First Up Close Exit Strategies look to exit a position on the first positive close made after a position is entered. the exit strategy based on moving averages). Case #3: RSI_Entry_Threshold = 10; RSI_Exit_Threshold = 75. The concept behind these strategies is that once the 2-Period RSI value has risen to one of those values, the market is no longer oversold and may actually have become overbought. Obviously, this only works when used with a short-term system that is looking to take quick, small profits out of the market with a very high win rate. Advanced Strategy RSI + Stochastic + МА. While they could have simply stopped after identifying all of these different strategies, what I like about Connors and Alarez’s work is that they went a step further and actually tested three of these strategies. The logic here is very similar to the New High Exit Strategies. Research Goal: To benchmark the RSI exit strategy against the trend exit strategy based on moving averages. Quantamentals – The Next Forefront of Trading and Investing, Moving Averages and the RSI: Two Exit Strategies for Short Term Traders. Your email address will not be published. Much like we saw with using the 2-Period RSI as an entry signal, the higher RSI values returned more profitable trades on average. Trade Filter: The 2-Period RSI closes below RSI_Threshold (Default Value: RSI_Threshold = 5). We will discuss many things in this article, including RSI vs. stochastic indicator and why both indicators are excellent to trade with. This is a clear example of how we can attain an extra signal from the RSI by using divergence as an exit signal. Jersey City, NJ: Trading Markets; (ii) Wilder, J. W. (1978). That explains why they can be almost exactly opposite from some of the long-term trend following strategies that I prefer and still be profitable. In a later chapter of their book, Short Term Trading Strategies That Work, they discussed five different types of exits and then provided data from backtesting some of those signals. Greensboro: Trend Research. On those entry signals, Fixed Time Exit Strategies performed the worst of the three strategies tested. 80% of the time I will hold this stock until it crosses above 80. Using the 10-day moving average increased the average return to 2.80%. Case #4: RSI_Entry_Threshold = 15; RSI_Exit_Threshold = 75. Short Term Trading Strategies That Work. Jersey City, NJ: Trading Markets; (ii) Wilder, J. W. (1978). While the Fixed Time Exit Strategies produced impressive return numbers, the exit strategies based on moving averages performed even better. Based on that, it is reasonable to assume that if a position is going to produce a positive return, it will do so sooner rather than later. Table 2 | Inputs: Table 1; Fixed Fractional Sizing: 1%; Commission & Slippage: $50 Round Turn. Algorithmic and Mechanical Forex Strategies | OneStepRemoved, September 19, 2013 by Andrew Selby Leave a Comment. RSI Trading Strategy: RSI Divergence Another way that you can use RSI is as a divergence indicator. Concept: The long equity trading system based on the 2-Period RSI (Relative Strength Index). At this time, I sell the stock when it crosses below 80. Related Entries: Relative Strength Index (RSI) Model (Filter) | Long Equity Trading System (Filter & Exit) | 3-Bar Momentum Pattern (Filter & Exit) | Hikkake Pattern (Filter & Exit) Related Topics: (Public) Trading Strategies Proprietary Strategies: CFTC RULE 4.41: HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN LIMITATIONS. It looks to exit a position when the 2-Period RSI closes above a certain number. It appears that choosing an exit strategy for your system has more to do with your comfort level with a given strategy than its actual performance. #4 – RSI + Price Action Trading. Learn more about our products and services here. This is the exit strategy that was used in backtesting the Cumulative RSI System. Specification: Table 1. This provided them with 63,101 entry signals, so this was certainly not a small sample size. Source: (i) Connors, L., Alvarez, C. (2009). We benchmark the base case strategy (default parameters) against alternatives: Case #1: RSI_Entry_Threshold = 5; RSI_Exit_Threshold = 95 (Base Case).

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