The 2-period Relative Strength Indicator (RSI) strategy was developed by Larry Connors. It is based on the principle that market prices return to a mean after significant highs or lows. A buy signal is generated when the 2-period RSI goes below 5 and the market price is above the 200-period MA. A long position is closed when the market price closes above the 5-period MA. In this backtest, we used the components of the Russell 3000 index as a stock universe. The condition 'price ca sma(5)' in the formula for closing a position reads as 'price crossed above the 5-period simple moving average'.
Type of Positions
Long
Position Opening
Criteria for Opening a Position:
index(russell3000) and rsi(2) < 5
Order Execution Model:
Close Prices
Position Closing
Criteria for Closing a Position:
price ca sma(5)
Order Execution Model:
Close Prices
Backtest Parameters
Initial Capital:
$10,000
Capital at Risk:
5%
per trade
Portfolio Max Size:
20 positions
Comm. per Trade:
0.1%
Period:
1/1/2020 - 12/31/2020
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