Bitcoin Stochastic RSI Strategy Backtest: Combining Two Indicators into One

Stochastic RSI applies the Stochastic oscillator formula to RSI values instead of price — essentially creating a momentum-of-momentum indicator. It’s more sensitive than plain RSI and generates signals faster. Buy when %K crosses above 20 (leaving oversold), sell when it drops below 80 (leaving overbought).

Strategy Rules

• Buy when Stochastic RSI %K crosses above 20
• Sell when Stochastic RSI %K crosses below 80
• Settings: RSI(14), Stochastic(14), %K smoothing(3), %D smoothing(3)
• 100% position size — fully in or fully out
• 0.1% transaction fee per trade
• No leverage, no short selling

Backtest Results

Period: 2017-09-16 to 2026-03-23 (8.5 years)

Key Findings

Stochastic RSI achieves a 37.3% CAGR vs 41.5% Buy & Hold — close but slightly below. It doesn’t quite beat the benchmark.

The risk management is excellent. Max drawdown of -47.4% is among the best we’ve tested, much better than Buy & Hold’s -83.2%.

With 98 trades and 54.1% win rate, Stochastic RSI generates good quality signals. The win rate above 50% is notable — most trend-following strategies have lower win rates.

The risk-reward profile sits between ADX (better returns) and CCI (worse returns). A solid defensive choice.

Complete Trade Log

Should You Use Stochastic RSI?

Stochastic RSI is a respectable strategy — not the highest returns, but excellent risk management. It’s best suited for traders who prioritize capital preservation over maximum gains. The 54% win rate and manageable drawdowns make it psychologically easier to follow than more aggressive strategies.

Data source: Binance BTC/USDT daily candles. Backtest includes 0.1% transaction fees. Past performance does not guarantee future results.