The Thesis
RSI Snap-Back is built on a straightforward premise: the seven largest US tech names — AAPL, MSFT, NVDA, GOOGL, AMZN, META, and TSLA — tend to recover sharply after short-term selling exhaustion. The strategy enters when RSI drops below 35 (oversold) and exits when RSI climbs above 70 (overbought), rotating through a hard cap of four simultaneous positions. That book limit isn't an afterthought; it's a deliberate discipline mechanism that keeps drawdown exposure concentrated and manageable rather than spread thin across the full Mag-7 universe.
Backtest Performance
Over 451 trading days, the backtest produced a 20.95% total return on a $10,000 paper portfolio, finishing at $12,095. The CAGR of 11.21% is respectable for a rules-based system running on just seven names.
The Sharpe ratio of 0.61 is modest — not exceptional, but not alarming either. It reflects the core tension in mean-reversion strategies: you're often catching falling knives, and the ride can be bumpy before the snap-back materializes. The max drawdown of 23.73% confirms that tension. Entering RSI < 35 by definition means buying into weakness, and when weakness extends (think a sector-wide rotation or macro shock), the book can sit underwater for a meaningful stretch.
The win rate of 66.7% across 37 trades is the most encouraging number here. Two out of every three exits were profitable, which suggests the RSI signal has real edge in this universe — large-cap tech does tend to recover, and the exit discipline at RSI > 70 captures a solid portion of that recovery before momentum fades.
Turnover of 773% over the period underscores that this is an active rotational strategy, not a buy-and-hold wrapper. Total fees tallied to $37 (one dollar per trade), negligible at this scale but worth watching if position sizes grow.
Recent Activity: Patience in Practice
The last six scheduled runs — June 22 through June 29 — each logged zero executed trades and a flat $10,000 cash balance. This is not a malfunction. It is the strategy doing exactly what it's designed to do: refusing to force entries when none of the seven names have hit oversold territory.
In a market where Mag-7 names have broadly held elevated levels, RSI < 35 triggers simply haven't appeared. A strategy that sits on cash rather than chasing momentum is behaving correctly, even if the activity log looks quiet.
Strengths and Risks
Strengths:
- Clean, auditable signal logic with no ambiguity about entry/exit
- High win rate (66.7%) suggests genuine edge within this universe
- Four-slot book cap enforces position discipline automatically
- Willingness to hold cash is a feature, not a flaw
Risks:
- A 23.73% max drawdown is meaningful — drawdowns cluster when Mag-7 sells off in unison, exactly when RSI < 35 signals fire most aggressively
- No formal validation run yet (
validation: null); the backtest numbers are promising but untested against out-of-sample data - Universe concentration in seven highly correlated names limits diversification; a sector rotation against tech could hit all four book slots simultaneously
- High turnover (773%) may amplify slippage and fees at larger position sizes
Bottom Line
RSI Snap-Back is a disciplined, rules-based strategy with a credible thesis and encouraging historical numbers. The quiet recent stretch is a market condition, not a strategy problem. The clearest gap is the absence of a formal out-of-sample validation — that's the next milestone to watch before drawing stronger conclusions about live-trading readiness.