RSI and Trend MA Dual Filter Trading Strategy

Pine ScriptTrend following Mean reversion Momentum RSI SMA Volume

Author: ianzeng123
Complexity: Starter · 52 lines
Parameters: 0
Backtest bar: 1m · intraday
Tested on: DOGE/USDT · spot

Jump to code View in vault Original on FMZ

Overview

This strategy is a dual-filter trading system combining RSI (Relative Strength Index) and trend moving average. It operates on daily timeframes by integrating RSI overbought/oversold signals with long-term trend moving averages. The core innovation lies in adding a trend filter to traditional RSI trading signals to enhance accuracy and reliability.

Strategy Principles

The strategy is based on the following core components:

RSI indicator for identifying overbought/oversold areas, default period 14
Overbought level set at 70, oversold level at 30
200-period simple moving average as trend filter
Buy condition: RSI crosses above oversold level with price above MA
Sell condition: RSI crosses below overbought level with price below MA The strategy automatically executes trades at each signal and can be configured with alerts.

Strategy Advantages

Dual confirmation mechanism significantly improves trading reliability
Combines trend and momentum indicators to reduce false signals
Fully automated trading execution system
Flexible parameter settings allow strategy optimization
Integrated real-time alerts for practical operation
Clear visualization of trading signals
Supports backtesting for strategy validation

Strategy Risks

May generate frequent signals in choppy markets
Potential lag at trend reversal points
Performance may be affected by improper parameter settings
Large drawdowns possible during extreme market volatility Risk management recommendations:

Set appropriate stop-loss levels
Adjust position sizing properly
Regularly optimize strategy parameters
Incorporate additional technical indicators for confirmation

Strategy Optimization Directions

Add volatility filter to adjust trading criteria during high volatility periods
Implement adaptive parameters based on market conditions
Incorporate volume confirmation to improve signal reliability
Develop more sophisticated exit mechanisms
Integrate multiple timeframe analysis for broader market perspective

Summary

This strategy builds a robust trading system by combining RSI and trend moving averages. The design is rational, with clear operational rules and good practicality. Through proper risk management and continuous optimization, this strategy has the potential to achieve stable returns in actual trading.

Source Pine Script

/*backtest
start: 2025-02-13 00:00:00
end: 2025-02-20 00:00:00
period: 1m
basePeriod: 1m
exchanges: [{"eid":"Binance","currency":"DOGE_USDT"}]
*/

//@version=5
strategy("Leading Indicator Strategy – Daily Signals", overlay=true, 
     pyramiding=1, initial_capital=100000, 
     default_qty_type=strategy.percent_of_equity, default_qty_value=100)

/// **Inputs for Customization**
rsiLength   = input.int(14,  minval=1, title="RSI Period")
oversold    = input.float(30.0, minval=1, maxval=50, title="Oversold Level")
overbought  = input.float(70.0, minval=50, maxval=100, title="Overbought Level")
maLength    = input.int(200, minval=1, title="Trend MA Period")
useTrendFilter = input.bool(true, title="Use Trend Filter (MA)",
     tooltip="Require price above MA for buys and below MA for sells")

/// **Indicator Calculations**
rsiValue = ta.rsi(close, rsiLength)                      // RSI calculation
trendMA  = ta.sma(close, maLength)                       // Long-term moving average

/// **Signal Conditions** (RSI crosses with optional trend filter)
buySignal  = ta.crossover(rsiValue, oversold)            // RSI crosses above oversold level
sellSignal = ta.crossunder(rsiValue, overbought)         // RSI crosses below overbought level

bullCond = buySignal and (not useTrendFilter or close > trendMA)   // final Buy condition
bearCond = sellSignal and (not useTrendFilter or close < trendMA)  // final Sell condition

/// **Trade Execution** (entries and exits with alerts)
if bullCond
    strategy.close("Short",  alert_message="Buy Signal – Closing Short")   // close short position if open
    strategy.entry("Long",  strategy.long,  alert_message="Buy Signal – Enter Long")  // go long
if bearCond
    strategy.close("Long",   alert_message="Sell Signal – Closing Long")   // close long position if open
    strategy.entry("Short", strategy.short, alert_message="Sell Signal – Enter Short") // go short

/// **Plotting** (MA and signal markers for clarity)
plot(trendMA, color=color.orange, linewidth=2, title="Trend MA")
plotshape(bullCond, title="Buy Signal", style=shape.labelup, location=location.belowbar,
     color=color.green, text="BUY", textcolor=color.white)
plotshape(bearCond, title="Sell Signal", style=shape.labeldown, location=location.abovebar,
     color=color.red, text="SELL", textcolor=color.white)

// (Optional) Plot RSI in a separate pane for reference:
// plot(rsiValue,  title="RSI", color=color.blue)
// hline(oversold, title="Oversold",  color=color.gray, linestyle=hline.style_dotted)
// hline(overbought, title="Overbought", color=color.gray, linestyle=hline.style_dotted)

Published by ianzeng123 on the FMZ strategy square · last modified 2025-02-21. Collected in the Quant Trading Vault. Unvalidated research: re-test with your own data and costs before trusting it.

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