Are Breakeven Stops Worth The Effort? We all know there are no rsi forex plus visa indicators but there is one that certainly acted like magic over the past 10 years or so.
P when it experiences a pullback in a bull market. We can use a 200-day simple moving average to determine when we are in a bull trend and using a 2-period RSI to locate high probability entry points. We can then exit when price closes above a 5-day simple moving average. Price must be above its 200-day moving average.
Exit when price closes above the 5-day moving average. The system backtest was performed from September 1997 through March 2012. 50 for commissions and slippage was deducted per round trip. Below is a chart of what this system would look like along with the system results. These results are great considering we have such a simple system. Just with this concept alone you can develop several trading systems.
For now, let’s see if we can we improve upon these results. Instead of a single calculation we will be computing a running daily total of the 2-period RSI. In this case, we are going to use the total of the 2-period RSI for the past three days. P cash market going back to 1993? The accumulated strategy worked as intended.
As a bonus, the drawdown was slightly smaller. While both systems do a fantastic job, the accumulation strategy may do a slightly better job. Dow as well as the two ETFs, DIA and SPY. Please note, the trading concept and the code as provided is not a complete trading system. It is simply a demonstration of a robust entry method that can be used as a core of a trading system. So, for those of you who are interested in building your own trading systems this concept may be a great starting point.
2013 Update:An additional article was published in 2013 which updates the RSI system and explores it in more detail. Both strategies look the same to me and there is no cimmulative RSI there, just a regular RSI. Furthermore, 52 trades in 15 years is far from a significant sample. Rick, I just updated the the text file.
It was missing the cumulative RSI strategy. I do use RSI and love them. Rick why don’t you backtest the last 100 years and let us know. 15 years is pretty darn good! I decided to test out how a Cumulative DV2 indicator would work. 1000 stop-loss ensured when buying at closing price? This is part of the risk of holding trades when the market is closed.
That means that your simulated returns are incorrect and the system is not profitable at all. Can you explain why the simulated returns are not correct and what the true simulated results are based on your runs? Because one can’t control the gap between closing and opening price the simulation you offered might not be profitable at all. Please run the simulation at opening price instead of closing price. If the price gaps below our stop we will be taken out at a loss larger than our stop. I’ve also been trading a similar system which drills down to the 5-minute chart. I encourage you to test the concept on your own platform.
1000 stop-loss condition needs to be removed when running at closing price. For those using TC2000 or Telechart, this is from Bruce at worden. I’ve not testing a 15-minute time frame. I just picked what I thought was reasonable. Of course you are free to test and modify the parameter to your liking. Since we cannot predict today’s closing price, does it mean buying tomorrow’s stock at today’s closing price? If you trade futures, things are a bit easier.