RSI Threshold Breakouts with ATR-Based Stops and Trailing Exits

Summary

This document describes a rule-based strategy that enters a trade when the RSI crosses above 73 or below 27. It uses the RSI signal to initiate a buy or sell position, then relies on average true range (ATR) to set and adjust exits. The initial stop is placed three ATRs from entry. After the price moves in the trade’s favor by more than three ATRs, the stop moves to break even; if the trade continues favorably, a three-ATR trailing stop is used to exit.

The document explains ATR as a volatility measure that can better reflect markets with price gaps, such as commodities and forex. It provides no backtest results, performance evidence, or detailed rules for signal timing, position sizing, or handling repeated signals. The thresholds and stop distances are presented as a strategy description, not as validated settings, so their suitability across instruments and market conditions is not established.

Key ideas

• The strategy enters when RSI crosses above 73 or falls below 27.
• The initial stop is set three ATRs from the entry price.
• After a favorable move greater than three ATRs, the stop moves to break even.
• A three-ATR trailing stop is used if the position continues to gain.
• ATR is presented as a volatility measure suited to markets that can gap.

Tags

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