Prateek Jain

Strategy Playbook

RSI Divergence

Unprofitable

Trades price/RSI divergences where price makes new highs/lows but RSI does not, suggesting weakening momentum.

Total P&L
$-8.7K
from $10K starting
Win Rate
42.8%
5584W / 7469L
Total Trades
13,053
Jan 2020 — Mar 2025
Max Drawdown
99.5%
avg hold 7.9h
Equity Curve — 5 Year Backtest
Equity curve$1.3K$5.6K$9.9K$14.2K$18.5K$22.8K2020-012020-112021-092022-082023-062024-042025-032025-03
Monthly P&L
Monthly P&L20-01 20-08 21-03 21-10 22-05 22-12 23-07 24-02 24-09 +$913-$913
Deep Dive
RSI Divergence is a well-known technical pattern: when price makes a new low but the RSI indicator makes a higher low (bullish divergence), it suggests selling pressure is weakening and a reversal may be imminent. The inverse (bearish divergence) signals weakening buying pressure. This implementation adds a confirmation requirement — after detecting the divergence, the strategy waits for the next candle to confirm the reversal direction before entering. In 5 years of backtesting across 13,053 trades, the strategy achieved only a 42.8% win rate. A critical finding: 5,154 trades (39%) had low quality scores, meaning the divergence detection was triggering on noise rather than genuine momentum divergences. The strict confirmation candle filter, while theoretically sound, creates a paradox: it delays entry, which in fast-moving crypto markets means entering after much of the reversal has already occurred. But without confirmation, the false positive rate would be even higher. RSI divergence is better suited to daily or weekly timeframes where momentum shifts are more meaningful. On hourly candles, the noise-to-signal ratio is simply too high.
Parameters
Signal:Price/RSI divergence
Confirmation:Next candle must confirm
Timeframe:1h candles
Loss Analysis — Failure Modes
Low Qual Score
5154
Entered Pump Top
781
Stop Too Tight
422
Adverse Move
107
Low Volatility Chop
54
Missed Take Profit
16
Profit Reversal
6
Top Symbols by Trade Count
LINK
175
ATOM
153
DUSK
150
FET
150
ICX
143
ADA
142
ONE
142
RLC
140
CELR
140
ETH
139

Backtested on hourly OHLCV data across 65+ symbols from Jan 2020 to Mar 2025 — $10,000 initial balance — 0.1% commission — 0.05% slippage

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