SMA Crossover Trend Following with RSI Filters and Fixed Risk Levels

Summary

This trend following system enters on crossovers between an 8 period and a 21 period simple moving average, with a 14 period RSI filter. A long signal requires the short average to cross above the long one while RSI is below its overbought threshold; a short signal requires a downward crossover while RSI is above its oversold threshold. The described risk settings pair a 1% stop with a 2% profit target. In the supplied implementation, a short signal closes a long position and opens a short position, while the exits apply stop and limit orders relative to average entry price.

The document explains the rationale and names familiar limitations: crossover lag, false signals in sideways markets, parameter sensitivity, and dependence on trending conditions. It provides no reported performance metrics or detailed validation. The published backtest settings cover only a brief SOL/USDT period, so they do not establish robustness across assets, market regimes, or timeframes. The suggested enhancements include regime or trend strength filters, volume confirmation, and adaptive or dynamic risk settings, all of which would require separate testing.

Key ideas

• An 8 period and 21 period SMA crossover supplies the directional entry signal.
• A 14 period RSI filter allows longs below 70 and shorts above 30.
• The described exits use a 1% stop loss and a 2% take profit relative to entry.
• Moving average lag and choppy markets can cause missed moves and repeated false signals.
• The brief published SOL/USDT test does not establish performance across markets or regimes.

Tags

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