LSMA Strategy Templates

Strategy Overview

These three strategies showcase different ways to use Least Squares Moving Average in Reversion:

1. LSMA Trend Following with ADX Filter — price_above_lsma / price_below_lsma entries filtered by ADX trend strength
2. LSMA + RSI Pullback — Trade pullbacks in the trend direction using RSI extremes
3. LSMA + Bollinger Bands Squeeze — Breakout entries confirmed by both LSMA direction and Bollinger Band breaks

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Strategy 1: LSMA Trend Following with ADX Filter

Overview

Enter long when price crosses above LSMA in a trending market (ADX confirms), exit when price crosses below or trend weakens.

When This Works Best

• Trending markets with sustained moves (ADX > 25)
• Assets with clear directional behavior
• 4H to 1D timeframes

Algorithm Configuration

Setting	Value
Type	BOTH
Position Size	50% of equity (REL)
Order Type	MARKET
Timeout	COOLDOWN_ONLY, 3 bars

Long Entry Conditions

Group	Indicator	Signal	Threshold
Required	LSMA	price_above_lsma	—
Required	ADX	adx_above_threshold	25

Long Exit Conditions

Setting	Value
Required	LSMA · price_below_lsma
Stop Loss	5% (REL), trailing enabled
Take Profit	10% (REL)

Short Entry Conditions

Group	Indicator	Signal	Threshold
Required	LSMA	price_below_lsma	—
Required	ADX	adx_above_threshold	25

Short Exit Conditions

Setting	Value
Required	LSMA · price_above_lsma
Stop Loss	5% (REL), trailing enabled
Take Profit	10% (REL)

Recommended Parameters

Indicator	Parameter	Value	Notes
LSMA	Period	20 bars	Trend smoothing lookback
ADX	Period	14 bars	Trend strength filter
ADX	Threshold	25	Minimum trend strength

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Strategy 2: LSMA + RSI Pullback

Overview

In an established uptrend (price above LSMA), enter on RSI oversold pullbacks. In downtrends, enter shorts on RSI overbought rallies.

When This Works Best

• Trending markets with periodic pullbacks
• Assets that mean-revert after short-term extremes
• 1H to 4H timeframes

Algorithm Configuration

Setting	Value
Type	BOTH
Position Size	40% of equity (REL)
Order Type	MARKET
Timeout	REGULAR, 2 bars

Long Entry Conditions

Group	Indicator	Signal	Threshold
Required	LSMA	price_above_lsma	—
Required	RSI	rsi_below_threshold	30

Long Exit Conditions

Setting	Value
Required	RSI · rsi_above_threshold · threshold: 60
Stop Loss	4% (REL)
Take Profit	8% (REL)

Short Entry Conditions

Group	Indicator	Signal	Threshold
Required	LSMA	price_below_lsma	—
Required	RSI	rsi_above_threshold	70

Short Exit Conditions

Setting	Value
Required	RSI · rsi_below_threshold · threshold: 40
Stop Loss	4% (REL)
Take Profit	8% (REL)

Recommended Parameters

Indicator	Parameter	Value	Notes
LSMA	Period	20 bars	Trend direction filter
RSI	Period	14 bars	Momentum lookback
RSI	Oversold	30	Long entry trigger
RSI	Overbought	70	Short entry trigger

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Strategy 3: LSMA + Bollinger Bands Squeeze

Overview

Enter when price breaks above/below LSMA while Bollinger Bands confirm the breakout direction.

When This Works Best

• Breakout conditions after consolidation
• Markets transitioning from low to high volatility
• 1H to 1D timeframes

Algorithm Configuration

Setting	Value
Type	BOTH
Position Size	30% of equity (REL)
Order Type	MARKET
Timeout	COOLDOWN_ONLY, 5 bars

Long Entry Conditions

Group	Indicator	Signal	Threshold
Required	LSMA	price_above_lsma	—
Required	Bollinger Bands	price_above_upperBand	—

Long Exit Conditions

Setting	Value
Required	LSMA · price_below_lsma
Stop Loss	5% (REL)
Take Profit	12% (REL)

Short Entry Conditions

Group	Indicator	Signal	Threshold
Required	LSMA	price_below_lsma	—
Required	Bollinger Bands	price_below_lowerBand	—

Short Exit Conditions

Setting	Value
Required	LSMA · price_above_lsma
Stop Loss	5% (REL)
Take Profit	12% (REL)

Recommended Parameters

Indicator	Parameter	Value	Notes
LSMA	Period	20 bars	Trend filter
Bollinger Bands	Period	20 bars	Volatility lookback
Bollinger Bands	Multiplier	2.0	Band width (2 std devs)

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Backtesting Recommendations

• Test period variations: Compare 10 vs 20 vs 50 to find the best balance of responsiveness vs smoothness
• Compare with other MAs: Backtest LSMA against EMA/SMA/HMA to see which MA type works best for your asset
• Measure ADX filter impact: Test with and without the ADX > 25 filter to quantify trend filtering benefit
• Check indicator usefulness scores: After backtesting, review the algo metrics to confirm the MA is adding value

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Note

Pro Tip: When building strategies in Reversion, put your primary signal in the Required group and confirmation signals in Optional. This ensures the core signal must always be present while allowing flexibility in confirmation. Always backtest parameters per asset — crypto often benefits from adjusted settings due to higher volatility.