EUR/USD Strategy Using RSI and Its Five-Period EMA

Summary

This EUR/USD strategy uses the relative strength index (RSI) as a momentum signal, then smooths it with a five-period exponential moving average. It opens a long position when the smoothed RSI crosses above 50 and a short position when it crosses below 50. Each side has configurable profit and loss limits, both set to 500 in the script; the accompanying description characterizes these as 50-pip targets and stops. An opposing entry is also described as closing the current position.

The document gives backtest settings of $100,000 initial equity, full-equity order sizing, and no pyramiding, but supplies no performance results. The strategy is a simple threshold crossover whose behavior depends on instrument settings and execution assumptions. The author cautions that it was developed with hindsight and that historical performance does not establish future results. Costs, slippage, and robustness across time periods are not evaluated in the provided description.

Key ideas

• The strategy smooths a 20-period RSI with a five-period exponential moving average.
• A cross above 50 triggers a long entry, while a cross below 50 triggers a short entry.
• The script sets separate profit and loss limits for long and short trades.
• The stated backtest uses full-equity sizing, no leverage, and disabled pyramiding.
• The document provides no performance evidence and warns that hindsight may affect the strategy.

Tags

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