Overview

This strategy is a trend following strategy that utilizes a combination of Relative Strength Index (RSI) and volume to identify trend direction and follow trends. Key points include:

1. Using Volume Weighted Moving Average to calculate midline and incorporate volume information to determine trend midpoint
2. Setting up buy zone and sell zone based on midline
3. Using RSI information to adjust range of buy zone and sell zone
4. Setting stop loss and take profit after entering buy/sell zones
5. Having re-entry mechanism

Strategy Logic

This strategy uses the following indicators and parameters:

• Midline: Volume Weighted Moving Average of highest and lowest prices in certain periods to determine midpoint of the trend
• RSI: Relative Strength Index calculated over certain periods, converted into 0-1 range
• Buy Zone: Midline plus RSI adjusted amount at certain ratio, long entry when price enters
• Sell Zone: Midline minus RSI adjusted amount at certain ratio, short entry when price enters
• Take Profit Line: Midline
• Stop Loss Line: Certain percentage below buy zone/above sell zone

When price enters buy or sell zone, a corresponding direction order will be opened. Stop loss and take profit lines are then set. When take profit or stop loss is triggered, position will be closed. A re-entry mechanism is also set so that new orders can be opened when signal triggers again if configured.

Advantages

The advantages of this strategy include:

1. Using both RSI and volume to identify trends, improving accuracy
2. RSI parameterized adjustment makes buy/sell zone adapt better to actual trend
3. Volume information assigns higher weight to price actions, making midline more accurate
4. Having stop loss mechanism to control risks
5. Allows re-entry, reducing risks of false breakouts

Risks

There are also some risks:

1. Improper RSI and volume parameters may affect buy/sell zone accuracy
2. Midline may fail to accurately determine trend, causing false breakout
3. Stop loss too wide may lead to higher losses
4. Re-entry may cause over-trading

Solutions:

1. Adjust RSI and volume cycle to fit market conditions
2. Use other indicators to verify buy/sell signals
3. Tighten stop loss to limit losses
4. Limit trades per day to prevent over-trading

Optimization

This strategy can be optimized by:

1. Trying other indicators to verify signals e.g. candlestick, volatility indicators etc
2. Adding position sizing mechanisms e.g. pyramiding winners
3. Using machine learning algorithms to improve buy/sell zone accuracy
4. Evaluating optimum parameters for stop loss and take profit
5. Parameters need separate test and optimization for different products

Conclusion

In conclusion, this is a quantitative trend following strategy utilizing RSI and volume indicators. It has dual verification system to identify signals, stop loss/profit take to control risks, and re-entry mechanism to improve profitability. With parameter tuning and algorithm optimization, it can become a very practical trend trading strategy.