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Variations On RSI

The document discusses using the relative strength index (RSI) to develop trading strategies for Tesla stock. It examines using RSI as an oscillator strategy, where stocks are sold when RSI reaches an overbought level of 70 and bought when reaching an oversold level of 30. The document performs parameter searches testing different overbought and oversold levels using weighted and unweighted RSI calculations on Tesla stock data from 2013 to 2016. The best configuration found oversold levels of 46 and overbought of 51, resulting in about 2.45 roundtrip trades per year and positive returns over the three-year period examined.

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137 views7 pages

Variations On RSI

The document discusses using the relative strength index (RSI) to develop trading strategies for Tesla stock. It examines using RSI as an oscillator strategy, where stocks are sold when RSI reaches an overbought level of 70 and bought when reaching an oversold level of 30. The document performs parameter searches testing different overbought and oversold levels using weighted and unweighted RSI calculations on Tesla stock data from 2013 to 2016. The best configuration found oversold levels of 46 and overbought of 51, resulting in about 2.45 roundtrip trades per year and positive returns over the three-year period examined.

Uploaded by

therm000
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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VARIATIONS ON RSI

OVER TESLA US EQUITY


MARKET MICROSTRUCTURE AND TRADING STRATEGIES FALL 2016
PROF. ANATOLY SCHMIDT STEVENS INSTITUTE OF TECHNOLOGY
STUDENT: JOSE I. ORLICKI
RELATIVE STRENGTH INDEX
Over a n-day period (classically 14 days) two basic metrics U and D are
composed into the RSI indicator.
Variations: Discrete (0 or 1 is summed per up or down day), Moving Average,
or Summation.

We have RSI in [0,100] segment.


RSI IS, COMMONLY, USED AS A OSCILLATOR STRAT.
High and low levels are defined, usually 70 and 30.
Above 70 is indicated as an Overbought Market condition. So SOLD.
Below 30 is indicated as an Oversold Market condition. So BUY.
RESULTS ON TESLA US EQUITY UNWEIGHTED RSI
Chosen similar start and end date price (to avoid trivial buy&hold).
Did a parameter search of OB and OS levels. (2013-10-07 to 2016-10-28)
RESULTS ON TESLA US EQUITY WEIGHTED RSI
Chosen similar start and end date price (to avoid trivial buy&hold).
Did a parameter search of OB and OS levels. (2013-10-07 to 2016-10-28)
EMPIRICAL RETURNS FOR BEST CONFIG.
OversoldLimit=46, OverboughtLimit=51, RoundtripTradesPerYear=2.45
773 business days (>3 years) of TSLA. Weighted RSI Sum. (not averaging).
BIBLIOGRAPHY/SOURCES

Anatoly B. Schmidt, Financial Markets and Trading, 2011.


Wikipedia, Relative strength index, 2016.
Bloomberg Terminal, BTST: Back-testing of Indicator Strategies, 2016.

THANKS! / GRACIAS!

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