Thesis
The mean-reversion strategy operates on a straightforward premise: markets overreact. When RSI drops below 30, the agent treats the asset as oversold and buys; when RSI climbs above 70, it sells. The universe spans 24 large-cap U.S. equities across tech, financials, healthcare, consumer, and energy — names with sufficient liquidity to make the signal actionable and spreads manageable.
No exotic inputs, no sentiment overlays. The edge, if it exists, comes entirely from disciplined execution of a classical oscillator rule.
Backtest Performance
Over 451 days of simulated history, the strategy returned 14.73% on a $10,000 starting balance, compounding to a final equity of $11,473. Annualised, that works out to a 7.98% CAGR — modest but respectable for a rules-only approach with no leverage.
The win rate stands at 70.6% across 38 trades, which is the headline number most retail traders would cite approvingly. Maximum drawdown came in at 15.64%, and the Sharpe ratio of 0.58 suggests the strategy earns about half a unit of risk-adjusted return per unit of volatility. That is acceptable, not impressive.
Turnover at 879% is worth flagging: the strategy cycles through position value roughly nine times over the period. At $1 per trade in fees (38 total), cost drag is negligible in simulation — but real-world slippage on a live account would compress returns further.
Walk-Forward Validation: Where It Gets Complicated
The four-fold walk-forward tells a more nuanced story:
| Fold | Period | Return | Sharpe | Max DD | Trades |
|---|---|---|---|---|---|
| 1 | Aug 2024 – Jan 2025 | +2.06% | 0.57 | 4.24% | 8 |
| 2 | Jan 2025 – Jul 2025 | +11.10% | 1.32 | 10.53% | 10 |
| 3 | Jul 2025 – Dec 2025 | +2.21% | 0.46 | 8.80% | 6 |
| 4 | Dec 2025 – May 2026 | -2.84% | -0.33 | 14.96% | 10 |
Three of four folds are positive, and Fold 2 is genuinely strong (Sharpe 1.32). But Fold 4 — the most recent, and therefore the most relevant — is the weakest: a -2.84% out-of-sample return with a negative Sharpe and the highest drawdown of any fold.
The validation system flagged this: validation did not pass. The Probabilistic Sharpe Ratio sits at 0.785 and the Deflated Sharpe Ratio at 0.304 — the DSR in particular, which penalises for multiple testing across six trials, suggests the strategy's edge is not yet statistically robust.
Live Deployment: Quiet So Far
The agent went live on May 31, 2026 with $10,000. Its first action was a single buy: 21 shares of WMT at $115.75. Since then, four consecutive daily runs have executed zero trades. As of June 4, the portfolio holds $7,569 in cash and $2,471 in WMT, for a total of $10,040 — essentially flat since inception.
The dormancy is not surprising: RSI-based strategies are patient by design and only fire when the signal triggers. A quiet market or a universe trading in neutral RSI territory simply produces no entries.
Strengths and Risks
Strengths: High win rate, interpretable logic, diversified universe, low fee drag in simulation, and two strong historical folds that demonstrate the thesis can work.
Risks: The most recent fold is the weakest, the DSR raises a legitimate overfitting concern, and a 15.6% max drawdown is non-trivial for a strategy with a sub-0.6 Sharpe. Mean-reversion also tends to struggle in trending regimes — if a holding enters a sustained downtrend, repeated RSI-30 buys can compound losses rather than capture a bounce.
The validation gate exists precisely for this reason. Mean-reversion is a strategy to monitor, not yet one to scale.