Fibonacci + RSI - Strategy

Overview

This is an intraday mean-reversion strategy designed for short timeframes (1–30 minutes).
It combines volatility-based Fibonacci bands with RSI momentum signals to identify temporary price extremes and trade pullbacks back toward fair value.

The strategy trades both long and short, uses limit entries, a manual exit logic, and a hard stop-loss as risk protection.

Market Context

The strategy assumes that, on intraday timeframes:

price frequently deviates from its short-term fair value,

extreme deviations tend to revert,

momentum (RSI) can confirm exhaustion.

It is not a trend-following system.
Trades are taken against short-term extremes, not in the direction of breakouts.

Indicators Used
1. Fibonacci Volatility Bands

The bands are calculated using:

VWMA (Volume Weighted Moving Average) as the central price,

Standard Deviation as a volatility measure,

a multiplier to create upper and lower bands.

Key levels:

Upper Band (fu1) – overextended price zone

Lower Band (fd1) – oversold price zone

Intermediate targets (fu764 / fd764) – mean-reversion profit targets

These bands behave similarly to dynamic volatility channels.

2. RSI (Relative Strength Index)

RSI length: typically 14

Oversold level: 30

Overbought level: 70

The strategy uses RSI crossovers to confirm momentum reversal:

crossing up from oversold → potential long

crossing down from overbought → potential short

Entry Rules
Long Entry

A long position is considered when:

Price trades below the lower Fibonacci band (fd1)

RSI crosses upward from the oversold level

Price is still below the predefined upside target

The trade is entered using a limit order at the candle close.

Short Entry

A short position is considered when:

Price trades above the upper Fibonacci band (fu1)

RSI crosses downward from the overbought level

Price is still above the predefined downside target

The trade is entered using a limit order at the candle close.

Exit Rules
Manual Exit (Primary Exit)

Positions are closed manually when price reaches predefined Fibonacci target levels:

Long: price moves back up into the target zone

Short: price moves back down into the target zone

This exit represents the mean-reversion objective of the strategy.

Stop-Loss (Risk Protection)

A hard stop-loss is always active to protect against adverse moves.

Long stop: below entry price

Short stop: above entry price

The stop is calculated as a fixed percentage (or ATR-based in later versions) from the entry price.

The stop-loss is not the primary exit, but a safety mechanism.

Order Management Philosophy

Limit entries are used to avoid market slippage.

Manual exits control trade logic.

Stop-loss exits control risk only.

Only one position per direction is managed at a time.

Alerts are generated at signal or entry time for automation or monitoring.

Risk & Characteristics

Designed for frequent, small trades

Low average drawdown per trade

Performance depends heavily on:

volatility regime

correct stop sizing

disciplined risk management

Without proper position sizing, the strategy must not be traded live.

Suitable Markets

Forex pairs

Indices

Liquid crypto pairs

Best performance is expected in ranging or mildly trending markets.

Summary

This strategy attempts to exploit short-term price overextensions by combining volatility bands with momentum confirmation.
It relies on mean reversion, controlled risk, and disciplined execution rather than large directional moves.