einok
msg #83643
- Ignore einok |
11/30/2009 9:55:43 PM
Hi,
I've been doing some reading on this site and the Trading Markets site about RSI 2. I get the ideas about above the 200 day MA and RSI(2) below 10, 5, 2.5, etc. and for short trades the opposite. How exactly is the initial protective stop placed on this system? What about trailing stops to lock in any profit?
Thanks
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BarTune1
441 posts
msg #83646
- Ignore BarTune1 |
11/30/2009 10:24:51 PM
Trading Markets = Larry Connors ..... and as for stop losses, he does not advocate them - statistically on reversion to the mean trades, using stops will cost you ......
Connors advocates a couple different exit strategies ... the main two are:
1) end of day, where the price is greater than the 5 day moving average, or,
2) end of day, where the RSI(2) crosses above 70.
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einok
msg #83648
- Ignore einok |
11/30/2009 11:02:44 PM
BarTune1
Very interesting. I guess the risk is that the stock could keep getting more oversold for quite a while. Seems sort of risky, but I would love to hear thoughts from others. I am wondering if an ATR stop of some sort would be prudent?
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BarTune1
441 posts
msg #83651
- Ignore BarTune1
modified |
11/30/2009 11:29:20 PM
I have traded an average of 100 trades per month and have not used stop losses all year .... only got burned on a handful of trades and have profited every month but 2 so far this year.
Stop losses, and trailing stop losses, are more generally considered more appropriate when using a momentum based system.
Using the RSI(2) as a trigger to enter trades has very little to do with a momentum strategy. TradingMarkets/Connors use it purely for reversion to the mean trades.
If you want to trade momentum, consider something like a cross of the RSI(11) over 30. Its a trigger used by another trader on this site. That trigger usually coincides with a stock coming off the bottom and moving up.
If you want to use stops, the are a hundred ways to calculate them. However, a fixed percentage or the previous day's low, or a percentage thereof, are common methods.
Determining your exit strategy is equally important.
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TrendSurfer
109 posts
msg #83652
- Ignore TrendSurfer
modified |
12/1/2009 1:14:33 AM
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drmohdali
7 posts
msg #83653
- Ignore drmohdali |
12/1/2009 1:15:14 AM
did u mean rsi(11) or rsi(2)..is that trader m4m..
thanks for reply
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evo34
82 posts
msg #83654
- Ignore evo34 |
12/1/2009 3:35:21 AM
TrendSurfer, As someone who traded reversion strategies professionally for a fund and now for myself, I can assure you that a strategy of exiting all trades that do not "immediately" move in your favor is guaranteed to severely limit, if not destroy your long-term profitability. Reversion trading is not about getting the timing precisely right every time -- it's about recognizing that a large move in one direction is more likely than the other...whether or not that happens in 5 minutes or 5 days. In a true reversion strategy, panicking out of positions via stops and/or setting small profit targets will crush your returns. The key to reducing risk in such strategies is position sizing.
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BarTune1
441 posts
msg #83660
- Ignore BarTune1
modified |
12/1/2009 8:44:03 AM
By the way, I substantially agee with what TrendSurfer said ....
And, yes I meant RSI(11) ..... I think it was Crunkle that mentioned it ..... so I have been keeping an eye on it with a couple of scans ...... and have traded it a few times with success ....
Often ..... when an RSI(11) scan drops below 30 and crosses above, it has coincided with a significant move or trend to the upside ..... I have also been looking at RSI(11) where it crosses below 70 for shorts ..... often the stock is turning over ....
Here is the long scan I use:
RSI(11) crossed above 30
and average volume(30) is greater than 1,000,000
and price is between 8 and 40
and show stocks where market is not ETF
add column RSI(11)
I only check it for trading candidates .... often a good one pops up where you can see where it breached 30 in the past and crossed back over ....
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chetron
2,817 posts
msg #83663
- Ignore chetron |
12/1/2009 9:20:16 AM
clickable....
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fortyfour
189 posts
msg #83671
- Ignore fortyfour |
12/1/2009 11:13:16 AM
evo34,
You state what I know is true for me but is hard to quantify.
I cant get it right, balls dead on perfect (using day bars) most of the time.
If I dont give myself "a day or two" to be wrong then things dont go well.
If stops are a fraction below, say a 3 day low the market seems to always "touch"
there and reverse.
Rsi(2) < 1 with a huge red day bar ( or FAZ for that matter) doesnt allow one to
apply the above.
I need a DROP and STOP setup. "hasnt reversed yet but volatility is drained out"
If plummet resumes in a day,two or three then I am out. It is very clear to see when I am
wrong when this happens.
However, If I read you right....... do you advocate hanging in there as the 'thing" does
say..... another ..... three day drop from your entry ?
Trust me , I am not challenging you in any way.... I am just very interested
in you practical professional experience. Could you eleborate?
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