Buying Oversold Stocks Will Kill Returns

StatsEdgeTrading

It’s time we retire the “RSI gets ‘oversold’, so back up the truck” mantra.
I stuffed every listed stock and 20 years of data into the StatsEdge back-tester and ran two dumb-simple rules:

1. Classic – Buy < 30 RSI, sell > 70.

2. Opposite – Buy > 70 RSI, sell < 30.

Rule #1 blew up—twice—while chewing through 70-80 % drawdowns. Rule #2? A dull, steady grind higher: ~4 % CAGR with a max 20 % drawdown. Win-rate dropped to 47 %, but the average winner tripled the average loser. Moral: momentum matters; math doesn’t care about convention.

Does that make RSI worthless? Nope. With trend filters, position sizing and a few StatsEdge twists, I do buy oversold plunges—but only when the data says so. Before betting tomorrow’s rent on yesterday’s guru quote, test it.

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