RSI and MACD Combined Long-Short Strategy

Overview

This strategy combines two technical indicators: Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD). It uses RSI to determine overbought and oversold conditions, and MACD to identify trend direction, forming a complete long-short strategy. When RSI is overbought, a sell signal is generated, and the position is closed when MACD fast line crosses above the slow line. When RSI is oversold, a buy signal is generated, and the position is closed when MACD fast line crosses below the slow line. The stop-loss point is set by calculating half of the average price change of the asset.

Strategy Principle

1. Calculate RSI indicator to determine overbought and oversold conditions:
   • When RSI is above 70 and crosses down the 70 line, a sell signal is generated
   • When RSI is below 30 and crosses up the 30 line, a buy signal is generated
2. Calculate MACD indicator to identify trend direction:
   • When MACD fast line crosses above the slow line, a signal to close the short position is generated
   • When MACD fast line crosses below the slow line, a signal to close the long position is generated
3. Setting the stop-loss point:
   • Calculate the average price change of the asset and take half of it as the stop-loss point

By using RSI to determine overbought and oversold conditions, the strategy enters at the beginning of a reversal. By using MACD to identify trend direction, it closes the position at the beginning of a trend, effectively capturing the trend. The two indicators complement each other, forming a complete trading system.

Strategy Advantages

1. The strategy combines overbought/oversold and trend-following approaches, allowing it to enter at the beginning of a reversal and exit in a timely manner when a trend forms, effectively avoiding losses caused by market fluctuations.
2. The stop-loss point is set based on the volatility characteristics of the asset, helping to control drawdowns and improve capital efficiency.
3. The code logic is clear and uses a modular programming approach, making it easy to understand and optimize.

Strategy Risks

1. The selection of RSI and MACD parameters has a significant impact on strategy performance, and parameter optimization may be required for different assets and timeframes.
2. During extreme market conditions, such as rapid changes caused by unexpected events, the strategy may suffer significant drawdowns.
3. The strategy may not perform well in a rangebound market, resulting in frequent trades and high transaction costs.

Strategy Optimization Directions

1. Optimize the parameters of RSI and MACD to find the most suitable combination for the current asset and timeframe, improving the stability and profitability of the strategy.
2. Add more filtering conditions, such as volume and volatility indicators, to reduce frequent trading and improve signal quality.
3. Introduce a position management module to dynamically adjust positions based on market trends and performance, controlling drawdowns.
4. Combine with other strategies, such as trend-following and mean-reversion, to form a multi-strategy portfolio and enhance adaptability.

Summary

This strategy uses RSI to determine overbought and oversold conditions and MACD to identify trend direction, forming a complete long-short trading system. The strategy logic is clear, and the advantages are obvious, while there are also certain risks. Through parameter optimization, adding filtering conditions, position management, and combining with other strategies, the performance of this strategy can be further improved, making it a robust trading strategy.