Relative Strength Mean Reversion System

Family: pullback · Regime: trending · Complexity: medium · Asset classes: Forex · Timeframes: H1, H4

Thesis

Market participants tend to overreact to short-term price fluctuations even within a strong underlying trend. By identifying currencies that are broadly strong (via the basket template) but locally oversold (via RSI) and confirming the bounce with volume (via Force Index), we can exploit these temporary mispricings with a positive expectancy.

Components

• Imported UDT typed UDF params Test (regime) — Serves as a 'data availability' and volatility regime filter; if the UDT-derived offset logic produces no change, market structure is considered stagnant.
• Currency Strength Template (direction) — Establishes the macro direction by ensuring the base currency is exhibiting net positive strength across its entire basket before taking a long signal.
• Relative Strength Index (RSI) (entry) — Provides the primary timing for mean-reversion entries at oversold/overbought extremes.
• AI - RSI Strategy (exit) — Provides the trend-following exit logic and the long-term SMA filter to ensure mean reversion is traded in the direction of the primary trend.
• Risk Reward Indicator Tool (risk) — Calculates position sizing and hard stop-loss levels based on a fixed risk-to-reward ratio.
• Force Index (NNFX Variant) (confirmation) — Confirms that price movement is supported by tick volume, filtering out low-liquidity RSI spikes.

Known failure conditions

• Currency strength basket returns flat values across all majors, indicating lack of relative dispersion.
• Force Index remains at zero for extended periods, suggesting a failure in volume data feed.
• Price remains pinned above/below SMA 200 for >300 bars without an RSI mean reversion trigger.

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