Strategy Overview
This strategy is a trading system based on short-term price momentum after market opening. It observes the price movement direction during the first 90 seconds after market opening, then enters a trade in the established direction. The strategy has two exit conditions: a reversal signal based on the RSI indicator and a fixed 10-minute time window limit. This approach is particularly suitable for rapidly fluctuating market environments, leveraging the price volatility and trend formation characteristics typically present at market open.

The core concept is to capture short-term trends formed during the initial market opening period and profit from trend continuation, while controlling risk through technical indicators and time limitations. This method is especially suitable for intraday traders and options traders seeking to capitalize on market opening volatility for short-term gains.

Strategy Principles
The strategy operates through several key steps:

Initial Direction Determination: The strategy observes price movements during the first 90 seconds after market opening. At the end of this period, it determines market direction (up, down, or flat) by comparing the current price to the opening price.

Entry Signal: Once the direction is determined, the strategy immediately enters a position - going long (buying call options) for upward trends or going short (buying put options) for downward trends.

Exit Conditions: The strategy implements two exit mechanisms:

• RSI-based Reversal Signal: If RSI reaches or exceeds 70 (overbought) in a long position, or reaches or falls below 30 (oversold) in a short position, the strategy triggers an exit signal.
• Time-based Exit: Regardless of profit or loss, the strategy exits within 10 minutes (600 seconds) after entering a trade.

Daily Reset: At the beginning of each trading day, the strategy resets all variables in preparation for a new day of trading.

Strategy Advantages

1. Simple and Clear Entry Rules: The strategy determines direction based on price movement in the first 90 seconds after opening, making entry rules simple, intuitive, and easy to execute.

2. Combines Technical Indicators and Time Limits: Through RSI overbought/oversold indicators and a fixed time window, the strategy provides multiple layers of protection, helping to control risk.

3. Adapts to Market Opening Characteristics: Markets often experience significant volatility at open, and this strategy capitalizes on this characteristic to capture short-term price momentum.

4. No Need for Complex Market Analysis: The strategy doesn't rely on complex market analysis or combinations of multiple indicators, making operation straightforward.

5. Well-defined Stop-loss Mechanism: Through RSI reversal signals and time limitations, the strategy has clear stop-loss mechanisms, helping to control maximum loss per trade.

6. Suitable for Options Trading: The strategy is particularly appropriate for options trading, utilizing options leverage to amplify returns while controlling fixed risk.

Strategy Risks

1. False Breakout Risk: The early market opening period may experience false breakouts, causing the strategy to establish positions in the wrong direction. Solution: Consider adding additional filtering conditions, such as volume confirmation or a longer observation period.

2. RSI Indicator Lag: RSI as a reversal indicator has inherent lag, potentially causing exit signals to appear after missing the optimal exit point. Solution: Adjust RSI parameters or combine with other leading indicators.

3. Fixed Time Window Limitation: The fixed 10-minute holding period may be too short or too long, depending on market conditions. Solution: Adjust the time window based on volatility characteristics of different markets and instruments.

4. Failure to Consider Overall Market Trend: The strategy is based solely on short-term opening movement without considering the broader market trend. Solution: Add daily or weekly trend filtering conditions.

5. Potentially High Transaction Costs: As a short-term strategy, frequent trading may lead to high transaction costs. Solution: Choose brokers or trading instruments with lower transaction costs.

6. Impact of Major News Events Not Considered: Major news events can cause abnormal market volatility. Solution: Pause the strategy or adjust parameters on days with major news announcements.

Strategy Optimization Directions

1. Adjust Time Parameters: Initial observation window (90 seconds) and maximum holding time (10 minutes) can be adjusted for different markets and instruments to adapt to varying market volatility. Optimization rationale: Different markets and instruments have different volatility characteristics, and fixed parameters may not be optimal.

2. Add Trend Filters: Incorporate larger timeframe trend filters, only entering positions when aligned with the major trend direction. Optimization rationale: Following the direction of larger timeframe trends can improve the strategy's win rate.

3. Optimize RSI Parameters: Adjust RSI length and overbought/oversold thresholds based on the characteristics of specific trading instruments. Optimization rationale: Standard RSI parameters (14, 70, 30) may not be suitable for all markets and timeframes.

4. Add Volume Confirmation: Incorporate volume analysis in entry decisions to ensure price momentum is supported by sufficient trading activity. Optimization rationale: Price movements confirmed by volume can reduce the risk of false breakouts.

5. Dynamic Stop-loss Mechanism: Introduce volatility-based dynamic stop-losses, rather than relying solely on RSI and time limitations. Optimization rationale: Volatility-adjusted stops better adapt to current market conditions.

6. Add Drawdown Control: Set maximum acceptable drawdown percentages, pausing the strategy when exceeded. Optimization rationale: Controlling drawdowns protects capital and prevents significant account reduction from consecutive losses.

7. Incorporate Multiple Timeframe Analysis: Combine analysis from multiple timeframes to improve entry signal quality. Optimization rationale: Multi-timeframe consensus can enhance signal reliability.

Summary
The Market Open Momentum Reversal RSI Trading Strategy is a simple yet effective short-term trading method, particularly suitable for capturing momentum opportunities at market open. This strategy determines trading direction by observing price movements during the first 90 seconds after opening and manages exits through RSI reversal signals and a 10-minute time window.

Despite its simple design, the strategy encompasses core elements of a trading system including direction determination, entry execution, risk control, and exit management. With appropriate parameter adjustments and optimization, this strategy can adapt to different market environments and trading instruments.

However, traders should be aware of the risk of false breakouts during market opening and consider incorporating larger timeframe trend analysis to improve the win rate. Additionally, dynamically adjusting RSI parameters, adding volume confirmation, and implementing more flexible stop-loss mechanisms are all worthwhile optimization directions to explore.

For options traders, this strategy provides clear directional trading signals with limited risk exposure time, making it well-suited to the time decay characteristics of options. Through reasonable position sizing and appropriate selection of option expiration dates, the risk-reward ratio of the strategy can be further optimized.

Strategy source code

/*backtest
start: 2025-04-13 00:00:00
end: 2025-04-20 00:00:00
period: 7m
basePeriod: 7m
exchanges: [{"eid":"Futures_Binance","currency":"TRX_USD"}]
*/

// @version=5
strategy("Market Open Options Strategy", overlay=true)

// Define trading session start (e.g., 9:30 AM for US markets)
session_start = timestamp("GMT-4", year, month, dayofmonth, 09, 30, 00)

// Time window for initial direction (90 seconds = 1.5 minutes)
initial_window = 90 * 1000 // in milliseconds
is_in_initial_window = (time - session_start) <= initial_window and (time - session_start) >= 0

// Variables to track open price and direction
var float open_price = 0.0
var float direction = 0.0
var bool direction_set = false

// Capture open price at session start
if (time == session_start)
    open_price := close
    direction_set := false

// Determine direction after 90 seconds
if (is_in_initial_window[1] and not is_in_initial_window and not direction_set)
    direction := close > open_price ? 1.0 : close < open_price ? -1.0 : 0.0
    direction_set := true

// Reset direction_set at the start of a new day
if (time == session_start)
    direction_set := false

// Reversal indicator (RSI-based)
rsi_length = 14
rsi_overbought = 70
rsi_oversold = 30
rsi = ta.rsi(close, rsi_length)
reversal_signal = (direction == 1.0 and rsi >= rsi_overbought) or (direction == -1.0 and rsi <= rsi_oversold)

// Time-based exit (10 minutes = 600 seconds)
max_hold_time = 600 * 1000 // in milliseconds
is_within_hold_time = (time - (session_start + initial_window)) <= max_hold_time and (time - (session_start + initial_window)) >= 0

// Strategy logic
if (direction_set and direction != 0.0 and is_within_hold_time and not reversal_signal)
    if (direction == 1.0)
        strategy.entry("BuyCall", strategy.long)
    else if (direction == -1.0)
        strategy.entry("BuyPut", strategy.short)

// Exit conditions: Reversal or time-based
if (reversal_signal or not is_within_hold_time)
    strategy.close_all("Exit")

// Plot signals
plotshape(direction == 1.0 and strategy.position_size == 0 and direction_set ? close : na, "Buy Call", shape.triangleup, location.belowbar, color.green, size=size.small)
plotshape(direction == -1.0 and strategy.position_size == 0 and direction_set ? close : na, "Buy Put", shape.triangledown, location.abovebar, color.red, size=size.small)

The original address: Market Open Momentum Reversal RSI Trading Strategy