Thursday, January 15, 2009

RSI 2 Breakout system

With all the buzz about the RSI2 lately (too many links to post), I thought I'd explore the trading opportunities when the RSI2 breaks out of an oversold or overbought range, as defined by a moving average. One of the problems with the RSI2 is that oversold or overbought conditions, as measured by the RSI2 can continue for some time, thereby frustrating traders who jump the gun with their entries. In previously profiled systems like the Grand Slam series (see BZB Dirty Dozen systems on the right panel of the blog) we used the "cross above" and "cross below" signals to trigger the trades. . .with respectable results. This system is a bit different in that it uses a moving average of the RSI2 indicator as a baseline and then looks for crosses above and below that MA line to trigger the trades. While not wildly successful, the results are certainly encouraging of further work in this direction and when added to the larger Kit of Parts systems, including the KOP10 and KOP16, to provide a nice confirmation.
TS 2000i is shown below.
Blogger, of course, won't let me post the open code because of the symbols so, as usual, the open code is posted as a comment for those who wish to cut and paste into their own platform.


bzbtrader said...

Inputs: Len(3),OverSold(35),OverBought(75),Len2(4),Len3(6),Len4(7);

If Average(RSI(Close,2),Len)< Oversold and RSI(Close,2) Crosses Above Oversold
Then Buy This Bar at Close;
If BarsSinceEntry = Len2
Then ExitLong This Bar at Close;
If Average(RSI(Close,2),Len2)> OverBought and RSI(Close,2) Crosses Below OverBought
Then Sell This Bar at Close;
If BarsSinceEntry = Len3
Then ExitShort This Bar at Close;

Buck V said...

does your site have an RSS feed ? pls post the URL if so.. i'm no RSS expert but love the service..

also a TradeStation user and system developer. so wanted to say howdy, brother.

bzbtrader said...

Haven't set up feed burner yet. Maybe someday.
Thanks for checking in.

dclancy said...

What software are you using to screen?

What brokerage can you use to make mechanical trades?

bzbtrader said...

The screen shots for this post are Tradestation 2000i (TS2000i). I have listed most of the chart setups I use on the right panel of the blog under "CHARTS ON THIS BLOG". I execute all my trades on the Schwab platform. Telechart reflects my weekly updates of the 3linear regression (3LRs) studies as well as potential butterfly channels. Many mechanical traders use TS8.4 for trading, althoug many paltforms will accomodate system traders, depending on your particular focus. Go to the back of any issue of Stocks & Commodities magazine under "Trader Resources" to see a full list.

bzbtrader said...

If your reference was to "screening" software. . .I don't use any. I just trade a very narrow stable of ETFs and a few stocks, like GE, using very specific setups like the NYAD divergence.

Brad said...

You may want to check this out (scroll down) for code on how to add text boxes to blog posts:

It may help w/ your posting of code!

bzbtrader said...

Many thanks for the link. Being old and feeble(minded), I can always use a little help from my friends.

Rick said...

I love it when I stumble upon a blog I've never heard of that is chock-full of truly interesting trading-related material! God bless the Internets.

BZB, thanks for sharing your efforts and results. I'm fairly new to TradeStation but very interested in building my backtesting skills with systems just like this. I'll be following your RSS feed!

Thanks & good trading -- Rick