RSI, EMA, and Fair Value Gap Mean-Reversion Strategy

Summary

This short-term mean-reversion approach combines price location, momentum extremes, and gap structure to identify possible reversals. It seeks longs when price is below both the 20- and 100-period EMAs, RSI is below 20, and a bullish FVG aligns with an up candle. Shorts require price above both averages, RSI above 80, and a bearish FVG aligned with a down candle. The strategy sets a take-profit target at entry using 14-period ATR multiplied by four, so the target scales with volatility.

The document describes the rules and gives BTC/USDT futures backtest settings spanning about a year, but reports no performance results. It also notes that the strategy has no explicit stop loss, may produce few signals, and can struggle in strong trends. The stated 25% capital allocation adds position risk. Suggested extensions include a trend filter, entry confirmation, dynamic parameters, and more conservative position sizing; claims about signal selectivity are not supported by reported test statistics.

Key ideas

• Longs require an oversold RSI, price below both EMAs, and a bullish gap signal aligned with an up candle.
• Shorts require an overbought RSI, price above both EMAs, and a bearish gap signal aligned with a down candle.
• The take-profit target is fixed at entry using four times the 14-period ATR.
• The strategy has no explicit stop loss and may perform poorly during strong trends.

Tags

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