Filtering 123 Reversal Signals with the Relative Momentum Index

Summary

This strategy combines a 123 price-reversal setup with a Relative Momentum Index (RMI), taking a position only when both components point in the same direction. The 123 component uses recent closes and stochastic levels to identify potential reversals. RMI modifies the RSI idea by comparing upward and downward price momentum over a lookback period; threshold zones determine its directional state. When the two signals agree, the system enters long or short, and when they no longer agree, it closes positions.

The document lists default settings and a BTC/USDT futures backtest window from January to February 2024, but supplies no performance statistics. The written description and code differ on some signal details: for example, the prose describes RMI as long below an overbought line and short above an oversold line, while the parameters and code use distinct buy and sell thresholds. Dual confirmation may reduce trades but can also delay or omit opportunities. The document notes reversal errors and parameter sensitivity, and suggests testing variations, adding volume confirmation, and applying stop losses.

Key ideas

• The strategy requires agreement between a 123 reversal signal and an RMI signal before entering.
• The 123 component combines recent closing-price changes with stochastic oscillator conditions.
• RMI compares upward and downward momentum across a lookback and uses separate buy and sell thresholds.
• The code closes positions when the combined signal is neutral.
• The provided backtest settings contain no reported performance results, and the text flags missed trades and parameter risk.

Tags

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