Dual Reversion RSI HistoAlert Strategy

Overview

The Dual Reversion RSI HistoAlert strategy generates more accurate trading signals by combining the 123 Reversion strategy and RSI HistoAlert strategy. The 123 Reversion strategy judges price reversal points and the RSI HistoAlert strategy judges overbought and oversold points. The integrated signals from both strategies can produce more reliable trading signals.

Strategy Logic

123 Reversion Strategy

The 123 Reversion strategy is based on the hypothesis that: price reversal signals often appear 2 days before the actual price reversal.

The specific rules are:

• Buy signal: Previous close < 2-day ago close AND Current close > Previous close AND 9-day slow K-line below 50
• Sell signal: Previous close > 2-day ago close AND Current close < Previous close AND 9-day fast K-line above 50

It uses the price relationship 2 days before reversal to judge potential reversal points. The K-line indicators filter some noise signals.

RSI HistoAlert Strategy

The RSI HistoAlert strategy modifies the RSI indicator:

• Scale RSI values to -100 to 100
• Generate trading signals when RSI exceeds preset buy/sell alert lines

It uses the absolute RSI value to indicate overbought/oversold states and triggers signals.

Advantages

This strategy combines two different strategy ideas to complement strengths and generate more reliable signals:

1. 123 Reversion strategy is good at catching price reversal points. RSI HistoAlert strategy is good at catching overbought/oversold points. The combination leads to more comprehensive judgements of trading chances.
2. The two strategies use different input indicators. This decreases the probability of false signals and improves reliability.
3. Both strategies have optimization space themselves. Further performance improvement can be achieved by parameter tuning.

Risks

The main risks are:

1. Price reversal is not guaranteed. Prices may continue the trend even if 123 Reversion signal rules are met.
2. RSI indicator can have a high rate of false signals. Exceeding the alert line does not always truly represent overbought/oversold status.
3. Both strategies may give out wrong signals simultaneously. This doubles the wrong direction risks.

The solutions are:

1. Fine tune 123 Reversion parameters to ensure signals only on high probability reversal points.
2. Adjust RSI HistoAlert alert line positions to decrease false signal rates.
3. Add other indicator confirmations to avoid excessive wrong direction risks.

Optimization Directions

The strategy can be optimized in aspects:

1. Test different parameter combinations of both strategies to find optimum values.
2. Introduce more factors like MA, volatility indicators for multifactor verification to filter out more false signals.
3. Test different holding period schemes. The current strategy uses momentum holding. Trend following holding may be evaluated.
4. Separate parameter sets for long term and short term.

Conclusion

The Dual Reversion RSI HistoAlert strategy combines price reversal and overbought/oversold judgment strategies for more reliable trading signals compared to single strategy usage. It has lower false signal probability and more comprehensive judgement. There is also large room for optimization via parameter tuning, multifactor verification, position holding scheme etc. for further enhancing stability and profitability.