EMA Crossover Signals with RSI Filters and ATR-Based Risk Sizing

Summary

This strategy combines 20- and 50-period EMA crossovers with a 14-period RSI filter. A bullish crossover can trigger a long when price is above the slower EMA and RSI is below the overbought threshold; a bearish crossover can trigger a short when price is below the slower EMA and RSI is above the oversold threshold. Opposite confirmed signals close existing positions.

ATR sets stop and target distances, with the stated default target distance twice the stop distance. Position size is calculated from a chosen fraction of capital divided by the stop distance, linking trade size to the volatility-based stop. The document also discusses risks such as whipsaws in ranging markets, parameter sensitivity, slippage, and correlated losses, and suggests testing additional filters. It describes rules and suggested refinements but supplies no backtest results or evidence that its risk-reward settings produce profitable outcomes. Actual execution and portfolio-level risk can differ from the simplified calculations described.

Key ideas

• A 20-period and 50-period EMA crossover supplies directional entry signals, with price location used as an additional condition.
• The RSI filter excludes longs above its overbought threshold and shorts below its oversold threshold.
• ATR determines stop and target distances, and position size is based on risk capital divided by stop distance.
• Opposite confirmed signals close open positions before a stop or target necessarily triggers.
• The document identifies whipsaws, slippage, parameter sensitivity, and correlated losses as limitations.

Tags

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