RSI(2) Says Go Long, At Open
Eight leveraged ETFs made the RSI(2) screen this evening. They are here, in order of largest to least volume.
QLD
SSO
DDM
UWM
MVV
URE
USD and ROM also made the screen, but I got tired of making charts.
I still have more testing to complete for this strategy, but the results so far have been robust. Therefore, I will likely buy 5K of QLD, SSO, DDM, UWM, and MVV, in the morning. This position sizing will leave 50% cash left in the account I am dedicating to mechanical trading.
Should you decide to give this strategy a try, beware that without stops a drawdown of over 30% is possible. However, the system recovers quickly. This fact, coupled with the high win ratio, makes it easier for me to accept the inevitable large drawdown.
Also, I will be selling 300 SDS, bought at $55.26 average, in the morning as the exit trigger has hit. I am approximating a 2 point / ~3.5% gain from the trade. This could go more in my favor if we gap down at the open. The trade would have had a better gain had I not jumped the gun and bought 1/3 a day too early.
This morning, I sold my QID, for a .23 cents loss. This position was also purchased a day too early, or it would have been very profitable.
Finally, from the “Great Minds Think Alike” category, Dogwood has this evening published a similar post on this strategy.
Shove this rsi2 shit into a piehole, then eat it.
May 22nd, 2008 at 12:25 amHey, Chinballs…would you prefer I not trade profitably?
Secondly, I’m going to mail you pig nuts, in a gourmet red wine vinegar, for your birthday. You’re welcome.
May 22nd, 2008 at 12:31 amWhenever you think of debating me, always remember: The North defeated the South and burned your stupid cities to a cinder, with the exception to the beautiful city of Savannah.
May 22nd, 2008 at 12:41 amAhhhh. Most Yankees don’t understand that Savannah is so beautiful because it has escaped the wrath of hurricanes, for over 100 year.
Trivia for you birthday boy. Why did Sherman not burn Savannah?
May 22nd, 2008 at 12:44 amBecause he was impressed with the architecture.
Or, he was getting laid there.
May 22nd, 2008 at 12:47 amHere’s two facts for Northerners living in the South.
1) There’s a golden statue of William Techumsah Sherman at the very south end of Central Park in NYC. It is so worshipped not even the sloppiest pigeons dare to shit on it.
2) A descendent of William Tecumsah Sherman works for the venerable investment banking firm (since purchased by Citibank) of Robinson Humphrey. It’s headquarters location? Atlanta, Georgia. Odd, no?
The descendant’s name? None other than William Tecumsah Sherman. We call him “Bill.” I shit you not.
May 22nd, 2008 at 1:00 amGood job Fly.
Good thing wikipedia is available.
May 22nd, 2008 at 1:02 amSavannah does kick ass, and Tybee Island’s not a bad place to bring the kids for a week, even as it used to be a military base.
Ms. Flannery O’Conner was born and raised in Savannah before moving on to the former capitol of Georgia in Milledgeville, where she died at age 38, and is buried today.
Without a doubt (in my mind, at least), America’s finest short story writer…ever.
A good Catholic, as well.
May 22nd, 2008 at 1:03 amI do not need wikipedia for anything. Unlike you southerners, up north, we are educated.
Southern MBA=Northern High School
May 22nd, 2008 at 1:04 amHillary is quite popular in your state Jake.
Did you get a chance to cast your vote?
May 22nd, 2008 at 1:06 amWood, this’ll be a good test. That’s some busted down shit you’re throwing your money at tomorrow morning.
May 22nd, 2008 at 1:06 amJake, growing up in Charleston, I’ve spent quite a few days at Tybee Island, and spent considerable time camping on another sea island, the name of which escapes me.
I did a Master’s at Georgia College, in Milledgeville, of course, and spent considerable time in the Flannery O’Connor library.
May 22nd, 2008 at 1:06 amThey don’t let you switch sides here. If you’re registered GOP, that’s all you get to look at in the primary.
May 22nd, 2008 at 1:06 amWood,
I wrote one of my thesis’ on her work. Get ye the collected works.
Was the other island… Jekyll? Sea Island? St. Mary’s?
May 22nd, 2008 at 1:08 amJake, I agree about the busted down shit.
I am probably gonna scale back my position sizes so that I will be trading about 1/4 of my mechanical account cash. On paper, the strategy works great. It is tempting to throw a bunch of cash at it. However, that is probably not smart.
May 22nd, 2008 at 1:10 amWe now do Prince George’s Island … just south of Litchfield (SC). Highly recommended.
May 22nd, 2008 at 1:11 amSea Island. We took sea kayaks over there on a boat for a week of camping, kayaking, biking, etc.. Good times!
May 22nd, 2008 at 1:12 amNight all, I just came down to get the baby monitor, after all….
May 22nd, 2008 at 1:12 amJake, my family has gone to Garden City for the better part of 30 years. Never been to Prince Georges, but I’ve stayed near there at Huntington Beach State Park.
Now, we typically go to Folly Beach, as it is eclectic, has good waves, good food, and I still have old friends from college that live there.
May 22nd, 2008 at 1:14 amGood night Jake. Good night moon. Good night mouse, and the red ballon.
May 22nd, 2008 at 1:15 amhi woody,
i have commented yesterday, my process is a simple method got from poor2rich yahoo group. very consistent and profitable method.
as per the strategy u go long and on 1st +ve day, u buy when index are >.5 % , then sell on 6th or 7th day…wait for pullback and then buy again on next +ve day.
Something simmilar to your strategy. what would be a problem if you use your logic on options.
say u buy spy or dia. u can buy spy option 133 for around 7 dollars and get same movement, or some close to money calls without risking much.
May 22nd, 2008 at 1:39 amIn your backtests, what was the average holding period of this strategy?
May 22nd, 2008 at 2:06 amAt least it didn’t tell you to go long UYG
I think I like UWM the best based on your charts
Hattery, winners are being held at an avg. of 6 days, with losers held 15.
UYG should have made the screen. I’m trying to figure out why it didn’t.
May 22nd, 2008 at 2:19 amBill, I’m not sure I understand the abbreviations.
May 22nd, 2008 at 2:20 amMan, fo-get “Folly Beach” you gots ta get you a crib on Kiawah or Seabrook, brofis!
_____________
I am familiar with Garden City…. Long Island. Not sure about GC, SC, though.
“Prince George’s Island” is really just a resort area on the southern tip of Pawley’s Island… I think it’s one of those bullshit made up real estate names. Still, it’s very pretty, and it’s part wildlife preserve, so it’s great for the kiddies.
Here’a shot of some of the houses…
_
May 22nd, 2008 at 8:58 amJake, my family sold our property on Seabrook, about 15 years ago.
Growing up, we would go out on the boat (still do, when I go back and visit) and would hit the barrier islands, which dot the coast around Charleston. The islands are only accessible by boat, so there is plenty of good beach walking, fishing, etc., without all the crowds.
May 22nd, 2008 at 9:02 amHoly shit, Shed, I hope they got good value for that property… ocean front plots there are now going higher than Kiawah’s.
An old client of mine just finished a $6mm ocean front home out there. He loves it more than any of his Florida houses.
May 22nd, 2008 at 9:24 amBald Head Island, at the base of the Cape Fear River, is also a nice “no autos” development. Not sure that I don’t like NoCa a little bit better than SoCa, but I go back and forth. I like Greenville better than Charlotte, for example, but I think if I had my choice I might choose Raleigh Durham over all of them.
Something to be said for being in the Yankee minority, however.
May 22nd, 2008 at 9:28 amI’m a NYC living ATL born transplant myself. Those islands are pretty sweet. My parents still vacation there from time to time.
Hope this doesn’t jinx anything but as of 10:45 AM, it looks like all but one of these is up on the day? Nice.
May 22nd, 2008 at 10:48 ambhh, et. al.
I bought 2.5K positions in QLD, SSO, DDM, UWM, and MVV.
I went with 1/4 positions as that is probably the smart thing to do since we are still testing.
Jake, I used to live in Greenville as well (Traveler’s Rest, actually). The property we sold in Seabrook was unimproved. It was one of the last unimproved lots, and yes, my parents got some jingle from the sale.
Charleston is one of top 10 cities in the U.S., without a doubt. While the rest of SC can be an armpit, Charleston is like a little outpost of culture, with the charm and sensibility of a small European city.
May 22nd, 2008 at 11:32 amCharleston reminded me of Old San Juan.
May 22nd, 2008 at 11:39 ambhh- you jinxed me! lol
May 22nd, 2008 at 11:50 am
May 22nd, 2008 at 12:20 pmI really don’t like this idea of using ETF’s. Try comparing the QQQQ to QLD then inverse it to QID. Q’s showed it was at 200 day qld showed it was way below etc.
May 22nd, 2008 at 1:18 pmWood,
While I love the architecture, culture and setting of Charleston, give me the people of Greenville, any day.
Scions of rice plantations tend to get on my nerves…
May 22nd, 2008 at 2:06 pmEach ETF has its own supply and demand curve, which doesn’t exactly lineup with the underlying index. I think it best to use the indexes to gauge market technicals, but using the ETF RSI(2) readings is okay because they represent legit buying and selling pressure.
May 22nd, 2008 at 2:42 pmCubs, in my opinion, the value of using the leveraged ETFs is that 1. They are leveraged, hence 2x return of the underlying. 2. The ETFs reduce the risk of large overnight moves, which allows the trader to rachet up exposure (more leverage) with decreased risk.
In the end, the system works because markets move to extremes, and then back to the middle. This has you buying and selling extremes. I don’t really think it matters which vehicle you choose to exploit these moves, but I could be wrong. I choose the ETFs for the reasons outlined above.
May 22nd, 2008 at 2:53 pmMilledgeville, Ga? I pass by it on the way to Greensboro, Ga. and Reynold’s Plantation.
May 22nd, 2008 at 4:14 pmTC –
Stop by an have a beer at Flannery O’Conner’s grave stone. That’s what I do. Her (in town) house is still there, as well. Not sure about the farm.
May 22nd, 2008 at 5:38 pmHow are you using R2 signals?
Do you have this in archives?
Is your system based on Dummy Trades?
May 22nd, 2008 at 8:02 pmJoeseph, for archives, check “Strategies” and “RSI(2) Oversold Play”
The entry:
If RSI(2) < 10, then buy next bar
The exit:
If RSI(2) > 80, then sell next bar
I’m not familiar with Dummy Trades.
May 22nd, 2008 at 8:09 pmwoodrow, re Dummy Trades, check with the Fly!
May 22nd, 2008 at 8:15 pmFuck you buylo
May 22nd, 2008 at 11:39 pmIf you don’t worship Flannery O’Connor, then you are a dickhead. Damg, could she ever write! And stricken with Lupus. She just cut through everybody’s bullshit blindfolded with her hands tied behind her back. And Catholics give her a bad name.
May 23rd, 2008 at 8:54 amI love the South, and Southern writers…
May 23rd, 2008 at 9:00 amBased on your theory:(from my watchlist)
BUYS AAPL, BIDU, CAT, IVAN, QLD
SELLS QID, SRS
Do you concur with these picks based on your strategy?
May 23rd, 2008 at 9:09 amJoeseph, I’m not testing individual equities yet with this strategy.
According to what I’ve tested, QLD is a buy here.
Beware, if the indexes continue to roll over here, you may be in the QLD trade for a few weeks to a month, before the exit signal hits. Make sure you’re trading the appropriate size. If we roll over and test the March lows, QLD will see a 30% haircut.
May 23rd, 2008 at 9:23 amAnd yes, SRS is a sell here, while QID was a sell Wednesday, I believe. Keep in mind that SRS will continue to stay overbought as the indexes roll over.
May 23rd, 2008 at 9:24 amDummy trades refers to Chairman Maoxian’s Strategy: http://www.maoxian.com/archivecat.html
May 23rd, 2008 at 9:32 amShed,
It looks like an RSI(2) buy signal is good in a sideways or uptrending market, but when you buy into a longer term downtrend you are asking for trouble. Maybe a simple trend indicator would keep you out of buying the falling knives?
May 23rd, 2008 at 9:36 amProspectus, as I am using inverse ETFs, it doesn’t really matter whether it is uptrending or downtrending.
The best market for this strategy is probably no trend at all, just sideways and range bound.
I am working on a solution to fix the tendency to buy a falling knife. However, and this is very important, as long as the strategy is followed correctly, even the falling knives will eventually reverse, and you will exit with a smaller loss than you probably are envisioning. One of the worst things that one can probably do is exit the falling knife trade too early, and then anticipate a bottom or top, get long or short, and then get more pain as the trend continues. Best to ride the trade out, and take the signals as they come. We are talking better than a 70% win rate, so the winning trades will follow the losing ones, quickly.
May 23rd, 2008 at 10:29 amAs mentioned before, DUG would have been a great RSI entry.
May 23rd, 2008 at 1:38 pmSure would have been. Can’t get them all!
May 23rd, 2008 at 1:56 pmShed, DUG looks good here but RS2 is already indicating a sell should it close at current RS2 of 90 … you’d advise against a buy or hold strategy here?
May 23rd, 2008 at 2:07 pm[...] everything is being taken to the woodshed, as the “WOODSHEDDER TOP” settles in and becoems [...]
May 23rd, 2008 at 2:18 pmE8-
The RSI(2) ETF strategy is not a buy and hold. The avg. win is held for 6 days.
If you were trading DUG according to the strategy, you be long it already, and you would be selling it on the open Tuesday morning, if RSI(2) closes above 80 today.
To be clear, buying and holding really has nothing to do with this strategy. You would have to feel that you want to short oil, to get into DUG. I can’t say I disagree with your sentiment.
May 23rd, 2008 at 2:20 pmSo even though the RSI2 strategy (ST trading) would sell on Tues, it could still be a buy or hold (from a TA or FA basis) … gotcha ya.
Thanks
May 23rd, 2008 at 2:24 pmWood — whattaya think of UPS as a buy on the RS(2) strategy?
May 23rd, 2008 at 3:39 pmIf you’ve got big balls, go long DCR when you get a signal on DUG. That ETF is priced so low that the percentage swings are enormous.
May 24th, 2008 at 1:40 pmDCR scares me dude.
May 24th, 2008 at 2:22 pmIsn’t DCR liquidating on 6/1?
May 25th, 2008 at 12:51 pmProbably - I’m not really sure. I kept hoping for a collapse in oil while that thing was still solvent but it looks like that is not to be.
May 25th, 2008 at 6:24 pm