RSI Strategy Backtest: Testing Overbought and Oversold on Indian Stocks

Published 9 July 2026 · 7 min read · SutraLipi

The RSI is the go-to indicator for spotting when a market has run too far, too fast. Used as a mean-reversion signal, it is simple to code and simple to backtest — but easy to misuse. Here is how RSI works, a basic strategy, and how to test it honestly on Indian stocks and indices.

What is the RSI?

The Relative Strength Index (RSI) is a momentum oscillator that moves between 0 and 100. It measures how strong recent gains are relative to recent losses over a lookback period (commonly 14). The traditional reading:

• Above 70 — the market is “overbought” (may be due for a pullback).
• Below 30 — the market is “oversold” (may be due for a bounce).

A simple RSI mean-reversion strategy

The classic rules buy weakness and sell strength:

• Buy when RSI falls below 30 (oversold).
• Exit when RSI recovers back above a middle level such as 55.

A runnable example

Here it is on a 15-minute chart, buying oversold dips and exiting on recovery:

EquitySymbol stock = NSE:EQ:"RELIANCE";
float[] rsi;

onTick {
    INDICATOR_RSI(rsi, stock, M15, 14, 1);

    // oversold -> buy
    if (rsi[0] < 30) {
        OrderSend(stock, BUY, 1, 0, 0, 0, INTRADAY, DAY, "rsi oversold");
    }
    // recovered -> exit
    if (rsi[0] > 55) {
        OrderCloseBySymbol(stock, INTRADAY, DAY, "rsi exit");
    }
}

The indicator fills the rsi array; rsi[0] is the latest value. See the indicators reference for the full RSI signature.

How to backtest it

1. Test across many stocks and indices, not just one — an RSI edge that works on one symbol may vanish on another.
2. Try different exit levels (50, 55, 60) but avoid tuning until it looks perfect.
3. Validate on out-of-sample data.
4. Include brokerage, taxes and slippage — mean-reversion trades are frequent, so costs add up.

The big pitfall: RSI in a strong trend

Variations worth testing

• Trend-filtered RSI — only take longs when price is above a long moving average.
• RSI + support — require the oversold reading near a known level.
• Different periods — a shorter RSI is twitchier; a longer one is smoother.

Try it

Build the RSI strategy in the SutraLipi platform, backtest it across a basket of stocks, then add a trend filter and compare. For a trend-following contrast, see the Supertrend strategy.

This article is for education only and is not investment advice. Trading and investing in securities and derivatives carry risk of loss; past performance and backtested results do not guarantee future returns. Please read our Risk Disclosure Statement and consult a SEBI-registered adviser before trading.