\udc49 Suggests weakness in selling\u2014possible reversal up<\/p>\n
\u2734\ufe0f Bearish Divergence:<\/p>\n
Price makes a higher high, but RSI makes a lower high
\n\ud83d\udc49 Suggests weakness in buying\u2014possible reversal down<\/p>\n
This is one of the most reliable reversal signals when used on liquid Nifty stocks like Reliance, Infosys, HDFC Bank, etc.<\/p>\n
\n\u2705 3. Use RSI with Price Action<\/h5>\n
![\"\"](\"https:\/\/www.gwcindia.in\/blog\/wp-content\/uploads\/sites\/2\/2025\/06\/e32833ae-4286-4f75-8afc-eeaf6cd0a1f4-200x300.png\")
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\n- Combine RSI with candlestick patterns like hammer, engulfing, or doji at key levels<\/li>\n
- Confirm RSI signals with volume analysis<\/li>\n<\/ul>\n
\ud83d\udccd Example: If RSI shows oversold at a trendline support, and a bullish engulfing candle forms \u2192 strong reversal signal.<\/p>\n
\n\ud83e\uddea Real-World Example: RSI on a Nifty Stock<\/span><\/h5>\nLet\u2019s say you\u2019re watching Infosys:<\/p>\n
\n- RSI dips to 28<\/li>\n
- Price approaches a key support level<\/li>\n
- A bullish hammer candle forms on the daily chart<\/li>\n<\/ul>\n
\ud83d\udc49 This confluence gives a strong buy signal with a tight stop-loss, a smart move for any investment<\/strong><\/a> portfolio.<\/p>\n
\n\ud83d\udeab Common RSI Mistakes to Avoid<\/span><\/h5>\n\u274c Blindly Buying Below 30 or Selling Above 70<\/p>\n
Sometimes a stock stays overbought or oversold for weeks\u2014use confirmation before acting.<\/p>\n
\u274c Using RSI Alone<\/p>\n
Always combine RSI with support\/resistance, trend, and volume for high-probability trades.<\/p>\n
\u274c Ignoring Timeframe<\/p>\n
RSI on a daily chart is more reliable for swing trades than on a 5-min chart.<\/p>\n
\n\ud83d\udcc5 Best Timeframes to Use RSI<\/span><\/h4>\n![\"\"](\"https:\/\/www.gwcindia.in\/blog\/wp-content\/uploads\/sites\/2\/2025\/06\/Screenshot-2025-06-05-164929-300x70.png\")
<\/p>\n
\nConclusion<\/span><\/h3>\nRSI is a powerful reversal tool when used smartly. For Nifty stocks, it can help you:<\/p>\n
<\/p>\n\n\u2022 Above 70 = Overbought (price may correct)
\n\u2022 Below 30 = Oversold (price may bounce) Developed by J. Welles Wilder, RSI is one of the most popular indicators for short-term traders and swing traders looking to optimize their investment<\/a> timing.<\/p>\n
\n
RSI Formula (Simplified)<\/span><\/h3>\nRSI = 100 – (100 \/ (1 + RS))
\nWhere RS = Average gain over X periods \/ Average loss over X periods
\n(Default period is 14 days)<\/p>\n
Luckily, you don\u2019t have to calculate it manually\u2014most trading platforms provide RSI on the chart by default.<\/p>\n
\nHow to Use RSI Strategy for Nifty Stock Reversals<\/span><\/h3>\n<\/p>\n
\u2705 1. Look for Overbought\/Oversold Zones<\/h5>\n
\u2022 RSI > 70: Stock may be overheated. Consider booking profits or waiting for a dip to protect your investment.
\n\u2022 RSI < 30: Stock may be undervalued short term. A bounce could be near, potentially signaling a good investment<\/a> entry point.<\/p>\n\ud83d\udd01 Use this with support\/resistance zones for better accuracy.<\/p>\n
\n\u2705 2. Spot RSI Divergences<\/h5>\n
<\/p>\n
<\/p>\n
\u2734\ufe0f Bullish Divergence:<\/p>\n
Price makes a lower low, but RSI makes a higher low
\n\ud83d\udc49 Suggests weakness in selling\u2014possible reversal up<\/p>\n
\u2734\ufe0f Bearish Divergence:<\/p>\n
Price makes a higher high, but RSI makes a lower high
\n\ud83d\udc49 Suggests weakness in buying\u2014possible reversal down<\/p>\n
This is one of the most reliable reversal signals when used on liquid Nifty stocks like Reliance, Infosys, HDFC Bank, etc.<\/p>\n
\n\u2705 3. Use RSI with Price Action<\/h5>\n
<\/p>\n
\n- Combine RSI with candlestick patterns like hammer, engulfing, or doji at key levels<\/li>\n
- Confirm RSI signals with volume analysis<\/li>\n<\/ul>\n
\ud83d\udccd Example: If RSI shows oversold at a trendline support, and a bullish engulfing candle forms \u2192 strong reversal signal.<\/p>\n
\n\ud83e\uddea Real-World Example: RSI on a Nifty Stock<\/span><\/h5>\nLet\u2019s say you\u2019re watching Infosys:<\/p>\n
\n- RSI dips to 28<\/li>\n
- Price approaches a key support level<\/li>\n
- A bullish hammer candle forms on the daily chart<\/li>\n<\/ul>\n
\ud83d\udc49 This confluence gives a strong buy signal with a tight stop-loss, a smart move for any investment<\/strong><\/a> portfolio.<\/p>\n
\n\ud83d\udeab Common RSI Mistakes to Avoid<\/span><\/h5>\n\u274c Blindly Buying Below 30 or Selling Above 70<\/p>\n
Sometimes a stock stays overbought or oversold for weeks\u2014use confirmation before acting.<\/p>\n
\u274c Using RSI Alone<\/p>\n
Always combine RSI with support\/resistance, trend, and volume for high-probability trades.<\/p>\n
\u274c Ignoring Timeframe<\/p>\n
RSI on a daily chart is more reliable for swing trades than on a 5-min chart.<\/p>\n
\n\ud83d\udcc5 Best Timeframes to Use RSI<\/span><\/h4>\n<\/p>\n
\nConclusion<\/span><\/h3>\nRSI is a powerful reversal tool when used smartly. For Nifty stocks, it can help you:<\/p>\n
\nWhere RS = Average gain over X periods \/ Average loss over X periods
\n(Default period is 14 days)<\/p>\n
<\/p>\n
\u2705 1. Look for Overbought\/Oversold Zones<\/h5>\n
\u2022 RSI > 70: Stock may be overheated. Consider booking profits or waiting for a dip to protect your investment. \ud83d\udd01 Use this with support\/resistance zones for better accuracy.<\/p>\n <\/p>\n \u2734\ufe0f Bullish Divergence:<\/p>\n Price makes a lower low, but RSI makes a higher low \u2734\ufe0f Bearish Divergence:<\/p>\n Price makes a higher high, but RSI makes a lower high This is one of the most reliable reversal signals when used on liquid Nifty stocks like Reliance, Infosys, HDFC Bank, etc.<\/p>\n \ud83d\udccd Example: If RSI shows oversold at a trendline support, and a bullish engulfing candle forms \u2192 strong reversal signal.<\/p>\n Let\u2019s say you\u2019re watching Infosys:<\/p>\n \ud83d\udc49 This confluence gives a strong buy signal with a tight stop-loss, a smart move for any investment<\/strong><\/a> portfolio.<\/p>\n \u274c Blindly Buying Below 30 or Selling Above 70<\/p>\n Sometimes a stock stays overbought or oversold for weeks\u2014use confirmation before acting.<\/p>\n \u274c Using RSI Alone<\/p>\n Always combine RSI with support\/resistance, trend, and volume for high-probability trades.<\/p>\n \u274c Ignoring Timeframe<\/p>\n RSI on a daily chart is more reliable for swing trades than on a 5-min chart.<\/p>\n RSI is a powerful reversal tool when used smartly. For Nifty stocks, it can help you:<\/p>\n
\n\u2022 RSI < 30: Stock may be undervalued short term. A bounce could be near, potentially signaling a good investment<\/a> entry point.<\/p>\n
\n\u2705 2. Spot RSI Divergences<\/h5>\n
<\/p>\n
\n\ud83d\udc49 Suggests weakness in selling\u2014possible reversal up<\/p>\n
\n\ud83d\udc49 Suggests weakness in buying\u2014possible reversal down<\/p>\n
\n\u2705 3. Use RSI with Price Action<\/h5>\n
<\/p>\n\n
\n\ud83e\uddea Real-World Example: RSI on a Nifty Stock<\/span><\/h5>\n
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\n\ud83d\udeab Common RSI Mistakes to Avoid<\/span><\/h5>\n
\n\ud83d\udcc5 Best Timeframes to Use RSI<\/span><\/h4>\n
<\/p>\n
\nConclusion<\/span><\/h3>\n