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Trading Rules based on the Relative Strength Index - RSI Indicator
The Relative Strength Index or RSI is a normalized momentum oscillator created by J. Welles Wilder. The Relative Strength Index oscillates between 0 and 100. When the RSI is above the 70 area, it is considered overbought and when it is below the 30 area, it is considered oversold. Besides this basic rule, the Relative Strength Index indicator can be used to create much more rules; we can compare it to its previous values, we can analyze its moving average, check its volatility, its distance from its previous highs and lows...
The current list includes more than 5000 trading rules based on the Relative Strength Index. The default look-back period was used (14 bars), as well as the 7-bar and 2-bar periods.
The list can be used to test additional buy/short rules in an existing trading system or it can be passed to the genetic optimizer to generate new profitable trading strategies.
Example of trading rules:
- RSI is higher than its previous bar value
- RSI increased at least once during the previous two trading bars
- RSI increased four bars in a row
- RSI is making a new 50-Bar high
- Linear regression of the RSI indicator is higher than 70
- Volatility of the RSI series is reaching a new 30-Bar high
- Percent Rank of RSI is higher than 80%
- RSI crosses above its 10-Bar moving average
- RSI crosses below its 30-Bar simple moving average
- 10-Bar SMA of the RSI crosses below the 60-Bar SMA
To analyze individual trading rules, click on "Analyze the list" in the "Rules Manager", select your symbols, start & end dates, output(s) and add a fixed rule.
The fixed rule I use in all the quantitative researches I perform is:
close > 2 and close*sma(volume, 5) > 50000
Interpretation: Stock price must be higher than $2 and the average trading volume per day must be higher than $50,000. This prevents the analyzer/backtester from buying/selling illiquid stocks and it provides me with stronger results.
Trading financial instruments, including foreign exchange on margin, carries a high level of risk and is not suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in financial instruments or foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
