How to detect RSI OverboughtOversold Signals in Pine Script

hey Traders today we're making a script
to detect overbought and oversold
conditions on the relative strength
index and drawing those signals onto the
chart when they happen in this series I
answer questions from students as
briefly as possible I have much longer
lessons on the channel but these are
intended to get straight to the point
let's go the source code to the script
will be in the pin comment below but
let's get started with a brand new blank
template script here now the first thing
we want to do with this particular
script is we want to draw over the top
of price action so we're going to set
overlay equals true on our indicator
next we need to get our user input so
this will be the RSI length the
overboard and oversold thresholds so I
like to put an I underscore before my
inputs just to differentiate them from
my other variables you can call this
whatever you want the first one will be
RSI length and that will be an INT input
a whole number input we'll set it to 14
by default and give it a title of RSI
length and then our other inputs will be
the overbo and oversold I like to make
these float inputs because that allows
us to put decimal places in the setting
gives us a bit more fine control those
are the only inputs we need right now
the next thing to do is get the RSI
value itself RSI value equals and then
for this we use the technical analysis
Library ta. RSI will get us the RSI
value based on the closing price and our
RSI length input so a 14 period RSI
based on the close using the inbuilt
trading view formula for RSI saves us a
lot of trouble next we need to check for
our overbought and oversold conditions
so RSI overbought is going to be true
when the RSI value is greater than iore
RSI overbought and RSI oversold will be
true when the RSI value is less than our
oversold input you could set these to
greater than or equal to but I'll leave
mine as greater than and less than next
we need to draw our actual signals onto
the chart for that we will use the plot
shape function this can take a Boolean
true or false value so we'll paste in
our overbought condition we'll give it a
title of overbought a shape of triangle
down since this is a cell signal
traditionally we'll set the location to
location. above bar we'll set the color
to red and if you leave it like this
then the size will be automatically
adjusted based on your your zoom level
on your chart or you can specify a size
if you want to I'll set minus small for
now just so it's easy to see as you'll
see in a moment small is actually quite
big on my chart but now I can copy this
line of code paste it in change
overboard to
oversold change triangle down to
Triangle up the location to below bar
the color to green and now this is
optional but I like to format everything
so that it lines
up and each parameter is easy to read
and adjust and then that's it we are
done now if I Sav my code minimize the
editor here are our signals so whenever
the RSI goes overbought we get a red
triangle whenever it goes oversold we
get a green triangle now this isn't a
trading lesson but as you can see these
can be quite good buying and selling
opportunities but I'd be careful just
buying or selling simply because
something is overbought or oversold
because as you can see markets can stay
overbought and oversold for long periods
of time so it's always is best to
combine these indicator conditions with
other technical factors price action
patterns that sort of thing to increase
the accuracy of this reversal signal it
can also make an interesting Trend
continuation signal where you buy in the
direction or sell in the direction of
the RSI overboard or oversold but for
that I would recommend making the um
inputs a bit looser our overbought and
oversold levels are a little bit looser
and our RSI period is a bit shorter so
we're getting more of a read on momentum
rather rather than a reversal condition
per se and if you wanted to add alerts
to this script all we would need to do
is come down to the bottom here
somewhere say fire alerts if RSI
overbought alert Market overbought with
a frequency of whatever you prefer I'll
select once per bar close and copy that
and
oversold done now if we come up and hit
this we can select our script and we can
select any alert function call click
create and then whenever the market goes
overbought or oversold we will be
notified and finally if you wanted to
add some sort of Candlestick pattern
detection to this we could add on the
end here uh RSI overb and close under
previous bars low or close above
previous bars high for a bullish
reversal now if I save my code we will
only get signals and alerts when we get
a lower close after the RSI goes
overbought or oversold which gives us
much better signals as you can see here
combining these sorts of indicated
conditions with candlestick patterns is
a great way to create potentially
profitable trading systems for veterans
of the channel this might seem like a
simple lesson that's because it's
intended to be in this series I answer
questions from students as briefly as
possible but if you want to see those
longer lessons where I go into much more
detail about the Practical
implementations of some of these
techniques into actual systems trading
strategies and trading tools check out
this playlist in the middle of your
screen right now or check out our
website pinescript mastery.com where
there is a 6-hour long free pinescript
Basics course that will teach you all of
the fundamentals or a 50 plus hour long
premium course where I go into much more
detail about applying these techniques
to make profitable and valuable trading
tools with that said I hope you enjoyed
this lesson take care good luck with
your trading and have a great day
goodbye