A Three-Period RSI Mean-Reversion Strategy with Profit-Based Position Scaling

Summary

This long-only strategy for QQQ uses a three-period Relative Strength Index to identify short-term weakness and recovery. It enters when RSI falls below 10 and exits when RSI rises above 50. Position size starts at 100 shares and increases in steps as strategy profit reaches successive thresholds, with the described default step set at $50. The approach therefore combines a mean-reversion entry and exit rule with profit-linked position scaling.

The document reports an annualized return of 11.5%, a maximum drawdown of 14.5%, market exposure of about 8% of trading time, and a 16-year test period. These figures are presented without details on data, transaction costs, slippage, benchmark, or whether the test was out of sample, so they do not establish robustness. Profit-based scaling also changes exposure as gains accumulate, while the rules provide no separate stop-loss or risk cap. The source describes the mechanics and headline test statistics, but not enough methodology to independently assess them.

Key ideas

• The strategy buys QQQ when three-period RSI falls below 10 and exits above 50.
• Initial position size is 100 shares, with additional shares added as strategy profits reach steps of $50 by default.
• The document reports an 11.5% annualized return, 14.5% drawdown, and roughly 8% market exposure over 16 years.
• The reported test lacks details about costs, data methodology, benchmark, and out-of-sample validation.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.