As of 09/29/2022
  Indus: 29,226 -458.13 -1.5%  
  Trans: 12,258 -199.22 -1.6%  
  Utils: 906 -38.84 -4.1%  
  Nasdaq: 10,738 -314.13 -2.8%  
  S&P 500: 3,640 -78.57 -2.1%  
YTD
-19.6%  
-25.6%  
-7.6%  
-31.4%  
-23.6%  
  Targets    Overview: 09/15/2022  
  Up arrow32,000 or 29,200 by 10/15/2022
  Up arrow13,800 or 11,800 by 10/15/2022
  Up arrow990 or 900 by 10/15/2022
  Up arrow11,975 or 10,700 by 10/15/2022
  Up arrow3,800 or 3,500 by 10/15/2022
CPI (updated daily): Arrows on 9/13/22
As of 09/29/2022
  Indus: 29,226 -458.13 -1.5%  
  Trans: 12,258 -199.22 -1.6%  
  Utils: 906 -38.84 -4.1%  
  Nasdaq: 10,738 -314.13 -2.8%  
  S&P 500: 3,640 -78.57 -2.1%  
YTD
-19.6%  
-25.6%  
-7.6%  
-31.4%  
-23.6%  
  Targets    Overview: 09/15/2022  
  Up arrow32,000 or 29,200 by 10/15/2022
  Up arrow13,800 or 11,800 by 10/15/2022
  Up arrow990 or 900 by 10/15/2022
  Up arrow11,975 or 10,700 by 10/15/2022
  Up arrow3,800 or 3,500 by 10/15/2022
CPI (updated daily): Arrows on 9/13/22

Bulkowski on a RSI Trading System

This article discusses the results of a system for trading the Welles Wilder relative strength index (RSI) as tested by Active Trader magazine. Perhaps some version of it would work for your portfolio.

Mechanical Relative Strength Index Trading System

Active Trader magazine, in their February 2010 issue, published an article titled, "RSI scale-out system," by Volker Knapp. It's similar to my test portfolio but it scales out of trades. Here are the rules.

  1. Long side only.
  2. Buy at tomorrow's open when the 14 period RSI goes below 30.
  3. Exit 25% of the position at tomorrow's open each time the 14 period RSI increases by 15 points, namely 45, 60, 75, and 90.
  4. Set a stop loss for the entire position if price falls below the entry price by 5 times the 20-day average true range (ATR).
  5. Sell the entire position if it is held 300 days without any sell activity.

For their tests, they used these guidelines on a portfolio of 17 stocks from Nov 1999 to Oct 2009:

They had 444 trades that made a net profit of $75,904 or 75.9% with a max draw down of 21%. The win/loss ratio was 70% with a 9.2% average profit. The average winning trade made 19.5% and the average losing trade lost 14.9%.

They mention that no trade hit the 90 RSI reading and say that most exits are time based. My test portfolio rarely hits 80 (4 times in 2 years in over 100 trades). A top end of 75 might work better as the last exit instead of 90. My feeling is that entering when the RSI is climbing above 30 from below would be a better method than when it's declining below 30. The RSI can remain below the 30 threshold for months and the stock keeps declining. On the last exit, at 75 or 90 or whatever value you choose, having the RSI dropping down from above tends to help avoid exiting too soon as price climbs.

-- Thomas Bulkowski

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My novels:  Bedroom to Boardroom book Remember Me book Bumper's Story book Head's Law book
My stock market books:  Chart Patterns: After the Buy Getting Started in Chart Patterns 2nd edition book Trading Basics book Fundamental Analysis and Position Trading book Swing and Day Trading book Encyclopedia of chart patterns book Encyclopedia of Chart Patterns 3rd Edition book Trading classic chart patterns book

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