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2006issue C081-5

Relative Strength Index 50-line entry beyond the 70 and 30 extremes

Extreme Relative Strength Index readings near 70 and 30 can appear after a strong directional move rather than at a completed reversal. The documented workflow waits for a 50-line cross, requires a stated ATR travel before fill, and places a Stop-loss order a larger ATR fraction beyond entry.

  • Extreme Relative Strength Index readings near 70 and 30 can appear after a strong directional move rather than at a completed reversal.
  • The documented Rule-based entry waits for a 50-line cross, then buys or sells after a stated ATR travel from the prior high or low and places a Stop-loss order a larger ATR fraction beyond entry.
  • The procedure may add after Relative Strength Index crosses 60, later reduce on further crossings, and treat an opposite-direction order as a stop-and-reverse that takes precedence.
  • A required ATR travel before fill and a 21-period lookback for both Relative Strength Index and ATR are specified to take fewer trades in choppy or tightly ranging conditions.
Entries in this reading3 entries
Current trackRelative Strength Index261 readingsRule-based entry292 readingsStop-loss order297 readings

Extremes after a directional move

Extreme Relative Strength Index readings near 70 and 30 can appear after a strong directional move rather than at a completed reversal. The documented workflow does not use those extremes as the entry cue.

The documented long and short procedures

The documented long procedure waits for Relative Strength Index to cross above 50, then buys a fixed fraction of daily ATR above the prior high and places a Stop-loss order a larger ATR fraction below entry.

The documented short procedure is the mirror. Relative Strength Index crossing below 50 leads to a sell a fixed ATR fraction below the prior low, and a Stop-loss order a larger ATR fraction above entry.

Adds, later crossings and stop-and-reverse

The procedure adds to a long after Relative Strength Index crosses 60 and later reduces or exits by later Relative Strength Index crossings, holding the remainder until an opposite signal or a further Relative Strength Index threshold.

An opposite-direction order is specified to take precedence and to be entered as a stop-and-reverse rather than as a second independent position.

Filters against a tight range

Requiring the market to travel a stated ATR distance before fill is presented as a filter against repeated 50-line crossings in a tight range.

Lookback 21 for both Relative Strength Index and ATR is specified in place of the more common 14, with the stated aim of taking fewer trades in choppy conditions.

The historical window

The same rule set was backtested on EUR/USD hourly and four-hour bars over a multi-year window, producing many small losses and a smaller number of larger winners.

Educational research material, not investment advice. Historical source context does not establish present-day performance.
15 of 26 in the Relative Strength Index track
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All readings on this track · 26 readings
  1. 1991Constructing the relative strength index from seed and recursive averages
  2. 1991Inverting relative-strength-index closes for same-session rules
  3. 1991Seeded averages and the recursive-update
  4. 1993Restating relative-strength-index parameters after a smoothing change
  5. 1993Relative momentum construction by stretching the relative strength lookback
  6. 1994Constructing relative strength index lookbacks, bands, and confirmation filters
  7. 1994Building the relative-strength-index from signed close changes
  8. 1997Constructing the relative strength index as a bounded up-down close oscillator
  9. 2002Four-line oscillator construction for rule-based entries
  10. 2004Assembling a bounded RSI path
  11. 2004Constructing RSI on highs, lows, and reverse targets
  12. 2004Reverse-engineered RSI as an explicit next-bar price target
  13. 2006Self-adjusting RSI thresholds from the oscillator's own spread
  14. 2006Constructing adaptive overbought and oversold levels for a relative strength index
  15. 2006Relative Strength Index 50-line entry beyond the 70 and 30 extremes
  16. 2007Lock a followable rule set before testing RSI exits
  17. 2008RSI bands as a one-day shift of reverse-engineered levels
  18. 2008Constructing an asymmetrical RSI from adaptive up and down averages
  19. 2010Building a bounded oscillator from a rainbow smoother, relative strength, and inverse Fisher
  20. 2011Two-horizon weekly RSI with moving averages and stops
  21. 2011Percent-offset simple moving average bands with relative-strength confirmation
  22. 2011Fast and slow relative strength index as one mechanical rule book
  23. 2011Price-zone oscillator construction from signed closes
  24. 2015Constructing a zero-lag oscillator against a relative strength index baseline
  25. 2015Relative Strength Index as a baseline in 2015 software listings
  26. 2018Building a Fisherized deviation-scaled oscillator
By fieldEntry and exit rules327 readingsBy year2006150 readings
All 261 readings tagged Relative Strength Index
Also on Relative Strength Index5 readings
2002Four-line oscillator construction for rule-based entries1991Inverting relative-strength-index closes for same-session rules1991Write a staged RSI exit book with trailing stops1998Oversold confirmation as a staged rule-based-entry case1999Evaluating Relative Strength Index momentum with zero-line and threshold rules