VWMA Trend Filtering with Smoothed RSI Signals

Summary

This long-only system combines a volume-weighted moving average with a smoothed RSI variant. It seeks entries when the close is above the VWMA and the smoothed RSI is above its threshold; exits occur when price falls below the average and RSI drops below its lower threshold. The document describes several smoothing choices for RSI and a delayed-condition mechanism that tracks a partially met buy setup. It also specifies fixed percentage take-profit and stop-loss levels.

The text explains the intended roles of volume-weighted trend confirmation and RSI momentum filtering, but supplies no backtest or live evidence for its claims. The RSI is described as machine-learning enhanced, although the implementation shown applies selectable moving-average smoothing to a conventional RSI. The stated limitations include lag, fixed thresholds and stops, and excess signals when price repeatedly crosses the VWMA in sideways markets. Suggested refinements include higher-timeframe filters, volatility-based stops, signal-based sizing, and robust out-of-sample validation.

Key ideas

• The VWMA serves as a trend filter, while a smoothed RSI provides a momentum confirmation signal.
• The entry condition requires price and RSI to be on the bullish side of their respective thresholds.
• The described exit requires price and RSI to cross bearish thresholds, alongside fixed percentage take-profit and stop-loss orders.
• The implementation uses configurable RSI smoothing methods rather than demonstrating a learned predictive model.
• Sideways markets, parameter overfitting, and fixed risk levels are stated limitations, and no performance results are provided.

Tags

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