This year I am focusing on learning from two of the best mentors in the Industry with outstanding track records for Creating Systems, and learning the what methods actually work as far as back testing.
I came across the RSI-2 system that Larry Connors developed. Larry has become famous for his technical indicators, but his RSI-2 system is what actually put him “On The Map” per se. At first glance I didn’t think it would work well, but I decided to code it and ran backtests on the S&P 100 In Down Trending Markets, Up Trending Markets, and both combined. I was shocked by the results. So I thought I would provide them for you. I also ran a test on the Major forex Pairs (12) for the last 5 years, and All Forex Pairs (80) from 11/28/2007 - 6/09/2014, impressive results also.
***At the bottom of the page is a link where you can download the PDF of the Backtesting Results.
The RSI-2 Strategy is designed to use on Daily Bars, however it is a short term trading strategy. The average length of time in a trade is just over 2 days. But the results CRUSH the general market averages.
Detailed Description of Rules For RSI-2 System are In The First Post. Also Provided are General Results Testing Stocks and Forex. And a PDF You Can Download To See Detailed Back Testing Results!!!
@aprils-alcove, strategy work or not? :) thanks from italy :)
deenius
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Hello!
Could re-upload your PDF please? Your Dropbox link doesn't work.
ChrisMoody
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RSI-2 Strategy
***At the bottom of the page is a link where you can download the PDF of the Backtesting Results.
The RSI-2 Strategy is designed to use on Daily Bars, however it is a short term trading strategy. The average length of time in a trade is just over 2 days. But the results CRUSH the general market averages.
Indicators Used:
A 2 Period RSI with the upper line at 90 and the lower line at 10 looking for Extremes.
A 200 period Simple Moving Average, and a 5 period SMA.
***That’s it!!!
Entry Rules:
Buy Only When Stock is Above 200-SMA, AND Below 5-Day SMA, With RSI Below 10
Short Only when Stock is Below 200-SMA, AND Above 5-Day SMA, With RSI Above 90
Exit Criteria:
If Buying EXIT when Price goes Above 5 SMA.
If Selling Exit when Price Goes Below 5 SMA.
***The thought process is that the security has “Pulled Back” from it’s Major Trend - And will Continue The Major Trend By Crossing the 5 SMA in the direction of the Major Tend.
Entry Choices:
Conservative - Once Criteria = True THEN Buy at Market on the Next Days Open
Aggressive - Once Criteria = True THEN Buy Near Current Days Close.
The Aggressive Entry would create more Profits However I used the Conservative Entry in my back test.
Rules Used in Backtest:
If Entry Condition True Then Enter Next Day At Market Open.
If Exit Condition True the Exit That Day At Market On Close IF Close is Above the 5 SMA in Up Trend, or Below the 5 SMA in Down Trend.
Dates used for back test…
***For Forex I just tested the last 5 years on The Major 12 Pairs (Page 1), and the last page I tested All forex Pairs (80) from 11/27/2007 to 6/09/2014.
***Starting on Page 4 (PDF Link Below) I Tested S&P 100 in Bull Markets, Bear Markets, and Bull and Bear Markets Combined…I ran the test on the Nasdaq 100 at the end.
***All The Markets I tested Showed Almost Exact Win Percentages…The RSI-2 System Seems to Be VALID…However, in Bull Markets “Buy” Trades significantly out performed “Short” Trades, The opposite for Bear Markets….So Filtering the Direction of Trades You Take Would Significantly Increase The Results.
For S&P 100:
First Period tested was from 11/27/07 through 06/09/2014…which covered a major Down Trend and a Major Up Trend.
Second Period tested was 11/27/07 to 3/13/09 … The beginning of the Major Sell Off in the Market to the Dead Low to test an Extreme Downtrend.
Third Period Tested was from 3/14/09 to 06/09/2014 … To Test a Major Uptrend.
***Results are based on Buying 100 Shares of Stock. Only 1 Entry…No Scaling In. Closing 100% of Trade on Exit Criteria.
***Forex Results are based on buying 1 Standard Lot***Note The Forex results aren’t showing a Dollar Amount…It Shows TOTAL PIPS. So multiply the Pips times your Trade Size.
Results:
S&P 100: Bull and Bear Markets Combined - 11/27/07 through 06/09/2014
Winning Percent - 65%
***Check Out The Equity Curve!!!
S&P 100: Bear Markets - 11/27/07 to 3/13/09
Overall Winning Percent - 66%
"Buy” Winning Percent - 67% but only made $151,127
“Short” Winning Percent - 65.6% but made $1,054,487 … Significantly More Money Made Going With Trend.
S&P 100: Bull Markets - 3/14/09 to 06/09/2014
Overall Winning Percent - 64.9%
"Buy” Winning Percent - 69.6% but made $2,665,689 … Significantly More Money Made Going With Trend.
“Short” Winning Percent - 54% Lost $130,840 … Going Against Trend.
Nasdaq 100: Bull and Bear Markets - 11/27/07 through 06/09/2014
Overall Winning Percent - 63%
Forex All Symbols (80): Bull and Bear Markets 11/27/2007 - 6-09-2014
Overall Winning Percent - 58.4% … + 32,552 Pips
Forex Major 12 Pairs: Last 5 Years
Overall Winning Percent - 59.6% … +9,196 Pips
Code for Upper Indicators. Highlight Bars and 5 SMA and 200 SMA.
pastebin.com/NYP282X6
i backtesting whit tdameritrade strategy desk but chngin SMA > 5 i have better results can you explain why?
baerrus
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What are the rules to exit failed trades?
ChrisMoody
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Connors never could find a STOP that made the system perform better. Therefore there isn't one in this system. the 5 SMA is so close to price you always get a price movement that gets you out of the trade...Even if you get a big gap that moves against you the 5 period avg will quickly catch up and exit you out of the trade.
Although if you read near the bottom of this thread..someone mentioned a revised system that was getting better results with a stop and a different moving avg. I will code that system sometime soon and report results under that thread.
jtdorman
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Thanks Chris for all of your really helpful work and guidance. I am using the CRSI strategy daily and I have been reading one of Mr Connors books that says a better way to implement this strategy is to use what he calls a cumulative RSI where the RSI values when added together would stay below, lets say, 35 for 2 days. Could you incorporate this cumulative structure into your current 2 period RSI strategy code?
Thank you again for your patience with us less talented scripters!!!
tpaise
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I am very late for getting best strategy rsi2 . Kindly guide me for getting rsi2 strategy afl for back test - tpaise@gmail.com
Thanks