High Prob ETF Trading - RSITradingStrategy - (Conners)

9/5/2020 High Probability ETF Trading: RSI Trading Strategy - Trading Schools.
Org
Thanks for reading. Today we are going to talk about an excellent trading strategy based upon the RSI
or Relative Strength Index. As much as I would love to take all of the credit for this trading strategy,
the real credit goes to Larry Connors and Cesar Alvarez.
On August 31, 2017, TradingSchools.Org published are an article titled: High Probability ETF Trading:
3-Day High Low Method.
In that article, I simply coded the exact strategy that Larry and Cesar described in their book. Nothing
more and nothing less. The results were excellent. Considering that the book and the strategy were
published in 2009, it is remarkable that the strategy has actually outperformed the original
sample period. In other words, the strategy has stood the test of time. The real-time performance is
actually much better than the sample performance.
If you have spent any amount of time programming trading strategies, then you probably already
know that this is a nearly impossible feat.
So, I have to give a lot of credit to Larry and Cesar for gifting the trading community with this precious
public gem. And considering that the book costs only $10, its an amazing value.
Lets now jump into yet another excellent trading strategy published in the book. The title of the
trading strategy is The RSI 25 and RSI 75.
Yep, you guessed it. This simple strategy is based upon one of the most common technical indicators,
the Relative Strength Index. I will not be spending too much time talking about the RSI or Relative
Strength Index because most traders are already familiar with this common indicator. So let’s jump
into the strategy, and talk about the tools that I personally use to research the market.
Trade Navigator: my favorite research platform

All of the strategies published on TradingSchools.Org were developed and tested using Trade
Navigator. They are all freely available and can be obtained by simply emailing me directly at
emmett@tradingschools.org. I am also in the process of creating a resource page where all strategies
and research can be downloaded and openly discussed. Yes, I am endorsing Trade Navigator.
However, I am not being paid to write nice things about them. (though I should be!)
Trade Navigator is ridiculously easy to learn. In my opinion, it is the very best trading and research
platform for aspiring systems traders that have zero technical skills and no desire to learn a
ridiculously difficult scripting language like C#, R, Python, or .Net.
In addition, with Trade Navigator you can pick up the phone and quickly speak with an actual human
being that will bend over backward to help you code your trading strategies. A big thanks to Glen
Larson for providing TradingSchools.Org readers will a free trial of the Platinum Edition of Trade
Navigator. The free trial also includes the entire database of historical data.
Most “free trial” trading software includes only a snippet of usable historical data. Glen makes sure
that your free trial includes the full arsenal of data: tick, bar, daily, custom. The whole enchilada.
Now that I got that “plug” out of the way, lets dive into the trading strategy.
https://www.tradingschools.org/reviews/high-probability-etf-trading/ 1/10
9/5/2020 High Probability ETF Trading: RSI Trading Strategy - Trading Schools.Org
The RSI 25 and RSI 75 ETF trading strategy: LONG SIDE

The following are the exact rules for Long signals, using only ‘daily’ bar data:
1. The ETF is above its 200-day moving average.

2. The 4-period RSI closes under 25. Buy on the close.
3. Exit when the 4-period RSI closes above 55.
Test the strategy on the recommended 20 highly diversified ETF’s. List and description included
below:
Symbol Linked to Quick Description

Complete
Description
DIA Diamonds The Dow Jones Industrial AverageSM

Trust (DJIA) is composed of 30 “blue-chip” U.S.
stocks.
EEM iShares Exposure to large and mid-sized

Emerging companies in emerging markets.
Markets
EFA iShares MSCI Exposure to a broad range of companies

EAFE in Europe, Australia, Asia, and the Far
East.
EWH iShares Hong Exposure to large and mid-sized

Kong companies in Hong Kong.
EWJ iShares Exposure to large and mid-sized

Japan companies in Japan.
EWT iShares Exposure to large and mid-sized

Taiwan companies in Taiwan.
EWZ iShares Exposure to large and mid-sized

Brazil companies in Brazil.
FXI iShares Exposure to large and mid-sized

China companies in China.
GLD SPDR Gold The first US traded gold ETF and the first
Shares US-listed ETF backed by a physical asset.
ILF iShares Latin Exposure to large, established companies

America in Latin America.
IWM iShares Exposure to small public U.S. companies.

Russell 2000
IYR iShares Dow Exposure to U.S. real estate companies

US Real and REITs, which invest in real estate
Estate directly and trade like stocks.
QQQ PowerShares Exposure to largest non-financial stocks

NASDAQ 100 on Nasdaq.
SPY SPDR SP500 The S&P 500 Index is a diversifed large

cap U.S. index that holds companies
across all eleven GICS sectors.
XHB SPDR SP500 Exposure to home building products and

Home producers.
Builders
XLB SPDR Exposure to materials producers:

Materials chemical, construction, packaging,
mining, paper, etc.
XLE SPDR Energy Exposure to the energy sector of the

Sector SP500.
XLF SPDR Exposure to insurance, banks, thrifts, RE

Financial trusts, mortgage finance, consumer
Sector finance of SP500.
XLI SPDR Exposure to defense, aerospace, marine,

Industrial machinery, airlines and air freight.
XLV SPDR Health Exposure to pharmaceuticals, health care

Care equipment, health care related produces
and services.
Note: the book makes no mention of position size or stop loss. For the benefit of the audience, I have
tested the strategy using a position size of $2,000, with a $500 stop loss per trade.
The following are results of just the long-only trades:
What really jumps out is smoothness of the equity curve. The profit factor of 2.62, with a sample size
of over 1600 trades is just awesome. What makes this strategy nice and easy is that traders with a puny
trading account can easily implement the strategy without overleveraging and exposing themselves to
massive risk per trade.
The RSI 25 and RSI 75 ETF trading strategy: SHORT SIDE

The following are the exact rules for Short signals, using only ‘daily’ bar data:
1. The ETF is below its 200-day moving average.

2. The 4-period RSI closes above 75. Sell Short on the close.
3. Exit when the 4-period RSI closes below 45.
Test the strategy on the recommended 20 highly diversified ETF’s. Use a $2000 per trade size and a
$500 stop loss.
The following are results of just the short-only trades:
Some readers are probably looking at the short side results and might be thinking “ugg, this doesnt
look very good.” Wrong answer. For the 15 years, global asset prices have basically only gone UP.
Whenever you can find a short side strategy catches the ‘Bear’ then you better take notice. The next
‘Bear’ will eventually happen, it always does. You need to have short side strategies in place.
Personally, this short side equity curve looks beautiful. You simply must keep the short side as part of
the arsenal.
The RSI 25 and RSI 75 ETF trading strategy: Both LONG and SHORT
The following are the results of the Long side and the Short side combined into a uniform trading
strategy. This is where the ‘rubber hits the road.’
Notice the symmetrical consistency? This is an obvious edge. For the past 15+ years, this simple
strategy just keeps chugging along. Catching the BULLS and the BEARS. Anyone that has been around
this game for awhile knows how difficult finding this sort of trading strategy.
Wrapping things up
Thanks for making it this far! Truth be told, I can talk about trading strategies until I am blue in the
face. For me, trading and investing isn’t so much about making money…its about the discovery. Its
about uncovering and discovering what nobody else it seeing. Its just fun.
Will the edge continue? I believe so. The sad and pathetic truth is that most people cling to the
distorted fantasy of ‘day trading’. That they can quickly buy and sell stocks in a fraction of a second,
and make $1k per day. The hard and cold reality is that the only people that make money at day
trading are the people selling fantasy trading educational courses, software, and expensive mentoring.
Yes, its true than some folks can pull off the day trading dream. For awhile. But over the long haul,
they usually pay whatever profits to the broker executing the trades. Its a terrible mountain of pain
that newbies should avoid.
Instead, focus on doing what everyone else is not doing.
1. Stop buying expensive and useless indicators.

2. Stop listening to trading Guru’s and day trading charlatans.
3. Invest your time and energy into learning how to program and test trading strategies.
4. Zone out the world. Let your intuition lead you. Validate everything with science.
Once again, thanks for reading. For those interested, you can download a free copy of Trade Navigator
through this link. (No, am not being paid)
And if you are interested in purchasing the book in which this review was written, you can find the link
below: (Yes, I earn .70 cents if you purchase the book)
Dont forget to leave a comment below. And for all my ‘haters’ please pick apart this strategy, I am
confident that I can defend this little dandy.

High Prob ETF Trading - RSITradingStrategy - (Conners)

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9/5/2020 High Probability ETF Trading: RSI Trading Strategy - Trading Schools.

Trade Navigator: my favorite research platform

The RSI 25 and RSI 75 ETF trading strategy: LONG SIDE

1. The ETF is above its 200-day moving average.

Symbol Linked to Quick Description

DIA Diamonds The Dow Jones Industrial AverageSM

EEM iShares Exposure to large and mid-sized

EFA iShares MSCI Exposure to a broad range of companies

EWH iShares Hong Exposure to large and mid-sized

EWJ iShares Exposure to large and mid-sized

EWT iShares Exposure to large and mid-sized

EWZ iShares Exposure to large and mid-sized

FXI iShares Exposure to large and mid-sized

ILF iShares Latin Exposure to large, established companies

IWM iShares Exposure to small public U.S. companies.

IYR iShares Dow Exposure to U.S. real estate companies

Estate directly and trade like stocks.

QQQ PowerShares Exposure to largest non-financial stocks

SPY SPDR SP500 The S&P 500 Index is a diversifed large

XHB SPDR SP500 Exposure to home building products and

XLB SPDR Exposure to materials producers:

XLE SPDR Energy Exposure to the energy sector of the

XLF SPDR Exposure to insurance, banks, thrifts, RE

XLI SPDR Exposure to defense, aerospace, marine,

XLV SPDR Health Exposure to pharmaceuticals, health care

The following are results of just the long-only trades:

The RSI 25 and RSI 75 ETF trading strategy: SHORT SIDE

1. The ETF is below its 200-day moving average.

The following are results of just the short-only trades:

Instead, focus on doing what everyone else is not doing.

1. Stop buying expensive and useless indicators.

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