The Strategic Trader
Detailed Strategy Evaluation

RSI Part 2 – Oversold Strategy

In the last article, we looked at RSI when it is above a threshold. This time we will explore what happens when RSI is below a threshold. To test this, we will optimize on two variables. One variable representing the look-back period for RSI and one variable to represent the threshold to cross below.

(Example results looking 3 bars into future – Long Only)
Method: RSI(3) < 10
Percent Profitable: 60.15%
Net Profit: +36,550
Trades: 5069

Dozens of parameter combinations surpassed our targets on both percent profitable and/or on net profit. Especially combinations that involved RSI being below 20. This was seen in both 3 and 5 bars into the future. These findings suggest that there may be a statistical advantage when RSI is below certain thresholds.

In a future article we can explore which threshold values are significant and if there are any values that remain significant across multiple markets. We will also explore if there is a difference when RSI crosses above/below a threshold instead of just being below that threshold.

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