Mean Reversion Indicator — Buy the (DCA) Dip Signal (unbiased)

Description

The Mean Reversion Signal — Buy the Dip (unbiased) indicator is designed to detect high-probability reversion points within Bitcoin’s cyclical market structure. These signals only appear when momentum has either fully reset on the Stochastic RSI (SRSI) or when a positive momentum reversal is beginning to form.

It combines 6H Relative Strength Index (RSI) data with 2-Week Stochastic RSI (SRSI) dynamics to identify exhaustion and early accumulation phases.

Core logic:
A buy signal appears when the 6H RSI closes below 30, indicating local oversold conditions.
The 2W Stochastic RSI confirms momentum alignment when both K & D are below 20 (deep oversold), above 80 (strong ongoing rally), or when K crosses above D (positive reversal).

The indicator is cycle-aware — active only after a defined date (e.g., 2023-01-01) to ensure it aligns with current market structure and avoids noise from pre-cycle conditions.
Additionally, green signals from previous bull cycles (e.g., 2015, 2019, 2020) are also displayed to highlight historically similar accumulation phases, allowing for cross-cycle comparison.

Color zones:
🟩 High probability of a durable new rally
🟧 Moderate probability zone
🔴 Momentum already extended; potential continuation but weaker signal

Recommended combinations:
For a deeper confirmation framework, this signal pairs well with:

- CoinGlass: Derivatives Risk Index Chart (to assess market (de)leveraging and derivatives pressure)
- BTC Futures Sentiment Index (Axel Adler Jr.) — (to monitor directional sentiment shifts)
- CheckonChain: Bitcoin — Short-Term Holder SOPR (to track realized profit-taking activity)
- CheckonChain: Bitcoin — Short-Term Holder MVRV (to evaluate valuation risk relative to cost basis)

Use case:
This tool helps traders identify favorable mean-reversion opportunities while considering broader cycle context and momentum structure.

It is not financial advice — best used alongside macro structure analysis, derivatives positioning, and on-chain behavior for comprehensive decision-making.