RSI Overbought Oversold Trading Strategy (Backtested in 15 Assets)

Forex Trading Strategy

RSI (Relative Strength Index) is a very famous oscillator. How do I trade on RSI (overbought and oversold condition) Some trader suggested to trade on RSI, but would it work?

So,,, You are wondering how to trade on RSI (overbought/oversold) and if it’s a valid trading strategy that you can generate profit.

In this post, you will find the backtest results of RSI Overbought Oversold Trading Strategy in 15 assets.

Who writes this post: Hi! My name is Luffy! I’ve been trading forex for six years. I make my living from software development, and trading has been one of my primary sources of side income. Being able to trade at a decent level enabled me to travel more freely. Have a Good Trade!

Contents Summary:

  • RSI Overbought Oversold Trading Strategy (Backtested in 15 Assets)
  • Download RSI Oversold Overbought Alert Indicator and EA (Expert Advisor)

RSI Overbought Oversold Trading Strategy (Backtested in 15 Assets)

(In the youtube example, I used GBP/JPY pair, 1H chart. If you would like to know the result for other pairs or timeframes, let me know on the youtube comment, I will run the test and update to this post)

Basic Strategy: Sell 70 & Buy 30

Sell when RSI curls below 70 level (candle close) and buy when RSI curls above 30 level.

Parameters:

  • Currency(Time): GBP/JPY(1H)
  • Date: 2018-01-01 ~ 2018-12-31
  • RSI: 14 (High:70 Low:30)
  • Take Profit: 3x ATR
  • Stop Loss: 3x ATR
  • Position Size: 1 lot/entry

Result:

Strategy1: Sell 70 & Buy 30

GBPJPY-1H-RSI-ATR

Most surprisingly, it ended with a positive result 😂

However, the profit factor of 1.01 suggests that it’s nearly as good as a coin toss.

Experiment: Add 200 MA filter

As the next experiment to test RSI oversold overbought strategy, I decided to add 200 MA (simple) as an extra filter.

Only enter Long if the price is above the moving average and vice versa.

Parameters:

  • Currency(Time): GBP/JPY(1H)
  • Date: 2018-01-01 ~ 2018-12-31
  • RSI: 14 (High:70 Low:30)
  • MA: 200 (simple)
  • Take Profit: 3x ATR
  • Stop Loss: 3x ATR
  • Position Size: 1 lot/entry

Result:

Strategy 2: Add 200 MA filter

GBPJPY-RSI-ATR-MA

Although 200 MA is one of the most common moving averages for many forex / CFD traders to determine the direction of entries, adding this extra filter provided a negative result.

Experiment: Adjust Take Profit Method

Instead of simply setting fixed pips value (3x ATR), I’ve made some adjustment. This type of optimization is not specific to RSI but would worth try applying to any forex trading strategies, especially for trend following type.

  1. Devide entry into 2 (Let’s say A and B)
  2. If A hit take profit (3x ATR) move B to break even
  3. Take profit if trailing stop hits or 20ma and 100ma cross

Parameters:

  • Currency(Time): GBP/JPY(1H)
  • Date: 2018-01-01 ~ 2018-12-31
  • RSI: 14 (High:70 Low:30)
  • Take Profit A: 3x ATR
  • Take Profit B: Traling Stop or MA (20&100) corss
  • Stop Loss: 3x ATR
  • Position Size: 1 lot/entry

Result:

Strategy 3: Improve Take Profit Function

GBPJPY-1H-RSI-ATR-MA-TS

You can see improvement in “Largest Win”, by using a flexible take profit method, some entries get to ride on a long trend.

Forward Test on 2019

So we got the filters & parameters optimised for 2018, let’s see if applying this trading strategy on 2019 chart will give us any positive result.

Parameters:

  • Currency(Time): GBP/JPY(1H)
  • Date: 2019-01-01 ~ 2019-12-31
  • RSI: 14 (High:70 Low:30)
  • Take Profit A: 3x ATR
  • Take Profit B: Traling Stop or MA (20&100) corss
  • Stop Loss: 3x ATR
  • Position Size: 1 lot/entry

Result:

Forward Test on 2019

GBPJPY-1H-RSI-ATR-TS-2019

😮😮😮

I was very surprised by this result, how about you??

Download RSI Oversold Overbought Alert Indicator and EA (Expert Advisor)

First of all, we will NOT take any responsibility for your trading result using our indicators and EA.

okay?

If you understand the risk of trading, we are glad to giveaway RSI indicator that will send you an alert when it hits 70 / 30 (or any value) to telegram.

Also, if you’d like to Automate the RSI Oversold Overbought Strategy, you can do so by activating the expert advisor (EA) that is also available for free download.

See you in the next post, have a good trade!

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