A Visibility Graph RSI for Automated Trading Signals

Summary

This document introduces the Visibility Graphs Relative Strength Index, a price-based indicator built from backward visibility relationships in an instrument’s price series. The indicator is scaled from zero to 100 and used to generate signals in an automated trading strategy. The evaluation uses a rolling design with a 30-day optimization window and a 7-day test window, applied to the Dow Jones Industrial Average, EUR/USD, and gold priced in US dollars over 2024–2025.

The reported results include profits for each market, moderate drawdowns, several trades per day, and Sharpe ratios. These are historical backtest results from three instruments, and the document provides no information about transaction costs, slippage, position risk beyond the stated fixed trade investment, or performance in other periods. The findings suggest the indicator may merit further investigation, but they do not establish that it will remain profitable out of sample or in live trading.

Key ideas

• The VGRSI derives trading signals from backward visibility relationships in price data.
• The indicator is scaled from zero to 100 and evaluated through an automated strategy.
• The study tests the strategy on a stock index, a currency pair, and gold.
• Its reported performance is based on historical tests and does not establish live-market profitability.

Tags

# Visibility graphs can make money in financial markets


# Visibility graphs can make money in financial markets









Traditional technical analysis indicators, although widely used by market participants, are often not sufficiently effective. We propose the Visibility Graphs Relative Strength Index (VGRSI), based on backward visibility relations in the price of a financial instrument. Rescaled to the 0--100 range, it can generate profitable trading signals. The performance of the indicator was evaluated using an automated trading strategy based on a 30-day optimisation window and a 7-day test window for three instruments representing different asset classes: DJI30, EUR/USD and XAU/USD over the 2024--2025 period (503 trading days). The strategy based on VGRSI signals generated a profit of USD~146,000 for DJI30, USD~69,000 for EUR/USD, and USD~125,000 for XAU/USD. This gives a total result of USD$\sim$340,000, which corresponds to an average profit of USD$\sim$676 per trading day, with a fixed investment of USD~1,000 to open a single trade. For all three assets, the strategy generated substantial profits while maintaining a moderate drawdown (10--18\% relative to a portfolio value of USD~10,000), a relatively low trading intensity (3.3--4.8 trades per day) and high Sharpe ratio values (2.55--3.6). These results indicate that VGRSI constitutes a promising technical analysis tool that goes beyond the classical trend-following approach by exploiting the geometric properties of asset price fluctuations.

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