RSI Dual Cross Reversal Strategy

Overview

This strategy is a trend following strategy based on the dual cross reversal principle of the RSI indicator. It uses crossovers between RSI lines of different periods as buy and sell signals, while also incorporating RSI indicator judgments on whether the current situation is overbought or oversold to further confirm the validity of trading signals.

Strategy Logic

The strategy is mainly based on the 5-day and 11-day two RSI indicator lines. When the faster RSI (5-day line) breaks through the slower RSI (11-day line) upward while the 6-day RSI is below 30 at the same time, a buy signal is generated; When the faster RSI breaks through the slower RSI downward while the 6-day RSI is above 70 at the same time, a sell signal is generated.

The strategy also draws 30 and 70 horizontal lines, with 30 representing the oversold area and 70 representing the overbought area. The basic idea of the RSI indicator is that when in the overbought/oversold area, it means the asset is over/under valued and one should consider taking profit/buying opportunities. Therefore, the strategy incorporates judgments on the 6-day RSI to see if it is in the OBOS region to filter out some false signals and improve reliability.

When buy and sell signals are generated, the strategy will place long and short orders accordingly. So it is a dual directional trading strategy that can track both uptrends and downtrends.

Advantages

1. High reliability due to dual cross principle
2. Avoid false signals by incorporating multi-period RSI
3. Dual directional trading suitable for trend following
4. RSI indicator is stable with large optimization space

Risks and Solutions

1. Dual cross signals lag and may miss some ups and downs
   Solution: Shorten faster RSI period parameter to make signals more sensitive

2. More false signals may occur in trending markets
   Solution: Adjust OBOS parameter to avoid false signals in trends

3. Divergence or failure probabilities of RSI indicator
   Solution: Combine with other indicators to avoid sole failure probability

Optimization Directions

1. Period parameter optimization: Adjust faster and slower RSI periods, find best combination

2. OBOS parameter optimization: Adjust OBOS parameters to improve signal accuracy

3. Combine with other indicators: Incorporate MA, volatility indicators etc to form comprehensive system

Conclusion

This strategy is a reliable trend following strategy based on the RSI dual cross reversal logic. Its multi-period RSI design can avoid certain false signals and thus has good practical results. Through parameter optimization and indicator combinations, the strategy has potential for even better performance. In summary, the strategy has clear logic and strong practicality, and is worth key attention and further optimization.