Guide · Mean reversion
Does StochRSI 20/80 work?
Across 375 stocks, StochRSI 20/80 cut the worst fall on 82%, beat buying and holding on risk-adjusted return on 10% and on raw return on 10%. Mainly a seatbelt: it softened the big falls on most stocks, but usually gave up return to do it.
What it predicts
The stochastic formula applied to the 14-day RSI: where today's RSI sits in its own 14-day range. It reaches overbought and oversold far more often than RSI does. Buy out of oversold, sell out of overbought.
- StochRSI = (RSI − lowest RSI of the last 14 days) ÷ (highest − lowest), from 0 to 1.
- In when StochRSI crosses up through 0.2.
- Out when it crosses down through 0.8.
Mean reversion plays bet that short, sharp moves tend to snap back. The family guide
How to use it
- It trades often (about 20 switches a year per stock), so costs, spreads and taxes eat into it more than the backtest's 0.05% per switch suggests.
- It worked best on Micro caps (33% beat holding on risk-adjusted return) and worst on Media & telecom (0%).
- Use it as one input. Your signal combines the plays you count with the other factors you weight into one call.
When it worked
StochRSI 20/80 did best against holding in the 2008 crash (+15% median gap) and worst in the 2020–21 rally (−26%). Median gap in return against holding the same stock (per year over stretches longer than 18 months; crypto excluded).
| 2008 crash | Recovery 2009–19 | COVID drop | 2020–21 rally | 2022 bear | Since Oct 2022 | |
|---|---|---|---|---|---|---|
| StochRSI 20/80 | +15% | −9% | +4% | −26% | +9% | −9% |
Where it worked
By kind of stock: how often it beat holding on risk-adjusted return, and the median Sharpe ratio gap.
| Group | Beat holding, risk-adjusted | Sharpe gap |
|---|---|---|
| Micro caps | 33% | -0.34 |
| Industrials & rentals | 22% | -0.31 |
| Energy & power | 22% | -0.15 |
| Software & devices | 15% | -0.22 |
| Financials | 12% | -0.20 |
| Healthcare | 11% | -0.16 |
| Real estate | 11% | -0.13 |
| Metals & mining | 10% | -0.21 |
| Semiconductors | 4% | -0.30 |
| Industrials & materials | 4% | -0.24 |
| Consumer & retail | 3% | -0.26 |
| Sectors | 0% | -0.29 |
| Indexes & ETFs | 0% | -0.24 |
| Big tech | 0% | -0.20 |
| Media & telecom | 0% | -0.14 |
Where it helped most
Sharpe ratio gap against holding, stocks with 3+ years of history
Right now
StochRSI 20/80 holds 203 of 377 names as of the Oct 13, 2026 close.
Changed its call in the last two weeks:
Backtest results since 2005 (or as long as each stock has traded), against holding the same stock over the same dates, after 0.05% per switch. Past results don't promise future ones. This analysis does not constitute trading advice. Please meet with an advisor or independently review sources before making any decision.