Combining a 123 Reversal Signal with Laguerre RSI Momentum

Summary

This strategy combines a short-term price reversal signal with a momentum filter intended to represent the broader trend. Its 123 component checks the sequence of recent closes and uses a stochastic oscillator condition to confirm a directional reversal. A Laguerre-filtered RSI supplies a second signal: the strategy takes a long or short position only when this indicator agrees with the reversal signal. If the signals do not align, the strategy closes its position.

The document explains the indicators and gives their default parameters, then provides source code and a short published backtest window for Bitcoin futures. It presents no backtest results, transaction costs, or comparisons against simpler strategies. The accompanying discussion identifies conflicting signals and parameter selection as risks, but claims that the combination can reduce false signals are not supported by reported evidence. The method is therefore best read as a rule-based strategy proposal whose behavior and robustness require independent testing across markets and regimes.

Key ideas

• The 123 component uses recent closing-price changes and stochastic conditions to identify potential reversals.
• A Laguerre-filtered RSI acts as a separate momentum and trend filter.
• Trades are taken only when both components point in the same direction.
• The strategy closes positions when the combined signal is neutral.
• The document gives a short Bitcoin futures backtest setup but no performance results.

Tags

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