Guide to Dual Average - RSI Quantitative Strategy
1.What is the Dual Moving Average?
Moving average is widely used in technical analysis, usually combined with time-sequenced data. It is mainly used to smooth out noise of short-term volatility to focus on the long-term trends and cycles. After many years’ development, there are many types of moving averages, the simple moving average, the exponential moving average, the weighted moving average and the cumulative moving average. Dual moving averages use the simple moving average (SMA).
Firstly, we calculate the moving average of each trading day based on the close prices of past N days. Then we connect those points to form a line, called the N-day moving average. The dual moving average uses two moving averages of different terms, 5-day and 60-day, for example.
2. What is RSI?
The relative strength index (RSI) is an indicator used in technical analysis that measures the magnitude of recent price changes. This is to evaluate overbought or oversold conditions by comparing an asset’s current strength with that of a previous period, thus predicting future market trends and reflecting the market's prosperity during a certain period of time.
3. About Dual Average-RSI Quantitative Strategy
The dual average-RSI strategy adopts the combination of dual moving average and RSI indicators to effectively predict future market trends and accurately grasp the appropriate moment to trade. The entry and exit conditions are as follows:
When the short term moving average breaks above the long term moving average and the RSI value is +50(threshold) or above, the strategy will go long; When the short-term moving average crosses below the long-term moving average and the RSI value is 50-(threshold) or below, the strategy will close the long position.
For example, in the following chart the threshold is set to 15, and the entry and exit points are indicated by the arrow:
When the short-term moving average crosses below the long-term moving average and the RSI value is 50-(threshold) or below, the strategy will go short. When the short term moving average breaks above the long term moving average and the RSI value is +50(threshold) or above, the strategy will close short position; For example, in the following chart, the threshold is set to 15, and the entry and exit points are indicated by the arrow:
4. Operational Procedure for Dual Average-RSI Strategy(Dual Average-RSI-Perps as an example)
Navigation bar - "Copy Trading" - "Create A New Strategy" - Select "Strategies Templates" - Click "Create Strategy" in column "Dual Average-RSI"- Choose settlement methods and trading pairs - Set parameters - Click "Create", as shown in the image below:
Backtest: You can conduct the backtest before the Dual Average-RSI strategy gets created. The process of backtesting is described as follows: Click “Backtest” in Figure(1-9), fill in the expected parameters in Figure(1-10), and click “Backtest”. Then the system will automatically backtest the data (within one month by default) and generate data for reference in the "Backtest Record".
Leverage Ratio: The leverage investor takes. Leverage will be included in calculating the order quantity.
Total Investment: The total amount of asset an investor put in as margin.
Auto-Stop Loss Ratio: When the total investment loss reaches the ratio, the strategy will close position and exit.
Fast SM, Slow SM, Period: Standard MA parameters.
RSI Period: The RSI is calculated using average price gains and losses over a given period of time.
RSI Threshold: 0 ≤ the threshold < 50
Number of Contracts: the number of contracts to be sent to the order book under the strategy when a signal is triggered.
Default Number of Contracts:
For reverse contract:
s = (Margin * the latest price) / (2* 0.00075 + (1/Leverage)) size = s / size per contract
For direct contract:
s = (Margin) / (2*0.00075 + (1/Leverage)) * the latest price size = s / size per contract The order quantity uses the calculated value or value set by you, whichever is smaller.
5. Operation Example
After creating a strategy, you can find the running strategy in the "My Strategies'' section. When indicators in the dual average moving strategy and RSI system are both met, the details of the relevant position, order and strategy will be shown in the "Active Strategies" section. If you want to stop and take profit or a loss, you can close the current position or end the current strategy.
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