The Strategic Trader
Detailed Strategy Evaluation

RSI Part 9: Risk/Reward

Before temporarily moving away from RSI, I want to evaluate each method one more time using the risk/reward test discussed in this article: Risk/Reward Testing

Crossing Above a Threshold:
Surprisingly many parameter combinations performed very well. Unfortunately, no combinations were able to exceed our desired targets.

Crossing Below a Threshold:
This method performed horrible based on this metric. This is what I thought might happen, and the reason I wanted to perform this test. Buying when oversold is a high percentage play if your nimble. But from a risk/reward standpoint its a hard strategy to trade.

Normal Divergence:
This method still did not contain any tradeable edge. Performs very poorly.

Hidden Divergence:
No combination was able to exceed our lofty targets, however several combinations missed by only fractions of a percent. This further underscores the fact that RSI Hidden Divergence contains a tradeable edge.

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