RSI and Moving Average Mean Reversion with Stops
Summary
This strategy combines the Relative Strength Index with a simple moving average to identify possible price reversals. It enters long when RSI is below 30 and price is below its 20-period average; it enters short when RSI is above 70 and price is above that average. The document describes a 14-period RSI and percentage-based stop loss and profit target, with stated settings of 0.5% and 1% respectively.
The rationale is that extreme readings may precede a return toward average prices, while the moving average provides a price reference. The document supplies BTC/USDT Binance futures backtest settings for April 2024 but reports no results. The source code applies the stop and target only to long positions, despite describing risk controls generally, and does not show a corresponding short exit rule. Trending markets can sustain extreme readings, and fixed percentage exits may not suit changing volatility; costs and slippage are not assessed.
Key ideas
- A long signal requires RSI below 30 and price below the 20-period simple moving average.
- A short signal requires RSI above 70 and price above the moving average.
- The described stop and profit target are 0.5% and 1% from average entry price.
- Mean reversion can struggle when prices keep trending away from the average.
- The source defines exits for long positions but does not implement equivalent short exits.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.