Mean Reversion for RSI SP500

Mean Reversion for RSI SP500

Made for Educational purposes. Check the YouTube video for full details. 

This is a simple RSI mean reversal strategy using the RSI 2 made popular by Larry Connors. 

It's been updated using some machine learning. 

How to use:

Add to daily SP500 chart.

IMPORTANT.

Change name of subchart to the name of SP500 your broker uses. 

It buys when price drops hard, but only if interest (volume) is picking up — then sells after a strong bounce.

1. RSI(2) < 10

• Price has fallen sharply in the last couple of days

? Meaning:

• It’s very oversold
• A bounce is likely soon

2. Average Volume is rising

• More people are trading it than before

? Meaning:

• The move actually matters
• There’s energy in the market, not just random drifting

Combined:

“Buy sharp dips that happen with increasing activity.”

RSI(2) > 95

• Price has bounced a lot and is now very stretched upwards

? Meaning:

• The rebound is likely done

1. Price drops fast → RSI goes very low
2. Volume is increasing → people are active
3. You buy
4. Price bounces
5. RSI gets very high
6. You sell

Buy panic dips with rising activity, sell when the bounce gets extreme.

This system:

• Does NOT check trend
• So it will also buy in falling markets

? That can work sometimes, but also increases risk compared to systems that only buy in uptrends.