***At the bottom of the page is a link where you can download the PDF of the Backtesting Results.
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 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.
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 Indicators, Rules Below:
Link For PDF of Detailed Trade Results
//Created by ChrisMoody //BarColor strategy for RSI-2 Paint Bars + 200SMA and 5 SMA study("_CM_RSI_2_HB_MA", overlay=true) src = close, //RSI Code up = rma(max(change(src), 0), 2) down = rma(-min(change(src), 0), 2) rsi = down == 0 ? 100 : up == 0 ? 0 : 100 - (100 / (1 + up / down)) rsi_up = rsi > 90 rsi_down = rsi < 10 //MovAvg's Code ma5 = sma(close,5) ma200= sma(close, 200) //Rules for Bar Colors isLongEntry() => close > ma200 and close < ma5 and rsi < 10 isLongExit() => close > ma200 and close < ma5 and high > ma5 and ((close > ma200 and close < ma5 and rsi < 10) or (close > ma200 and close < ma5 and rsi < 10) or (close > ma200 and close < ma5 and rsi < 10) or (close > ma200 and close < ma5 and rsi < 10) ) isShortEntry() => close < ma200 and close > ma5 and rsi > 90 isShortExit() => close < ma200 and close > ma5 and low < ma5 and ((close < ma200 and close > ma5 and rsi > 90) or (close < ma200 and close > ma5 and rsi > 90) or (close < ma200 and close > ma5 and rsi > 90) or (close < ma200 and close > ma5 and rsi > 90) ) //Rules For MA Colors col = ma5 >= ma200 ? lime : ma5 < ma200 ? red : na barcolor(isLongEntry() ? lime : na) barcolor(isLongExit() ? yellow : na) barcolor(isShortEntry() ? red : na) barcolor(isShortExit() ? yellow : na) plot(ma5, color=col, title="5 SMA", style=line, linewidth=3) plot(ma200, color=col, title="200 SMA", style=circles, linewidth=3)
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.
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
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.
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.
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
Link For PDF of Detailed Trade Results