RSI(2) Mean-Reversion Entries Filtered by Trend Conditions

Summary

This post describes a long-only RSI(2) mean-reversion strategy for equity indices. It buys when the two-period RSI falls below 15, subject to a positive slope in the 22-day moving average and a 22-period RSI above 50. It exits when RSI(2) rises above 60 and limits the position to one contract. The author presents these two trend filters as a substitute for the commonly used requirement that price remain above its 200-day moving average.

The rationale is to avoid some weak-trend entries while seeking to capture short-term rebounds. The author reports testing the approach on IG CFDs and says it appeared to work on several developed-market indices, but supplies no performance figures or detailed test design. The post stresses that losses can be negatively asymmetric: occasional large setbacks may erase accumulated gains. It also warns that overnight spreads on 24-hour index CFDs may consume much of the strategy’s edge, and notes a platform limitation affecting the desired timeframe setup. These caveats make the results difficult to generalize.

Key ideas

• The strategy buys oversold conditions measured by RSI(2) and exits after RSI(2) rebounds above its threshold.
• A rising 22-day moving average and RSI(22) above 50 filter entries by trend.
• The author caps exposure at one contract.
• Large losses and CFD spreads may outweigh gains, and the post supplies no detailed performance statistics.

Tags

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