Dynamic RSI Periods Based on Price–Momentum Correlation

Summary

This strategy adapts the RSI lookback according to the rolling correlation between price and a momentum series. It maps the correlation into a configurable minimum-to-maximum period range: stronger positive correlation leads to a shorter RSI period, while weaker or negative correlation generally produces a longer one. The example defaults to a 20–50 range and uses RSI threshold crossings to enter long positions when RSI rises through the oversold level and short positions when it falls through the overbought level.

The document explains the indicator logic and its intended responsiveness but presents no comparative backtest results. It cautions that correlation can lag turning points, may be an incomplete guide to useful RSI settings, and may require different period ranges across instruments. The code uses price-minus-lagged-price momentum and a one-month futures backtest configuration, but that short sample alone does not establish robustness. It also sizes orders at a fixed fraction of equity and provides no explicit stop-loss or take-profit rules, so risk management requires separate evaluation.

Key ideas

• The RSI period is mapped from rolling price–momentum correlation into a configurable range.
• Higher positive correlation selects a shorter, more responsive RSI period.
• Long entries occur as RSI crosses above the oversold threshold, while short entries occur as it crosses below the overbought threshold.
• Correlation lag and dependence on only one adaptation factor can weaken the method.
• The example provides no explicit stop-loss or take-profit rules and reports no performance evidence.

Tags

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