Strategy Session… Reviewing the Rules and Backtest of the RSI-2 Strategy

     On Thursday July 9 2020, we ran a one-hour Strategy Session Webinar for our RSI-2 Strategy.  This is the same RSI-2 Strategy that we offer to Free Members of our site.  You can find the Daily Strategy Scan Signals, which are Daily Trade Ideas posted every single day that the market is open, here.

 

The basic RSI-2 Strategy was an idea popularized by Systematic Pioneers Larry Connors and Cesar Alvarez.

 

The Strategy Idea focuses on a short-term oversold condition within the context of an uptrend, or, a short-term overbought condition within the context of a downtrend.  We only focus on the long side trading in our own implementation, and there are various differences in our implementation of the idea.

 

The RSI-2 fits within the "Reversion-To-Mean" category of strategies... the idea of "buy the dip" (in an uptrend), or "sell the rip" (in a downtrend).

 

The RSI-2 Strategy finds a short-term oversold condition in an uptrend, where the expectation is that the uptrend will continue and resolve itself to the high-side after the pullback condition has completed.  In essence, you are attempting to get in at a relative discount but continue to ride the wave a bit higher for a "swing trade".

 

The results of the Strategy over the past 20 years or so have been quite good.  As described in the backtesting section of the Webinar, if you adjust for one (1) draw down outlier situation that occurred back during the DotCom bust in 2000 (where there was a 31% drawdown), the Strategy averages around 12% (risk adjusted to 23.78% since it's only in the market about 50% of the time) with about a 14% Maximum Drawdown.  That puts the adjusted CAR/MDD at around 0.88 before commissions.  Not bad!

 

You can learn more in the Webinar video presentation below, where we cover the following...

 

Review the RSI-2 Strategy.

• Background
• Where does the RSI-2 Strategy Fit on the Trade Spectrum?
• Pre-Conditions. Implementation (EOD). Rules or “Setup”.
• What do real trades look like?
• Review the Backtest Results to answer the question “Does it have a positive Edge?” – SPOILER ALERT – Yes, it does!
• How you can Automate this strategy.
• Where you can find daily trade signals for the RSI-2 Strategy.

 

Please enjoy the Webinar Video Presentation, and if you have any questions, feel free to contact us.

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