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Cumulative RSI (3) Trading Strategy

Cumulative RSI 3 strategy by Connors and Alvarez for thinkorswim

Cumulative RSI (3) Trading Strategy for ThinkOrSwim

The cumulative RSI strategy comes straight out of Larry Connors’ & Cesar Alvarez’s book called “Short Term Trading Strategies that Work“. I’ve really been enjoying programming and testing some of the ideas presented in their book — a lot of which seem to have some merit — so I wanted to go ahead and share some of the work I’ve been doing with my readers. On page 104 of their book, Connors and Alvarez state that this strategy was 79.49% accurate on the SPY when tested, earning 779.51 S&P points with an average holding period of under 5 trading days.

There are 2 cumulative RSI strategies in the book. This particular strategy is Connors’ example of a different way of using his favorite tool, the cumulative RSIs, with a slight longer look-back timeframe. For the first version, which is also a strong contender, check out the other cumulative RSI strategy page here.

The default settings that the trading strategy comes with are straight out of the book on page 104, and seem to perform very well in my own tests, but they can be easily customized and tested with different values using the strategy properties menu. This is useful for quickly backtesting the strategy with different instruments, time frames, and market conditions.

The original strategy in the book calls for no stop to be used. But I added the option for a percentage based stop to make the strategy more applicable to different trading styles.

Results from thinkorswim strategy backtests can easily be exported and analyzed further in Excel or other spreadsheet programs simply by right-clicking on a strategy signal on the chart and clicking “Export” in the popup menu.

The Authors’ Stats:

  • Instrument: SPY
  • Win Rate: 79.49%
  • # Trades: 78
  • Points gained: 779.51
  • Avg. Holding Time: under 5 days

What You Get

  • Cumulative RSI(3) strategy file for thinkorswim from pg. 104
  • All parameters are customizable in the properties menu
  • Option to use a stop or not to use a stop, and to set the size in %
  • Customizable colors

Why You Want It

  • The extremely high win/loss ratio on the SPY makes it an easy strategy to trade from a psychological standpoint
  • Option to add a stop makes the strategy even more easy to trade
  • Long-only strategy further makes it even easier to trade for almost anyone, regardless of what type of account they trade out of
  • Ability to quantitatively backtest the strategy on multiple instruments, timeframes, and conditions affords more peace of mind and encourages traders to fully trust in their system.

How it Works

The cumulative RSIs strategy first makes sure the instrument is in a long term uptrend (with customizable parameters), and then takes the sum of the past x-number of RSI(y) values and if the number is sufficiently oversold, the strategy issues a buy signal, and if it then subsequently becomes sufficiently overbought, it issues a sell to close signal. The overbought and oversold levels can be customized as needed. Traders can optionally add a percentage based stop to the strategy (simple option in the properties menu) and customize how big the percentage stop should be.

 

$69.99 $49.99Add to cart

 

 

Cumulative RSI 3 strategy by Connors and Alvarez for thinkorswim

 

 

$69.99 $49.99Add to cart

 

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The TRIN Strategy for ThinkOrSwim

Connors and Alvarez TRIN SPY strategy for thinkorswim

The TRIN Strategy for ThinkOrSwim

According to Larry Connors and Cesar Alvarez in their excellent book, “Short Term Trading Strategies that Work“, the TRIN is a very popular indicator but few people have taken the time to quantify whether or not it can provide a trader with edge. With that in mind, the authors tested and developed the TRIN strategy for the SPY which I’ve programmed here for the ThinkOrSwim platform.

The TRIN was originally created by Richard Arms as the Arms Index but has become known as the TRIN. The basic calculation is as follows: (advancing issues / declining issues) / (advancing volume / declining volume). Readings above 1 tend to occur when markets decline, and eventually can lead to oversold conditions, and readings above 1 tend to occur when markets rise, and eventually lead to overbought conditions.

The Authors’ Stats:

  • Timeframe tested: 12 years
  • Instrument: SPY
  • Win Rate: 75.56%
  • # Trades: 90
  • SPX points gained: 558.30
  • Avg. Holding Time: under 4 trading days

What You Get

  • The TRIN strategy file for thinkorswim
  • All parameters include the default settings from the authors that gave the above results when the authors tested it
  • All parameters are customizable in the properties menu, including SPY sma length, TRIN threshold, etc.
  • Customizable market hours
  • Option to use a percentage-based stop or not to use a stop
  • Specify the size of stop to use, if any
  • Customizable colors

Why You Want It

  • The extremely high win/loss ratio on the SPY and SPX, as demonstrated by the authors, makes it an easy strategy to trade from a psychological standpoint
  • Option to add a stop makes the strategy even more easy to trade
  • Long-only strategy further makes it suitable for almost anyone, regardless of the type of account they trade out of
  • Ability to quantitatively backtest the strategy on multiple instruments, timeframes, and conditions affords more peace of mind and encourages traders to fully trust in their system
  • The ideas behind this strategy and its edge can be taken and further customized to your trading style to create a unique edge that only you know about

How it Works

The TRIN strategy works as follows: if the SPY is above its 200 day sma (indicating a primary uptrend), and the 2-period RSI of the SPY is under 50, and the TRIN closes above a reading of 1 for 3 consecutive days, a buy signal is issued. A sell signal is issued when the RSI(2) of the SPY closes above an overbought reading of 65.

 


$69.99 $49.99Add to cart

 

The TRIN strategy for thinkorswim
The TRIN strategy for thinkorswim

 


$69.99 $49.99Add to cart

 

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VIX RSI Strategy by Connors and Alvarez

Connors and Alvarez VIX RSI strategy for thinkorswim

VIX RSI Strategy for ThinkOrSwim

Larry Connors and Cesar Alvarez talk about taking advantage of the VIX as an indicator for trading the SPY in their excellent book, “Short Term Trading Strategies that Work“. The idea is that you want to trade the SPY or SPX long when the VIX gets extended and the market is pulling back. Based on that general principle, they have developed a way to quantify these variables, and packaged these ideas together in the VIX RSI strategy. The idea is that when the VIX gets a specific overbought reading on a short term RSI setting, and the market gets a specific oversold reading on the same RSI setting, and additionally the VIX has a unique opening pattern, the historical odds greatly favor a long on the SPY.

The Authors’ Stats:

  • Instrument: SPY
  • Win Rate: 79.35%
  • # Trades: 92
  • SPX points gained: 879.46
  • Avg. Holding Time: under 5 days

What You Get

  • The VIX RSI strategy file for thinkorswim
  • All parameters include the default settings from the authors that gave such a terrific result
  • All parameters are customizable in the properties menu, including SPY sma length, RSI length, RSI overbought/oversold parameters, etc.
  • Customizable market hours
  • Option to use a percentage-based stop or not to use a stop
  • Specify the size of stop to use, if any
  • Customizable colors

Why You Want It

  • The extremely high win/loss ratio on the SPY and SPX, as demonstrated by the authors, makes it an easy strategy to trade from a psychological standpoint
  • Option to add a stop makes the strategy even more easy to trade
  • Long-only strategy further makes it suitable for almost anyone, regardless of the type of account they trade out of
  • Ability to quantitatively backtest the strategy on multiple instruments, timeframes, and conditions affords more peace of mind and encourages traders to fully trust in their system
  • The ideas behind this strategy and its edge can be taken and further customized to your trading style to create a unique edge that only you know about

How it Works

The VIX RSI strategy is fairly simple to understand: the idea is we want to buy the SPY when the VIX gets overbought and additionally opens above its prior day’s close. Under the default settings, when the VIX has a reading over 90 on the RSI(2) and opens above yesterday’s close, and the market itself is currently trading above its 200 day SMA (indicating a primary uptrend), and the market itself also has an RSI(2) reading under 30, then a buy signal is issued. A sell signal is issued when the RSI(2) of the SPY closes above an overbought reading of 65.

 


$69.99 $49.99Add to cart

 

Connors and Alvarez VIX RSI strategy for thinkorswim

Connors and Alvarez VIX RSI strategy for thinkorswim

 


$69.99 $49.99Add to cart