RSI Strategy for Polymarket

What is RSI?

The Relative Strength Index (RSI) is a momentum oscillator that measures the speed and magnitude of price changes. It ranges from 0 to 100 and is one of the most widely used technical indicators in all of trading.

• RSI below 30 = Oversold — The asset has been selling off aggressively and may be due for a bounce.
• RSI above 70 = Overbought — The asset has been rallying hard and may be due for a pullback.
• RSI at 50 = Neutral — No strong momentum in either direction.

Why RSI Works for Prediction Markets

RSI is particularly effective for Polymarket crypto prediction markets because:

• Mean reversion is strong in short timeframes — Crypto prices tend to snap back after extreme moves on 5-minute, 15-minute and 1-hour charts.
• Binary outcomes simplify the trade — You don't need to predict the exact price — just whether it'll be above or below a level.
• Defined risk — If RSI gives a false signal, your max loss is the share price. No liquidation risk.
• High frequency — With markets resolving every 15 minutes, RSI generates many signals per day.

The Strategy

The core RSI mean-reversion strategy for Polymarket is straightforward:

1. 1
   Monitor RSI on the underlying crypto asset

   Use RSI(14) on the 5-minute or 15-minute chart of BTC, ETH, SOL, or XRP.

2. 2
   Wait for extreme readings

   Look for RSI below 30 (oversold) or above 70 (overbought).

3. 3
   Trade the prediction market

   When RSI is oversold, buy YES on "price above" markets (expecting a bounce). When overbought, buy NO (expecting a pullback).

4. 4
   Hold until resolution or exit early

   Either hold until the market resolves, or sell your shares when RSI returns to neutral (40-60 range).

Entry Rules

Bullish Entry (Buy YES)

• RSI crosses below 30 — The asset is oversold — expect a bounce.
• Current price is near or below the strike — YES shares are cheap, offering high return potential.
• Use limit orders — Don't chase. Set a limit order at your target YES price and wait.

Bearish Entry (Buy NO)

• RSI crosses above 70 — The asset is overbought — expect a pullback.
• Current price is near or above the strike — NO shares are cheap, offering high return potential.
• Confirm with volume — Overbought readings are more reliable when accompanied by declining volume.

Exit Rules

• Hold to resolution — The simplest approach — let the market resolve and collect $1.00 if correct.
• Exit on RSI normalisation — Sell your shares when RSI returns to the 40-60 neutral zone for a partial profit.
• Exit on opposite extreme — If you bought YES on oversold and RSI now shows overbought, take profit.
• Time-based exit — If RSI hasn't normalised within half the market's timeframe, consider exiting.

Risk Management

1. 1
   Position size: 5-10% of balance per trade

   RSI signals have roughly a 60-65% win rate. You need proper sizing to survive losing streaks.

2. 2
   Don't trade every signal

   Focus on extreme readings (RSI below 25 or above 75) for higher-probability setups.

3. 3
   Avoid trading during major news

   RSI mean-reversion breaks down during strong trend moves caused by major news events.

4. 4
   Diversify across assets

   Don't run RSI on just BTC. Spread across ETH, SOL, and XRP for uncorrelated signals.

Automating with Playground

The best part about this strategy is that it's perfectly suited for automation. In Polyblock's Playground, you can build this entire strategy by chatting with the AI:

Once deployed, the strategy runs 24/7 on Polyblock's servers. It monitors RSI in real-time, places orders automatically, and manages positions — all without you needing to watch the screen.

Advanced Variations