RSI Mean-Reversion
RSI Mean-Reversion is a contrarian strategy: it buys after a stretch of selling has pushed RSI into oversold territory, betting on a bounce, and sells once RSI recovers into overbought terr…
RSI Mean-Reversion is a contrarian strategy: it buys after a stretch of selling has pushed RSI into oversold territory, betting on a bounce, and sells once RSI recovers into overbought territory. This is the opposite temperament from SMA Crossover and Breakout Swing, both of which follow a move once it's underway - this strategy instead bets against a stretched move, expecting it to snap back.
What's below isolates that one idea into its own complete, standalone strategy, using only the RSI indicator that's already registered.
How it trades
| Ingredient | Meaning |
|---|---|
| RSI | Relative Strength Index (0-100) - how much of recent price movement has been gains vs. losses |
Buy (oversold bounce):
rsi < 30
Sell (overbought exit, only when already in a position):
rsi > 70
30/70 are the conventional oversold/overbought thresholds for RSI; both are configurable via the constant compared against in the statement.
When it works best
Works best in a range-bound or choppy market, where price oscillates between overbought and oversold without committing to a sustained trend - exactly the conditions that hurt SMA Crossover and Breakout Swing the most. In a strongly trending market, expect this strategy to buy dips that keep dipping (or sell bounces that keep bouncing) - the ATR-managed variant's stop exists precisely to cap that downside.
Backtest this strategy yourself
Build these rules on the Free plan, adjust them, and see how they would have traded.