Combining a 123 Reversal Pattern with ROC-Based RSI Momentum

Summary

This strategy combines a 123 reversal signal with an RSI calculated from the rate of change of price. The reversal component looks for two consecutive rising or falling closes and uses the stochastic oscillator's fast and slow lines relative to a midpoint as confirmation. The momentum component compares its ROC-based RSI with buy and sell zones. The source takes a position only when both components agree, and closes when the combined signal returns to neutral. The published example uses BTC-USDT futures over a short historical interval; no backtest performance figures are supplied.

The document frames the two signals as a way to filter reversal entries, while acknowledging that the 123 pattern can produce false breaks and that RSI remains price-based. Requiring agreement can also delay or miss entries. Suggested experiments include varying ROC and stochastic settings, changing the RSI zones, replacing the stochastic component, or testing a single-signal version. These are proposals for evaluation, not evidence that the combined method is profitable.

Key ideas

• The reversal component uses consecutive changes in closing prices together with stochastic oscillator conditions.
• The momentum component applies RSI thresholds to rate-of-change values.
• The source requires both components to signal the same direction before opening a position.
• The combined method may filter some entries but can also delay or miss trades.
• The document gives parameter ideas but reports no measured performance results.

Tags

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