Fast RSI Reversal Trading Strategy

The Fast RSI Reversal Trading Strategy generates trading signals by combining Fast RSI indicator, candlestick body filter, min/max price filter and SMA filter to determine trend reversal points for low-risk reversal…

Pine ScriptMean reversion Breakout Trend following RSI EMA SMA Volume

Author: ChaoZhang
Complexity: Intermediate · 95 lines
Parameters: 19
Backtest bar: 1h · intraday
Tested on: BTC/USDT · futures

Jump to code View in vault Original on FMZ

Overview

Strategy Logic

The strategy is mainly based on the following indicators for judgement:

Fast RSI Indicator: Calculates RSI using RMA function to make it more sensitive in order to capture overbought/oversold signals faster.
Candlestick Body Filter: Requires candlestick body size to exceed 1/5 of EMA body average to filter low volatility situations.
Min/Max Price Filter: Judges if price reaches new high or new low to confirm trend reversal.
SMA Filter: Requires price to break SMA line for additional confirmation.

Trading signals are generated when multiple conditions above trigger simultaneously. The specific logic is:

Long entry: Fast RSI below oversold level AND Candle body > 1/5 of EMA body AND Min price breakout AND Price crosses above SMA

Short entry: Fast RSI above overbought level AND Candle body > 1/5 of EMA body AND Max price breakout AND Price crosses below SMA

Exit: Fast RSI back to normal range

Advantages

The strategy has the following advantages:

Captures volatility from short-term reversals
Fast RSI indicator is sensitive
Multiple filters reduce false signals
Controllable risk, small drawdown

Risks and Optimization

The strategy also has some risks:

Failed reversal risk
Limited optimization space

Can further optimize by:

Add trading volume filter
Implement stop loss
Optimize parameter combination

Conclusion

Overall this is a low-risk short-term mean reversal trading strategy. It identifies trading signals with Fast RSI and uses multiple filters to reduce false signals, achieving controllable risk reversal trading. The strategy can be further optimized and has great potential.

Parameters

Name	Default	What it controls
v_input_1	true	Long
v_input_2	true	Short
v_input_3	true	Use Fast RSI Strategy
v_input_4	true	Use Min/Max Strategy
v_input_5	true	Use SMA Filter
v_input_6	20	SMA Filter Period
v_input_7	7	RSI Period
v_input_8	30	RSI limit
v_input_9_close	0	RSI Price: close \| high \| low \| open \| hl2 \| hlc3 \| hlcc4 \| ohlc4
v_input_10	true	RSI Bars
v_input_11	true	Min/Max Bars
v_input_12	false	Show SMA Filter
v_input_13	false	Show Arrows
v_input_14	2018	From Year
v_input_15	2100	To Year
v_input_16	true	From Month
v_input_17	12	To Month
v_input_18	true	From day
v_input_19	31	To day

Source Pine Script

/*backtest
start: 2024-02-01 00:00:00
end: 2024-02-26 23:59:59
period: 1h
basePeriod: 15m
exchanges: [{"eid":"Futures_Binance","currency":"BTC_USDT"}]
*/

//Noro
//2018

//@version=3
strategy(title = "Noro's Fast RSI Strategy v1.4", shorttitle = "Fast RSI str 1.4", overlay = true, default_qty_type = strategy.percent_of_equity, default_qty_value = 100, pyramiding = 5)

//Settings
needlong = input(true, defval = true, title = "Long")
needshort = input(true, defval = true, title = "Short")
usersi = input(true, defval = true, title = "Use Fast RSI Strategy")
usemm = input(true, defval = true, title = "Use Min/Max Strategy")
usesma = input(true, defval = true, title = "Use SMA Filter")
smaperiod = input(20, defval = 20, minval = 2, maxval = 1000, title = "SMA Filter Period")
rsiperiod = input(7, defval = 7, minval = 2, maxval = 50, title = "RSI Period")
limit = input(30, defval = 30, minval = 1, maxval = 100, title = "RSI limit")
rsisrc = input(close, defval = close, title = "RSI Price")
rsibars = input(1, defval = 1, minval = 1, maxval = 20, title = "RSI Bars")
mmbars = input(1, defval = 1, minval = 1, maxval = 5, title = "Min/Max Bars")
showsma = input(false, defval = false, title = "Show SMA Filter")
showarr = input(false, defval = false, title = "Show Arrows")
fromyear = input(2018, defval = 2018, minval = 1900, maxval = 2100, title = "From Year")
toyear = input(2100, defval = 2100, minval = 1900, maxval = 2100, title = "To Year")
frommonth = input(01, defval = 01, minval = 01, maxval = 12, title = "From Month")
tomonth = input(12, defval = 12, minval = 01, maxval = 12, title = "To Month")
fromday = input(01, defval = 01, minval = 01, maxval = 31, title = "From day")
today = input(31, defval = 31, minval = 01, maxval = 31, title = "To day")

//Fast RSI
fastup = rma(max(change(rsisrc), 0), rsiperiod)
fastdown = rma(-min(change(rsisrc), 0), rsiperiod)
fastrsi = fastdown == 0 ? 100 : fastup == 0 ? 0 : 100 - (100 / (1 + fastup / fastdown))

//Limits
bar = close > open ? 1 : close < open ? -1 : 0
uplimit = 100 - limit
dnlimit = limit

//RSI Bars
upsignal = fastrsi > uplimit ? 1 : 0
dnsignal = fastrsi < dnlimit ? 1 : 0
uprsi = sma(upsignal, rsibars) == 1
dnrsi = sma(dnsignal, rsibars) == 1

//Body
body = abs(close - open)
emabody = ema(body, 30)

//MinMax Bars
min = min(close, open)
max = max(close, open)
minsignal = min < min[1] and bar == -1 and bar[1] == -1 ? 1 : 0
maxsignal = max > max[1] and bar == 1 and bar[1] == 1 ? 1 : 0
mins = sma(minsignal, mmbars) == 1
maxs = sma(maxsignal, mmbars) == 1

//SMA Filter
sma = sma(close, smaperiod)
colorsma = showsma ? blue : na
plot(sma, color = colorsma, linewidth = 3)

//Signals
up1 = bar == -1 and (strategy.position_size == 0 or close < strategy.position_avg_price) and dnrsi and body > emabody / 5 and usersi
dn1 = bar == 1 and (strategy.position_size == 0 or close > strategy.position_avg_price) and uprsi and body > emabody / 5 and usersi
up2 = mins and (close > sma or usesma == false) and usemm
dn2 = maxs and (close < sma or usesma == false) and usemm 
exit = ((strategy.position_size > 0 and fastrsi > dnlimit and bar == 1) or (strategy.position_size < 0 and fastrsi < uplimit and bar == -1)) and body > emabody / 2

//Arrows
col = exit ? black : up1 or dn1 ? blue : up2 or dn2 ? red : na
needup = up1 or up2
needdn = dn1 or dn2
needexitup = exit and strategy.position_size < 0
needexitdn = exit and strategy.position_size > 0
plotarrow(showarr and needup ? 1 : na, colorup = blue, colordown = blue, transp = 0)
plotarrow(showarr and needdn ? -1 : na, colorup = blue, colordown = blue, transp = 0)
plotarrow(showarr and needexitup ? 1 : na, colorup = black, colordown = black, transp = 0)
plotarrow(showarr and needexitdn ? -1 : na, colorup = black, colordown = black, transp = 0)

//Trading
if up1 or up2
    strategy.entry("Long", strategy.long, needlong == false ? 0 : na)

if dn1 or dn2
    strategy.entry("Short", strategy.short, needshort == false ? 0 : na)
    
if time > timestamp(toyear, tomonth, today, 00, 00) or exit
    strategy.close_all()

Published by ChaoZhang on the FMZ strategy square · last modified 2024-03-01. Collected in the Quant Trading Vault. Unvalidated research: re-test with your own data and costs before trusting it.

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