Relative Strength with Retrace

Simple RSI strategy based on the absolute values of the index has one disadvantage. It is generating buy signals sometimes too early. If a stock is on a log downward trend RSI may reach a buying level but a sell signal will be generated when the price has already reached a low price. To avoid that this strategy does the following:
it generates a buy signal when RSI has fallen to some level a and has recovered to a value b which is higher than a.
A sell signal is generated when RSI has reached a high level c and has fallen from it to a lower level d. An advantage of sell signal is that it helps to stay in long position during a long upward run.
In the presented example a=20;b=30,c=90,d=80.

Formula

IF RSI(m) > v AND RSI retraced to v'
THEN GO SHORT
ELSE
IF RSI(m)< w AND RSI retraced to w'
THEN GO LONG
where RSI is relative strength index;
m is RSI periods;
and v > v' > w' > w;
e.g. v = 80; v' = 70; w' = 30; w = 20

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