No representation is being made tradinng any account will or is likely to achieve profits or losses similar to these being shown. There is another divergence right. RSI indicator strategy, Part 2. During the market experienced a sudden and sustained drop which put the system into loss. Following these four simple steps can improve your trading dramatically!
What indicator is it? Our reliable RSI indicator. During the market experienced a sudden and sustained drop which put the system into loss. It has been slowly recovering since. You can easily see trsding large drop around trade number The trading rules from Larry Connors are very simple and consist of long-only trades. As a reminder, the tradijg are as follows: Is the 2-period RSI indicator losing its edge? Hard to say at index put options definition zealous time.
I want to take a closer look at the 2-period RSI indicator and see if we can traing the basic trading system by Larry Connors. In tradint, the 2-period RSI is designed to highlight strong pullbacks. Tracing into pullbacks in an uptrend has been a well known and effective trading method and is the essence of the 2-period RSI trading system.
We can demonstrate this by looking at how the market behaves after a trade is triggered. I created an EasyLanguage strategy that can hold a position X days after opening methd trade. I then tested X for values in the range from 1 through In other methkd, I want to see how the market behaves days after mehhod a trade. Does the market have a tendency to climb after trade setup occurs or does it tend to drift lower? Below is a bar graph which represents the results.
This shows that after our 2-period RSI indicator triggers a trade, the market tends to climb over the next 30 days. This shows robustness in this particular parameter. The original trading rules by Larry Connors used a dynamic exit based upon a 5-day moving average. Once price closed above this average, the trade was closed. I wanted to take a closer look at the period used for this moving average exit. Like the bar graph above, I tested values for the period used in the moving average.
In this rsi trading method we can see increasing profit as we increase the moving average period from one to There is a slow decline after 14 as we continue to our final value of This shows stability across this parameter and exit method. Once again, we will create a bar graph as we look at a range of threshold values from We see values below 10 produce the best results.
Once again, every value produces positive results and this is a very good sign. Our increase in net profit comes at the cost of more trades which is due to the fact of lowering the stand on what we consider a viable pullback. By increasing the RSI threshold from 5 to 10 more setups qualify as a valid entry, thus we take more trades. But we also make more money on tradlng trade. This is due to our longer hold period by increasing our moving average period from 5 to In the end, we are willing to take more trades and hold on to those trades for longer periods of time.
All the results above do not use a stop loss value. I tradinf this value because it represents our risk value when scaling the number of shares to trade. This just gets better and better. Often stops will hurt a trading system in several key performance factors but not here. Unlike the original trading system, this equity curve is producing new highs. I will not modify the trading rules at all. Notice the number of trades is ,ethod lower for the above ETFs when compared with SPY.
This is due to SPY being around since while these other ETFs are much newer. Overall, the system holds up nicely across these different markets. Rsi trading method RSI indicator still appears to be mfthod robust indicator at locating high probability trzding points within the major market indices. You can modify the trigger threshold and holding period meyhod a large range of values and still produce positive trading results.
I hope this article will give you lots of ideas to explore on your own. There is no doubt in my mind the RSI indicator can be used as a basis for a profitable trading system. This topic has been updated with performance through RSI2 Strategy Files TradeStation ELD. RSI2 Rsi trading method TradeStation TSW. RSI2 Strategy File ,ethod file Jeff is the founder of System Trader Success - an inBox magazine dedicated to sharing great ideas and concepts from the world of automated trading systems.
Read More Google Notify me of followup comments via e-mail. You can also meyhod without commenting. Time limit is exhausted. Download this free guide on how to stop curve fitting. Following these four simple steps can improve your trading dramatically! Back to Basics Part 2 — How to Succeed at Algorithmic Trading. Searching for an Efficient Market Regime Filter.
The Better Methid Indicator. A Visual Mwthod Analysis of RSI using Tradestation and Excel. Two Rsi trading method Trade Systems — Part 2. Connors 2-Period RSI Update For This Simple Indicator Makes Money Again and Again. Win Rate: The Most Important Performance Measure. Improving The Simple Gap Strategy, Part 1. A Different Kind of System… Categories. Here is a closeup view of the last 19 trades, which covers about the last five rai. As a reminder, the rules are as follows:.
Price must be above its day moving average. Buy on close when cumulative RSI 2 is below 5. Exit when price closes above the 5-day moving average. All the tests within this article are going to use the following assumptions:. Number of shares is normalized based on a day ATR calculation. There are no stops. Is the 2-period RSI indicator losing its edge? Days After Opening A Trade. Jeff is the founder of System Trader Success - an inBox magazine dedicated to sharing great ideas and concepts from the world methld automated trading systems.
Combine Indicators to Identify High-Probability Reversals. Learn To STOP Curve Fitting!
RSI strategy for Intraday trading
With the year only being a few days old, it’s time to look at the very popular 2-period RSI trading method by Larry Connors and Cesar Alvarez. This article describes trading setups using Wilder's RSI for intraday trading, written by internationally known author and trader Thomas Bulkowski. It’s been about a year since I’ve taken a look at the very popular 2-period RSI trading method by Larry Connors and Cesar Alvarez. We all know there are no magic.