Strategy review
RSI + Stochastics / ADX Oversold Dip
Reviewed video: “Efficient RSI + Stochastics Trading Strategy for Better Trade Timing”
The claim
Filter for uptrends with ADX>25 & +DI>−DI, then buy only when RSI(5) drops below 30 (deep oversold). Stop below the signal candle.
How we tested it
Wilder ADX(14) + RSI(5), daily, 159 large/mid + 138 small-caps, 8 years, 0.25% cost. Tested the raw 'buy at RSI<30' (knife) vs waiting for RSI to turn back up (bounce).
The data
| Metric | Value |
|---|---|
| Knife: win % | +16.00 |
| Knife: payoff (×) | +4.50 |
| Bounce: win % | +40.00 |
| Bounce: payoff (×) | +1.50 |
₹2,00,000 track record
Backtested as a ₹2,00,000 portfolio: up to 5 positions at once, risking 1% of equity per trade, profits compounded. Monthly returns (% of account) below — yellow = up red = down.
| Jan | Feb | Mar | Apr | May | Jun | Jul | Aug | Sep | Oct | Nov | Dec | Year | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2019 | -10 | -1 | -13 | -12 | -2 | -8 | -5 | -35 | +5 | -60% | |||
| 2020 | -16 | -6 | -3 | +7 | -3 | -2 | +20 | -4 | -4 | +16 | -11 | -10% | |
| 2021 | -19 | +21 | -18 | -5 | +22 | -11 | -20 | +5 | +4 | -8 | -6 | -8 | -44% |
| 2022 | -12 | -3 | -6 | +101 | +1 | -12 | -5 | +6 | -20 | +17% | |||
| 2023 | -4 | +5 | -9 | -2 | -6 | -19 | +40 | +11 | -14 | -20 | -9 | -32% | |
| 2024 | -21 | -3 | +1 | -8 | -6 | +18 | +32 | -2 | -8 | -21 | -10 | -34% | |
| 2025 | +12 | -5 | -5 | -8 | -14 | -22 | +0 | -20 | +2 | -22 | -9 | -64% | |
| 2026 | -12 | -5 | -11 | +4 | -7 | -28% |
Our verdict
A beautifully convex setup — the raw RSI<30 version produced a +105R winner and ~90 trades over 5R. The ADX trend filter is, again, a sensible idea.
But it's net negative: only 16% of falling knives bounce, too few to clear the losers even at 4.5× payoff. Waiting for confirmation lifts the win rate to 40% but collapses the tail to breakeven. And it's bull-beta — positive in 2020/21/23, negative 2024/25/26. The convex tail it does have is the same small-cap fat tail the breakout book already harvests, more efficiently.
Bottom line
★★☆☆☆ 2.0/5