StockFetcher Forums · General Discussion · RSI Below One<< >>Post Follow-up
yepher
353 posts
msg #38203
Ignore yepher
9/25/2005 11:24:13 PM

I have tried backtesting "RSI(2) below 1" for trades that last between 1 and 5 days. I have not figured out how someone can make money that way.

Here is one report for:

Fetcher[
RSI(2) below 1
]



Very brief report:
http://yepher.com/~yepher/rsi_report/report.html

I have tried tweaking volume above 1,2M. I have tried using non-OTC stocks and then only OTC stocks and all seem to tell the same story.

Can anyone recommend how I might get better results from "RSI(2) below 1" for tades that last 1-5 days?

What is a good exit strategy?



leaddog
38 posts
msg #38206
Ignore leaddog
9/26/2005 7:21:09 PM

yepher,

I looked at your report and would not describe it as "very brief". It seems very detailed, to a point I am not sure I followed it. I am probably not as smart as you; however I use the filter below to make money. I buy them at the open and sell 2 days later.


Fetcher[RSI(2) < 5
and Close has been decreasing over the last 3 days
and Close dropped > 20 percent over the last 3 days
and Average Volume(10) is above 300000
and close is between .3 and 2
]




yepher
353 posts
msg #38210
Ignore yepher
9/26/2005 9:41:32 PM

leaddog,

Trust me, I am not that smart.

Thanks for the filter feedback. I am going to run it through a back-test tonight to see if I can find better results.

I called the report brief because each and every symbol has a report like the one shown plus a chart with buy and sell signals for every purchase.

This particular type of test tries to identify stocks that tend to have a particular personality.

If you are looking for hints on reading the report here is how I usually look at it. The "All Symbols" link gives you an indication of how many stocks made money overall versus how many lost money.

The "Equity Report" link is one I really like because it gives you and indication of how stable the given symbol is with a given strategy.

The "Positions Report" gives you an indication of how efficient a given strategy is. The further the peaks are to the right the more efficient the strategy is. Having peaks on the left is generally a bad sign. Peaks on the left means you probably would have been better off with buy and hold.

-- Yepher


yepher
353 posts
msg #38211
Ignore yepher
9/26/2005 10:58:46 PM

Leaddog,

Again thanks for the filter. First off I want to say I am posting this in a tone of seeking deeper knowledge about technical analysis.

I went through the results that the filter above returns and here is what I see:

sample of typical results.
http://yepher.com/~yepher/sf_leaddog/sf_charts/sf_Charts.htm

In general I observe a high percentage of losses.

I would classify this filter as "tight". It tends to return about 1-5 hits a week.

Also the automated test did not do well at all when buying on next day open and holding for two days. Maybe I ported it incorrectly to the test system.

Here is the ported code in MetaStock format:

<MS_CODE>
RSI(2) < 5

{************************************************* }
{* AND Close has been decreasing over the last 3 days}
{* Linear regression is probably just a good here}
AND Close < ref(close, -1)
AND ref(Close,-1) < ref(close, -2)
AND ref(Close,-2) < ref(close, -3)

{*************************************************}
{* AND Close dropped > 20 percent over the last 3 days}
{* % change =100 x ((new value-original value)/original value).}
AND 20 < (100 * (close / ref(close, -3)))


{*************************************************}
{* AND Average Volume(10) is above 300000}
AND mov(volume, 10, SIMPLE) > 300000


{*************************************************}
{* AND close is between .3 and 2}
AND close < 2
AND close > 0.3

</MS_CODE>


SurfnDestiny
78 posts
msg #38238
Ignore SurfnDestiny
9/27/2005 6:42:42 PM

The RSI(2) filters are just used as a basis to find candidate stocks, for a potential reversal in direction. I have yet to see a published filter on this website that gives great to perfect results on picking stocks. If such a thing could possibly exist it would break the bank. You have to use your own judgement on evaluating the candidate stocks that the filter returns.

One thing to keep in mind is that any stock with an RSI below 2 is been hammered pretty hard pricewise and the odds ar that it will recover somewhat eventually. Jumping in at the start of that recovery is the trick. Watching the morning movement of the candidate stock is one method of picking. if a stock that has an rsi below 2 shows a positive price movement between 9:30 to 10:00 AM in the morning, it then seems to have a good chance of staying positive that day.

Personally I prefer candidates that have a price pattern over the last several days that shows the price decline flattening out, like the beginning of a cup bottom formation. These have been my best picks, because I have to work for a living and cannot watch the market constantly. These type picks usually recover in price over several days. I watch for a reversal signal to jump out, or I will sell after making a 5% profit.

Just my 2 cents.......


leaddog
38 posts
msg #38239
Ignore leaddog
9/27/2005 7:59:03 PM

Yepher,

I am not familiar with Metastock. However lets look at the example you point to on your website, 15 July the filter picked TLPE on the following market open (18 July) it opened at $.31 (buy it). Two days later(20 July) TLPE open at $.38 (sell it). That is a 22% gain in two days! Not a bad trade. It is true that you can not always get the open price, however sometimes you get better than the open price.

These are the results from the backtest I ran today.

Test started on 06/01/2005 ended on 09/27/2005, covering 82 days

Trade Statistics
There were 45 total stocks entered. Of those, 45 or 100.00% were complete and or 0.00% were open.
Of the 45 completed trades, 27 trades or 60.00%resulted in a net gain.
Your average net change for completed trades was: 9.90%.
The average draw down of your approach was: -7.33%.
The average max profit of your approach was: 18.58%
The Reward/Risk ratio for this approach is: 4.22
Annualized Return on Investment (ROI): 1223.25%, the ROI of ^SPX was: 6.11%.

As for tight, I like it that way. I also prefer not to have to watch a lot of stocks.

Is there a reason that you do not use Stock Fetchers backtest for results?



yepher
353 posts
msg #38245
Ignore yepher
9/27/2005 10:28:40 PM

SurfnDestiny,

Thanks for the input I really appreciate your taking the time to respond. I know that several people here have a lot of trust in the RSI approach and all I am trying to do is achieve that same level of trust. I want to be a good Borean.

Here are a few comments I had on your previous post.

• SD: I have yet to see a published filter on this website that gives great to perfect results on picking stocks

My expectations are not for a "perfect" filter although we would all wish for such a thing. But I do expect a filter that is statistically positive. In that case I would classify it as “great” from my point of view. I love trading and I love to analyze new approaches to trading.

• SD: You have to use your own judgment on evaluating the candidate stocks that the filter returns.

Indeed judgment has its place in figuring out if you should enter the trade and exit the trade. But what I am working on is a viable system that takes some of the judgment call out and removes (as much as possible) emotion from the equation. I have trading patterns that I use where I feel fairly confident I can take 4 losses in a row and still trust the overall system as viable and trust worthy. I currently do not have that faith in RSI(X) < N.

• SD: … and the odds are that it will recover somewhat eventually.

The odds are precisely what I am trying to figure out. I know there are many strong believers here in RSI(X) < N filters. I am just trying to understand the odd for using this type of technique compared to another. Historically I have used Bollinger width and Triangles and have done fairly well with that. A bit of an off topic side note on this is I have personally seen great results with "Trade Against the Gap" system by Stephane Reverre, but I digress.

• SD: [Pattern] …[I] like the beginning of a cup bottom formation.

I like setups like this also. I have a lot of trade records and back testing that show this to be a valid trustworthy approach. I am also working on deeper proof that I can share in the coming weeks if there is any interest in this type of stuff here.

-- Yepher



yepher
353 posts
msg #38246
Ignore yepher
9/27/2005 10:45:24 PM

leaddog,

Well thought out/compelling reply. I will need to take some time to review your response deeper.

A few initial thoughts on your comments are:

• LD: I am not familiar with Metastock

It is just a tool that I like. If you read TASC (Technical Analysis of Stocks and Commodities - http://store.traders.com/articles.html) it is generally used for many of the article along with TradStation.

• LD: As for tight, I like it that way. I also prefer not to have to watch a lot of stocks.

I feel tight filters are fine as long as you don’t throw the baby out with the dish water. Sometimes this is the unfortunate side effect of a tight filter. I did not mean to claim you were, I just thought it was worthy of noting for the filter since it is one of its characteristics. The price range seems to be the part of the filter that causes the most attrition. Do you find yourself tending to primarily trade OTC stocks with that filter?


I will save the rest of my comments for a little later time when I can be more prepared.

One last thing for those of you who are diligently reading this I did find an error in the Metastock filter above. This line was wrong “AND 20 < (100 * (close / ref(close, -3)))” I will correct that and re-run the tests.

Regards,
-- Yepher





yepher
353 posts
msg #38248
Ignore yepher
9/27/2005 11:01:27 PM

Oops forgot this one:

• LD: Is there a reason that you do not use Stock Fetchers backtest for results?

Yes, I like to be able to back test a given strategy +10 years so I can see how it behaves in bear and bull markets over a reasonable sample of time. I also like the reports that are generated from MS. But the biggest thing probably is I can express filters that are very complex where stockFetcher limits set{} to only a few deep. I can also create fairly exit strategies as part of the system.

One other thing is I got turned off from StockFetchers performance when I realized it considered the performance from the trigger day. I know this is not an issue with the "backtest" pages now. Since you mention it I will make an effort to use them.




SurfnDestiny
78 posts
msg #38251
Ignore SurfnDestiny
9/28/2005 9:32:05 AM

I`ve written a lot of different filters with this site and have come to some conclusions. I would say that a filter would need to give results better than 50% to be considered a keeper. The higher than 50% the better. Also I have noticed that all the filters perform inconsistantly with different market conditions. Some work better with bull markets, and some work better in bear markets. But regardless I have not found one that removes the need for a person to not have to analyze certain aspects of the picks to determine which could be a winner. If someone has such a filter, then let me in on it please!.

Just about all stocks that are declining in price will eventually reverse in direction, unless the company is going bankrupt, or is really out of favor with investors. The rsi(2) filters seems to me at least, to be the best at predicting a coming reversal. That reversal may not come the next day the filter chooses the stock, but it will usually come eventually. And the reversal may only last for one day, before the stock continues its decline. Thats why you have to use your judgement on the pattern the stock is making in its downward journey.

The worst pattern seems to be a stock that has a consistant falling in price over a long period of time. Where the slope of the fall is almost a straight 45 degree angle down. This pattern seems to correspond with companies going bankrupt, or just not growing at all, and investors have been jumping ship for a long while.

Some of the best patterns are stocks with a sine wave type pattern that consistantly rise and fall over time. If one of these triggers an rsi(2) < 1 hit, it will probably be a good bet, because it will, with good probability rise again. A good pattern for this type of stock is the forming cup like I described previously. Also another good one is a stock that has been panic sold, where the price has falling like over a cliff in the last couple of days. If you wait till all the bears have sold, you can get in before the bargain hunters start buying. But this type of pattern usually requires you to sell the same day you bought or shortly there after, and you have to watch it closely because it is volatile.

Also I ignore any stock that has an rsi(5) above 5.
With rsi(2) < 1 and rsi(5) < 5 the odds for reversal improve.

I have contemplated adding to rsi(2) a pattern filter for screening out the bad patterns or looking for the good. But I have been making money with the system I`m using now and have gotten lazy.........



StockFetcher Forums · General Discussion · RSI Below One<< >>Post Follow-up

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