RSITrend

Description

The RSI Trend strategy is developed by Kevin Luo; it attempts an improvement of the classical Relative Strength Index (RSI) strategy, adapted for usage in longer-term trend conditions. Based upon the observation that the RSI strategy tends to overreact to minor changes in long trend conditions, this updated version introduces a trend filter. 

This strategy detects existence of a trend and only reacts if the trend is strong enough. This is believed to minimize the reaction to minor and temporary changes in the trend, thus indicating fewer false signals.

A simulated buy order is added when the RSI crosses above the oversold level in strong uptrend conditions. Rules for simulated sell signals are vice versa: these are added in strong downtrend upon the RSI falling below the overbought level. Trend existence and strength are analyzed here using the ZigZagTrendPercent indicator.

Input Parameters

price The price to be used in calculations.
length The period used in calculation of RSI.
over bought The overbought level.
over sold The oversold level.
percentage reversal The threshold percentage of the price used in the calculation of ZigZagTrendPercent.
average type The type of moving average to be used in calculations: simple, exponential, weighted, Wilder's, or Hull.

Description

1. "The RSI & Price Trends" by Kevin Luo. Technical Analysis of Stocks & Commodities, June 2015.

Backtesting is the evaluation of a particular trading strategy using historical data. Results presented are hypothetical, and there is no guarantee that the same strategy implemented today would produce similar results.

Technical analysis is not recommended as a sole means of investment research.

For educational purposes only. Not a recommendation of a specific security or investment strategy.

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