True Strength Index Signal Crossovers with Risk-Based Position Sizing

Summary

This strategy calculates the True Strength Index by double-smoothing price changes and their absolute values with exponential averages. It then smooths the TSI into a signal line, entering long when TSI crosses above that line and closing the position when it crosses below. The document also describes sizing trades from initial capital, a risk percentage, and price, and lists smoothing and signal lengths as adjustable inputs.

The explanation identifies false crosses, whipsaws, gaps, and sharp volatility as risks, and suggests testing filters, stop logic, instruments, and parameter sets across market regimes. It provides a BTC/USDT futures backtest configuration but no performance results. The source computes a quantity-like risk amount, but does not use it to set the order size; nor does it implement the proposed stop loss. Thus, the claimed risk-based sizing and risk controls are not demonstrated by the included trading logic.

Key ideas

• TSI is formed from double-smoothed price changes normalized by double-smoothed absolute changes.
• Crosses between TSI and its exponential signal line trigger long entries and exits.
• The document proposes risk-based sizing, but the calculated amount is unused in orders.
• Whipsaws, gaps, and volatile conditions can undermine the historical-price signals.
• Backtest settings are provided without reported performance results.

Tags

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