This strategy buys one or more of [[DDM]] [[SSO]] [[QLD]] [[DXD]] [[SDS]] [[QID]] when the RSI(2) crosses below 10. The buy is made on the open the day following the signal.Â The essence of the system is that the ultralong and ultrashort ETFsÂ put the trader in theÂ Dow, S&P, and Nasdaq when they are overbought or oversold, just before a reversal.
The trade is closed when the RSI(2) crosses above 80. The sell is made on the open the day following the signal.
Only 3 positions can be entered per day, and the system allows a maximum of 3 positions at one time.
A stop of 15% was used.
Starting Capital: $100,000Â Â Â Â Â Ending Capital $140,545.59
Take a look at the actual trades here. Long/Short Index ETF RSI(2) Trades
Further testing needs to give consideration to another type of stop. Perhaps if an entry is made, and RSI(2) rises back above 10, but then crosses below 10 again, a stop is executed.
As this RSI(2) stategy relies on a pullback or reversal to achieve gains, subsequent testing may reveal that the addition of a moving average filter may avoid entries when the market embarks on a strong trend, with very few significant pullbacks. An example of this kind of trend is the sharp decline in early January and the recent sharp uptrend that started in March. In a strongly trending environment, the first RSI(2) trades that occur after the trend reversal result in drawdowns.Comments »