Overview

This strategy is mainly based on two indicators - Stochastic Momentum Index (SMI) and Relative Strength Index (RSI). It also incorporates color filter and candle body filter as auxiliary judgement conditions. Trading signals are generated based on the buy and sell signals from SMI and RSI, combined with filter conditions. This strategy can effectively discover short-term trading opportunities in the market.

Strategy Logic

This strategy relies on SMI and RSI indicators for judgement. SMI mainly judges whether a stock is overbought or oversold, while RSI determines the relative strength of a stock. When both indicators give buy signals at the same time, a buy action will be triggered. The specific logic is as follows:

1. When SMI is oversold (below lower limit), it is considered as a buy signal
2. When RSI is below threshold, it is considered as a buy signal
3. When both SMI oversold and RSI below corresponding threshold occur, a buy signal is triggered
4. Sell signal logic is similar

In addition, this strategy has a dual signals mode. This mode requires both SMI and RSI signals to trigger any trades. This can effectively reduce false signals.

Moreover, color filter and candle body filter are incorporated. These filters require relatively large candle body and last candle close higher than open. This can further avoid trading false breakouts.

Advantages

1. Utilize SMI for overbought/oversold and RSI for relative strength, dual confirmation can reduce false signals
2. Dual signal mode can greatly decrease ineffective trades
3. Color and body filters can filter out false breakouts effectively
4. Strategy logic is simple and clean
5. Most parameters are customizable

Risks and Optimization

1. SMI and RSI may produce more false signals when used alone, need careful examination
2. In dual signal mode, good trading opportunities may be missed if parameters not set properly
3. Can test strategy profitability under different periodic parameters to find optimum parameter combination
4. Can evaluate threshold parameters through simulation or backtesting
5. Can consider incorporating more filters to optimize the strategy

Summary

This strategy integrates the signals from both SMI and RSI indicators and generates trading orders through dual confirmation. Color filter and candle body filter are also implemented to filter out false breakouts. The strategy has simple and clean logic flow, and most parameters are customizable. Better return can be achieved by tuning the parameters accordingly.