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Cumulative RSI Trading Strategy for ThinkOrSwim (2 period)

Larry Connors and Cesar Alvarez Cumulative RSI Strategy

Cumulative RSI trading strategy for ThinkOrSwim

The cumulative RSI trading strategy (2 period) 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 67 of their book, Connors and Alvarez state that this strategy was 88% accurate on the SPY when tested from 1993 through the date of publication, earning 65.53 SPY points with an average gain of 1.26% and and average holding period of 3.7 trading days.

The default settings (200, 2, 2, 35, 65, no) that the trading strategy comes with are straight out of the book on page 67, 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.

Alternate Settings

The alternate settings the authors suggest on page 68, for reference, are as follows: (200, 2, 2, 50, 65, no). These settings resulted in more trades and larger gains during the same time period, and only slightly decreased the accuracy, so it was a beneficial trade off. The results of those settings according to the authors were 85.46% winners, 105.95 total SPY points made, with an average gain of 1.05% and and average holding period of 3.57 trading days. The authors noted that this strategy picked up about the same number of points the SPY had done in the prior 15 years while only being in the market 20% of the time, greatly reducing risk exposure.

The original cumulative RSI trading strategy in the book calls for no stop to be used, but I went ahead and added the option for a percentage based stop to make the strategy more applicable to different trading styles and time frames.

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
  • Test period: Almost 15 years
  • Win Rate: 88%
  • # Trades: 50
  • Avg. P&L: 1.26%
  • Net points: 65.53
  • Avg. Holding Time: 3.7 trading days

What You Get

  • Cumulative RSIs strategy file for thinkorswim
  • 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 and other instruments 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 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 money stop to the strategy (simple option in the properties menu) and customize how big the money stop should be.

 

$69.99 $49.99Add to cart

 

cumulative RSI trading strategy
cumulative RSI trading strategy

 

$69.99 $49.99Add to cart

 

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Wide Range Bar Trading Strategy for ThinkOrSwim

alphonso esposito's Wide Range Bar Strategy

Wide Range Bar Trading Strategy for ThinkOrSwim

I recently watched Alphonso Esposito’s New Mastery Series at TradeSmart University regarding his Wide Range Bar Trading Strategy. It seemed awesomely simple and straight forward, and seems to give good signals to boot, so I decided I would make it even easier for my fellow ThinkOrSwim users to add this strategy to their arsenals. Basically you look for these wide range bars, as defined by Alphonso in the course, and buy on an subsequent retracement of approximately 40% (with custom tweaks explained in the course) back into the range of the bar.

This set of ThinkScripts lets you scan for these types of setups, and additionally it comes with a chart study that plots a signal whenever a wide range bar trading strategy setup appears, and plots the 40% line as well.

Trading It

Most of the parameters can be customized, but are set by default to those explained in the course, except for the minimum volume multiplier, which I just set myself since no specific rule was stated in the course.

The rules are pretty straightforward, but if you want to learn more about how to trade this strategy, you’ll need to sign up for the class at TradeSmart University.

I’m making these available for FREE for a limited time to all my TOS friends, so please help yourself!

UPDATE 12/21/2016 — I’ve been especially productive lately and decided to go ahead and code this into a mechanical strategy that can be backtested on any chart you want! That file will be included now as well.

NOTE: Since I did a bunch more work on this and included a new strategy file now, I’ll have to increase the price from free to a more typical price for a backtest-enabled strategy. Get it while it’s still free!

Use Promo Code: alphonso

$69.99 $49.99Add to cart

 

A chart of the Wide Range Bar Trading Strategy for ThinkOrSwim.
Wide Range Bar Trading Strategy for ThinkOrSwim. Example signal from the chart study showing the 40% retracement line and the signal arrow.
A stock chart with an example of Alphonso Esposito's Wide Range Bar Trading Strategy for ThinkOrSwim.
Alphonso Esposito’s Wide Range Bar Trading Strategy for ThinkOrSwim. Example entry signal on GPS.
A screenshot of Alphonso Esposito's Wide Range Bar Trading Strategy for ThinkOrSwim properties window.
Alphonso Esposito’s Wide Range Bar Trading Strategy for ThinkOrSwim. Properties window for the chart study.
Alphonso Esposito's Wide Range Bar Trading Strategy for ThinkOrSwim example scan.
Alphonso Esposito’s Wide Range Bar Trading Strategy for ThinkOrSwim. Stock hacker scanner screen with custom code plus average volume filter to make sure avg. volume is greater than 1 million shares/day.
Alphonso Esposito's Wide Range Bar Trading Strategy for ThinkOrSwim.
Alphonso Esposito’s Wide Range Bar Trading Strategy for ThinkOrSwim

 

$69.99 $49.99Add to cart

 

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Gap Trading Strategy: Mean Reversion Gaps in ThinkOrSwim

mean reversion gaps by adrian manz

Adrian Manz’s Gap Trading Strategy for ThinkOrSwim

This is a mean reversion gap trading strategy that is promoted by Dr. Adrian Manz of Trader Insight (see an example video by Manz here: https://www.youtube.com/watch?v=oudRj-Vcv0Q). A client of mine was interested in developing some tools to trade this strategy on ThinkOrSwim, and so I was able to work on this project and get several tools created to make it really easy. After looking into it more, I found the strategy to be pretty intriguing and very different from how I’ve traded gaps in the past, so I thought it might be worth my readers’ time to take a look at it. This is a complete set, which includes the strategy script itself, along with a custom scanner to find the gaps each day, and indicators and columns to help sort and evaluate the gaps.

What It Is

  1. Scanner: helps you find stocks that are gapping way outside their normal bounds, increasing the probability of an immediate mean reversion move that you can fade.
  2. Watchlist columns: these help you sort through and quickly analyze the best gap trading strategy candidates that are likely to have an immediate mean reversion.
  3. Indicator: helps you find past and current entries on the chart and study how individual stocks perform and respond to this kind of gap trading strategy.
  4. Strategy: Plots entries, exits, and (optionally) stops, on the chart (intraday charts only). The setups are based on the daily chart according to Adrian Manz’s rules, but the actual entries are done on whatever intraday timeframe you prefer to trade. The entry system is my own implementation of the gap trading strategy, which is to enter on the first intraday bar that is outside the standard deviation boundary and also outside of VWAP, and then it takes target once the price retreats back to VWAP. You can use this particular strategy if you like, or manage the trades on your own however you prefer. Adrian Manz uses a more price-action-based entry where he enters on a bar break in the direction of the fade, and takes targets based on support and resistance levels. However, S&R is very hard to code accurately, and I wanted to at least include one mechanical way of implementing the system, so the VWAP target makes sense on a mean reversion strategy like this. And this method seems to work well in my own tests.

Why You Want It

Trading is a game of probability and risk management. This strategy specifically addresses the probability issue, because there is always a reversion to the mean… statistically it’s just going to happen. This strategy helps you find the extreme conditions that are even more likely to result in an immediate mean reversion move.

How It Works

The scanner finds any stocks that meet the trading strategy’s criteria for being likely mean reversion candidates, and then the custom quote watchlist columns help you sort through them quickly and review the charts to see which ones you want to take a position on.

The indicator package helps you visually see previous setups that happened on your charts, as well as today’s signal, by plotting the unique standard deviation lines and signal arrows whenever an entry condition is triggered.

 


$99.99 $79.99Add to cart

 

 

Adrian Manz's Gap Trading Strategy for ThinkOrSwim
Adrian Manz’s Gap Trading Strategy for ThinkOrSwim
Adrian Manz's Gap Trading Strategy for ThinkOrSwim
Adrian Manz’s Gap Trading Strategy for ThinkOrSwim

$99.99 $79.99Add to cart