Trend-following RSI Strategy

2020年12月2日

According to classical technical analysis, an RSI above 70 should signal overbought conditions and, thus, a sell-signal. Cryptocurrencies represent a whole new asset class, and they reshape the classical concepts of technical analysis. FOMO-buying can be very powerful, and coins can remain in overbought conditions enough to provide excellent opportunities for scalping trades on the upside.


Building a trend-following trading strategy based on the RSI, which is generally considered a contrarian indicator, may sound counter-intuitive. Over 200 backtests prove that this is a very interesting long-term setup.

The setup is optimized on a 4-hours time frame and trading cryptocurrencies versus USD or stable coins.

The strategy tries to catch coins on sustained uptrends to take advantage of further upside.

• The strategy's buy-signal triggers when a coin has an RSI above 70 on a 4-hours time frame.
  
• The strategy sells the coin if a profit of 6% is achieved. Alternatively, it closes the position if the RSI drops below 55, indicating a possible weakening of the trend.
  

The strategy assumes each order to trade 30% of the available capital. A trading fee of 0.1% is taken into account. The fee is aligned to the base fee applied on Binance, which is the largest cryptocurrency exchange.