Two-Period RSI Strategy with a Long-Term Trend Filter

Summary

This document presents a short-term reversal strategy attributed to Larry Connors. For long entries, price must be above its 200-period moving average, below its 5-period average, and the 2-period RSI must be under 10. The position exits when price rises above the 5-period average. For short entries, the conditions are reversed: price is below the 200-period average, above the 5-period average, and the 2-period RSI exceeds 90; the short exits when price falls below the 5-period average. The example disables order accumulation and uses a fixed share quantity.

The author says the approach has tested positively on many stocks and indices, but reports limited enthusiasm for it and invites further testing or improvement. A chart is said to show results for the CAC 40 across the last 20 years, but the document supplies no numerical returns, benchmark comparison, costs, or risk statistics. The evidence is therefore anecdotal and incomplete. The rules combine a long-term direction filter with extreme short-period RSI readings and short moving-average exits, but their performance cannot be inferred from the description alone.

Key ideas

• Long entries require an uptrend filter, a close below the short average, and a very low short-period RSI.
• Long positions exit when price closes above the short moving average.
• Short entries reverse the trend, price, and RSI conditions, with an opposite moving-average exit.
• The example uses a fixed share quantity and prevents accumulating multiple orders.
• The author reports favorable tests on various assets but provides no numerical performance or risk measures.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.