Smoothed RSI Signals from Weighted Price Changes
Summary
This strategy adapts RSI by first smoothing price with a six-bar weighted average, then totaling upward and downward changes over a configurable lookback. It normalizes the upward total by the combined totals, producing a value between zero and one when movement is present. A reading above the upper threshold sets a long position; one below the lower threshold sets a short position. An option reverses those directions. The listed defaults are a length of 10 and thresholds of 0.8 and 0.2.
The document describes the method and its intended benefits, but provides no performance results. Its published backtest settings specify BTC_USDT futures on Binance over a short September 2023 interval, using 30-minute bars and a 15-minute base period. The author notes that smoothing may reduce false signals while some lag remains, and that reverse trading can increase costs. Parameter selection, additional filters, stops, and testing across markets are suggested, but not evaluated. The conclusion calls the system a breakout strategy, although the described signal logic is better characterized as threshold-based momentum.
Key ideas
- A six-bar weighted price average is used to reduce noise before measuring directional changes.
- The normalized indicator compares summed upward movement with total upward and downward movement.
- Crossing configurable upper or lower thresholds sets the position direction, with an option to reverse signals.
- The published backtest settings identify a short BTC_USDT futures interval but report no performance statistics.
- Remaining lag, parameter sensitivity, and added trade costs from reversing signals are stated risks.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.