I was able to get my trader (wife) to close out my (DDM: 24.53 0.00%) trade about 20 minutes from the close today. It was profitable, +1.25% Upon examining the trade this evening, I realized I have closed the trade early. Let me explain.

I was able to check Stockcharts several times today, and at one point, RSI(2) on DDM was 79.90. I figured that was close enough for me to close the trade. I checked yahoo later in the afternoon, and the indexes looked to be reversing. I went ahead and closed the trade, instead of waiting for tomorrow a.m.

After looking at the chart tonight, I have realized that Stockcharts only records the RSI(2) on a closing basis. Also, I have been testing the system with RSI(2) triggering a trade on a closing basis. Therefore, this trade should have been left on, to wait for a close where RSI(2) > 80.

Making matters worse, I bought (QID: 98.60 0.00%) and (SDS: 127.97 0.00%) at the same time, as it was my belief the RSI(2) was < 10. Again, I made a mistake. While RSI(2) was near 4 at one point today on the QID, like when Dogwood bought it, it closed in the 40s. This trade would not have triggered, since RSI(2) was not < 10 on a closing basis.

This exercise raises an important question: What will the results be when I can have this strategy trigger when using hourly bar readings of the RSI(2)? That was rhetorical. I’m just really curious to find out.

An obvious benefit of using the RSI(2) trigger on a closing basis is that it guarantees the etf is truly oversold or overbought before triggering an entry/exit. Using the appropriate criteria, the trader can get in and out near the bottom and top of the swing.