RSI Fibonacci Retracement Strategy

The RSI Fibonacci Retracement strategy generates trading signals based on the crossover between the RSI indicator and the set Fibonacci retracement levels, taking positions when reversals occur in overbought and…

Pine ScriptMean reversion Trend following RSI MACD Bollinger Bands Fibonacci

Author: ChaoZhang
Complexity: Starter · 58 lines
Parameters: 6
Backtest bar: 1d · swing
Tested on: BTC/USDT · futures

Jump to code View in vault Original on FMZ

Overview

Principle

This strategy is implemented based on the crossover between the RSI indicator and the Fibonacci retracement levels. First calculate the value of RSI indicator, then set the Fibonacci retracement levels (38.2%, 50%, 61.8%). When the RSI indicator crosses above the Fibonacci level, a buy signal is generated. When it crosses below, a sell signal is generated.

The RSI indicator is used to judge whether the market is overbought or oversold. RSI above 70 indicates an overbought area and below 30 indicates an oversold area. When RSI drops from the overbought area to the Fibonacci retracement zone, it is a reversal signal to go long. When RSI rises from the oversold area to the Fibonacci retracement zone, it is a reversal signal to go short.

The Fibonacci retracement levels in this strategy mainly serve as a reference, forming trading signals with RSI. In trending markets, continued running after retracements often touches Fibonacci retracement levels, which act like supports and resistances. Taking crossover with RSI as trading signals can capture reversal opportunities.

Advantages

Using RSI to identify overbought and oversold formations, combined with Fibonacci retracement area to capture reversal opportunities, can filter out some noise.
Trend following in nature, can capture mid-to-long term trends.
Can adapt to different market situations by adjusting the Fibonacci retracement area.

Risks

Long or short positions may last for a long time, requiring sufficient capital support.
Retracement process may exhibit probing highs and lows again, requiring stop loss to control risks.
Improper parameter settings may lead to excessive trading or insufficient capturing of reversal opportunities.

Optimization Directions

Consider incorporating other indicators to filter entry timing, such as MACD, Bollinger Bands to judge trend direction.
Parameters like RSI periods and Fibonacci retracement levels can be optimized.
Set up dynamic stop loss to lock in profits.

Summary

The RSI Fibonacci Retracement strategy has good stability in general as a trend following strategy. Compared to single RSI strategies, adding the Fibonacci retracement area can effectively filter out some noisy trades. By parameter optimization it can adapt to different trading instruments across various markets. In conclusion this is a reliable and easy-to-optimize strategy idea.

Parameters

Name	Default	What it controls
v_input_1	14	Rsi Periods
v_input_2	0	Fibonacci Level: 38.2 \| 50 \| 61.8
v_input_3	2010	From Year
v_input_4	true	From Month
v_input_5	2020	To Year
v_input_6	true	To Month

Source Pine Script

/*backtest
start: 2022-12-22 00:00:00
end: 2023-12-28 00:00:00
period: 1d
basePeriod: 1h
exchanges: [{"eid":"Futures_Binance","currency":"BTC_USDT"}]
*/

// (c) ReduX_o, 2019. All rights reserved.
//
// How to trade:
// The indicator is more reliable in longer time frames
// Choose a fibonacci level as reference 
// Buy when the RSI line turns green
// Sell when the RSI line turns red



//@version=4
strategy("RSI Fibonacci Levels", overlay=false, initial_capital=2000, currency=currency.USD, commission_value=0.1, slippage=0, commission_type=strategy.commission.percent, pyramiding=0, default_qty_type=strategy.percent_of_equity, default_qty_value=100)


len = input(14, minval=1, title="Rsi Periods")
f1 = input(title="Fibonacci Level", defval="38.2", options=["38.2", "50", "61.8"])

// === BACKTEST RANGE ===
FromYear = input(defval=2010, title="From Year", minval=2010)
FromMonth = input(defval=1, title="From Month", minval=1)

ToYear = input(defval=2020, title="To Year", minval=2010)
ToMonth = input(defval=1, title="To Month", minval=1)


src = hl2
fi= (f1 == "38.2") ? 38.2 : (f1 == "50")? 50 : 61.8


up = rma(max(change(src), 0), len)
down = rma(-min(change(src), 0), len)
rsi = down == 0 ? 100 : up == 0 ? 0 : 100 - 100 / (1 + up / down)


//***************************************************
rcolor = rsi >= fi ? color.lime : color.red

plot(rsi, title="RSI", color=rcolor, transp=0)
band1 = hline(78.6, color=color.red, linestyle= hline.style_solid,  editable= false)
band0 = hline(23.6, color=color.lime, linestyle= hline.style_solid, editable= false)
band2 = hline(61.8, color=color.gray, editable= false)
band3 = hline(50, color=color.black, editable= false)
band4 = hline(38.2, color=color.gray, editable= false)
band5 = hline(fi, color=color.blue, linestyle= hline.style_solid, editable= false)

strategy.entry("LE", strategy.long, comment="L", when=rsi >= fi )
strategy.entry("SE", strategy.short, comment="S", when=rsi < fi )

Published by ChaoZhang on the FMZ strategy square · last modified 2023-12-29. Collected in the Quant Trading Vault. Unvalidated research: re-test with your own data and costs before trusting it.

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