Arthur Hill – RSI Trend-Following and Momentum Strategies
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The RSI is a momentum oscillator that is extensively used to determine overbought and oversold levels. A closer look at the formula, however, indicates that RSI is well-suited for trend-following methods. It may also be used to rate ETFs and equities to determine which have the most momentum.
When the 5-day SMA of the 65-day RSI crosses above 51, the strategy buys. This will be referred to as “Smoothed RSI65”. Smoothed RSI65 is represented by the green line in the indicator window. It should be noted that RSI(65) is not displayed. Smoothed RSI65 rose over 51 in mid-April, signaling a bullish trend. A bear signal would be triggered if the price fell below 49.
There have been several winning examples in recent months, but how has this method performed over the previous twenty years? So, I put this strategy to the test and will be adding articles and videos to TrendInvestorPro.com in the coming weeks. Meanwhile, on July 29th, I presented this strategy to the CMT Association, and the recording is available to TrendInvestorPro subscribers. The lecture begins with an overview of RSI before delving into the primary driver of RSI readings. I then devise a trend-following technique and backtest it using S&P 500 equities.
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