ADX Regime Switching Between RSI Reversion and Breakout Trading

Summary

This strategy switches between mean reversion and breakout trading according to an ADX regime filter. When ADX is below its threshold, it looks for RSI extremes aligned with a 200-period EMA bias and exits as RSI returns toward its midpoint. When ADX is above the threshold, it enters on a break of the prior 20-candle closing-price range, again filtered by the EMA direction. ATR-based trailing stops are used for breakout positions, while the document also describes account-equity-based sizing and trade-state tracking.

The document lays out the entry and exit rules and identifies risks including lagging regime classification, false breakouts, parameter sensitivity, slippage, and excessive trading. It provides no performance statistics to establish profitability. Its recommendations for volume confirmation, multi-timeframe checks, and parameter stability testing are possible extensions, rather than tested results; the specific thresholds may require validation for each market and timeframe.

Key ideas

• ADX selects between ranging-market RSI entries and trending-market breakouts.
• The 200-period EMA filters entries to align with the prevailing price bias.
• RSI trades exit near its midpoint, while breakout trades use ATR-based trailing stops.
• The document describes false signals, slippage, and parameter sensitivity as key limitations.

Tags

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