RSI Extreme Reversals with Fixed-Fraction Stops

Summary

This range-oriented strategy uses a very short RSI reading to trigger trades against extreme moves. With a two-bar RSI, it goes long at or below 11 and short at or above 91, using the indicator's transitions between extremes to switch direction. It records the entry price and closes a position if price moves 0.5% against it. The settings describe a maximum risk fraction of 5%, although the source's order sizing does not clearly implement that amount as a position-sizing rule.

A Binance BTC/USDT futures backtest configuration is provided for daily bars from late October 2022 to early November 2023, based on hourly data. No performance metrics are reported. The strategy depends on prices reverting after RSI extremes, so persistent trends may produce repeated losses; the fixed stop can also be sensitive to market volatility. The document suggests testing other parameters, using adaptive stops, or adding filters, but gives no evidence that these changes improve results.

Key ideas

• A two-bar RSI reading at or below 11 triggers a long, while a reading at or above 91 triggers a short.
• Positions are closed if price moves 0.5% against the recorded entry price.
• The settings state a 5% maximum risk per trade, but the shown position-sizing logic does not clearly enforce it.
• The method is intended for ranging conditions and can struggle during persistent directional moves.
• The configured futures backtest has no accompanying performance statistics.

Tags

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