laurence connors - s&p 500 trading with connorsrsi
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RSI for short term tradingTRANSCRIPT
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ConnorsResearchTradingStrategySeries
S&P500TradingwithConnorsRSI
ByConnorsResearch,LLCLaurenceConnorsCesarAlvarezMattRadtke
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Copyright 2013, Laurence A. Connors and Cesar Alvarez. ALL RIGHTS RESERVED. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher and the author. This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold with the understanding that the author and the publisher are not engaged in rendering legal, accounting, or other professional service. Authorization to photocopy items for internal or personal use, or in the internal or personal use of specific clients, is granted by Connors Research, LLC, provided that the U.S. $7.00 per page fee is paid directly to Connors Research, LLC, 1-973-494-7333. ISBN 978-0-9886931-4-2 Printed in the United States of America.
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Disclaimer By distributing this publication, Connors Research, LLC, Laurence A. Connors and Cesar Alvarez (collectively referred to as Company") are neither providing investment advisory services nor acting as registered investment advisors or broker-dealers; they also do not purport to tell or suggest which securities or currencies customers should buy or sell for themselves. The analysts and employees or affiliates of Company may hold positions in the stocks, currencies or industries discussed here. You understand and acknowledge that there is a very high degree of risk involved in trading securities and/or currencies. The Company, the authors, the publisher, and all affiliates of Company assume no responsibility or liability for your trading and investment results. Factual statements on the Company's website, or in its publications, are made as of the date stated and are subject to change without notice. It should not be assumed that the methods, techniques, or indicators presented in these products will be profitable or that they will not result in losses. Past results of any individual trader or trading system published by Company are not indicative of future returns by that trader or system, and are not indicative of future returns which be realized by you. In addition, the indicators, strategies, columns, articles and all other features of Company's products (collectively, the "Information") are provided for informational and educational purposes only and should not be construed as investment advice. Examples presented on Company's website are for educational purposes only. Such set-ups are not solicitations of any order to buy or sell. Accordingly, you should not rely solely on the Information in making any investment. Rather, you should use the Information only as a starting point for doing additional independent research in order to allow you to form your own opinion regarding investments. You should always check with your licensed financial advisor and tax advisor to determine the suitability of any investment. HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN INHERENT LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING AND MAY NOT BE IMPACTED BY BROKERAGE AND OTHER SLIPPAGE FEES. ALSO, SINCE THE TRADES HAVE NOT ACTUALLY BEEN EXECUTED, THE RESULTS MAY HAVE UNDER- OR OVER-COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEYARE DESIGNEDWITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. Connors Research 10 Exchange Place Suite 1800 Jersey City, NJ 07302
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Table of ContentsSection1Introduction.............................................................................5Section2StrategyRules...........................................................................8Section3TestResults............................................................................16Section4SelectingStrategyParameters...............................................21Section5UsingOptions.........................................................................25Section6AdditionalThoughts...............................................................28Appendix:TheConnorsRSIIndicator.....................................................30
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Section1Introduction
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AftermovingfromLosAngeles(theentertainmentcapitaloftheworld)toNewYorkCity(thefinancialcapitaloftheworld)in2007,IgainedtheopportunitytospendqualitytimewithmanytoptradersandmoneymanagerslocatedintheCity.OneofthegentlemenwhoIhadthegoodfortunetospendanafternoonwithranawellrespectedtradingfirm.HisbackgroundincludedbeinganequitytraderontwoexchangesoverthreedecadeswithhisspecialtybeingtradinginS&P500stocks.Hisphilosophywasalotlikeanumberofprofessionalswholearnedtotradebeforetheinternetboom/bustofthelate1990searly2000s.Hisphilosophywasonlybuyquality.Whatdoesbuyqualitymean?Inhisminditwascompanieswhichhavebeeninbusinessfordecades;householdnamesthatheknewandunderstood.ItsinterestingbecausethisisthesamephilosophypopularizedbyWarrenBuffett.ButwhereasBuffetttendstobuyandholdthesestocks,thisgentlemanmadehisliving(averygoodliving)tradinginandoutofthesesamestocks.Hefeltthatholdingqualitycompaniesforafewdayswasfarsaferthanholdinghighvolatilitycompanieswhichhehadbarelyheardof.Everyonewhosucceedsinthefinancialmarketsdoessobecausetheytradeatcomfortpoints.Thisgentlemanscomfortpoint(asisBuffets)wastobeinstocksthatheknewandthatwouldlikelybeinbusinessforyearstocome.Hehadnointerestinowningcompanieshehadntheardof.Hetoldmehelikedsleepingatnightandowningthesecompaniesallowedhimtosleepatnight.Ifyousharethissamephilosophyofbuyingquality,youreingoodcompany.WhenIaskedhimhowhetraded,hesmiledandsaidcoyly,Ibuylowandsellhigh.Icordiallysmiledbackandthenprobedfurther.Ultimatelyheopenedupandwithoutdivulginghisexactstrategythebasisofhisphilosophywasthis:1.ThemajorityofmoneyinvestedintheUnitedStatesisdonebymoneymanagers.Themajorityofthatmoneyispensionmoney.Thesemanagershaveamandatetobeinqualitycompanies.ThebestplacetofindandinvestinqualitycompaniesisintheS&P500.2.ThemajorityofthismoneythatinvestsinS&P500stocksisusuallybuyandholdmoney.3.Whengiventheopportunity,thesemoneymanagers,especiallythevaluebuyers,looktobuythesestocksiftheybecomecheaperoverashortperiodoftime.Thebetteronesknowavaluewhentheyseeoneandwillallocatemorecapitaltotheirpositionstotakeadvantageofthelowerprices.4.Buyingatlowerpricesprovidesashorttermcushiontothesestocks.5.Thiscushionoftenallowspricestostabilizeandthenriseagain(itsthecorephilosophyofmeanreversiontrading).Havingseenitonthefloorandthenwithinhistradingfirmfordecades,heunderstoodthattheresbigmoneyouttherewaitingtobuymoresharesatcheaperprices,whichincreasestheprobabilityofthestockpricesmovinghigher(wellbackthisupwithstatisticsintheupcomingchapters).
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Attheendoftheday,heknowsthatbigmoneywillalwaysbethereincompaniesheknowsandtrusts.Whenheswrong,helookstogetout.Whenhesrighthemakeshismoneyandthenmovesontohisnextpositions.Thissimplicityintradingmakesalotofsense.Intuitivelyitscorrect.InnowaydoesitmeanthateveryS&Pstockbehavesthiswayeverytimebecauseitdoesnot.S&P500stockslikeEnron,Lehmanandmanymajorbanks(especiallyin2008)wentlowerandinsomecasesoutofbusiness.Butprofessionaltradersaregreatatunderstandingwhatsgoingon(valuebuyersbuyingatlower,betterprices),whyitsgoingon(inthemajorityofcasesitssimplyashorttermpullback),andtheyareabletomeasuretheprobabilitiesofthestockmovinghigher.InthisStrategyGuidebook,weregoingtoprovideyouwiththestatisticsthatsupportthetypeofbuyingbehaviordiscussedabove.HowtheTestsWereRun1. WelookedateveryS&P500stockfromJanuary2001throughthefirstquarterof2013(thefinal
quarteraheadofwritingthisGuidebook).2. Allstocksareincluded,includingtheEnrons,Lehmans.etc.3. Alltradesignalsweregeneratedontheclose.Entriestookplacethenextdayusingalimitorder,
andexitswereexecutedthenextdayasasimulatedmarketorderusingtheaveragepriceoftheday.
4. Slippageandcommissionswerenotincluded.Takingintoaccountallsimulatedtradesfromthisstrategyfromoveratwelveyearperiodoftime,youwilllearnthatasthisgentlemanstatedtomein2009,biginstitutionsliketobuyvaluewhentheyseeit.Andtheyoftenknowthatbecausemanymarketsaresomewhatefficientlongerterm,shorttermvaluesoftendontlastlong.Andthereforetheyprovidewonderfulopportunitiesforsmarttraders,likethegentlemanmentionedabove,tobuytheseS&P500stocksandquicklysellthemforprofits;oftentimeswithinafewdays.Whatyouwillseeintheupcomingchaptersareexactrules.Buylowandsellhighisnicetoknow,butwedontwantgeneralities.Wewantspecific,nonoptimized,simpletoapplyrulestobeabletosuccessfullytradeS&P500stocks.Wewillgiveyoutherules,themanyparametersyoucanapplywiththerules,andthefulltestresultsformorethanadecade.BythetimeyouvecompletedthisStrategyGuidebook,youllknowwhentobuyS&Pstocks,whentoexitthem,andthehistoricalreturnsforthe12yearsoftesting;aperiodwherethemarketdropped,rose,crashed,andthenreboundedallinallaroughtimeforlongterminvestors.ButitwasagreattimeforpeoplewhoknewwhentobuyandsellthestockswithintheS&P500Index.WehopeyouenjoythisStrategyGuidebook.AfterreadingtheGuidebookifyouwouldliketolearnmoreabouttradingS&P500stocks,pleasecometoourwebsiteatwww.tradingmarkets.comorclickhere.Letsnowmoveahead.
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Section2StrategyRules
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TheConnorsRSIS&P500TradingStrategyexecutestradesusingasimplethreestepprocessconsistingofSetup,EntryandExit.Therulesforeachofthesestepsaredetailedbelow.ASetupoccurswhenallofthefollowingconditionsaretrue:
1. ThestockisacurrentmemberoftheS&P500.2. ThestockcloseswithaConnorsRSI(3,2,100)valuelessthanW,whereWis5or10.3. ThestocksclosingpriceisinthebottomX%ofthedaysrange,whereX=25,50,75or100.
IfthepreviousdaywasaSetup,thenweEnteratradeby:4. SubmittingalimitordertobuythestockatapriceY%belowyesterdaysclose,
whereYis2,4,6,8,or10.Afterweveenteredthetrade,weExitwhen:
5. ThestockcloseswithaConnorsRSIvaluegreaterthanZ,whereZis50or70.Letslookateachruleinalittlemoredepth,andexplainwhyitsincludedinthestrategy.Rule1simplylimitsourtradinguniversetotheS&P500stocks.Rule2usesConnorsRSItoidentifyapricepullback.AcompletedescriptionofConnorsRSImaybefoundintheAppendix.Rule3determinestheextenttowhichthepricehascontinuedtodeclineheadingintotheclose.Notethatvariationswhichuseavalueof100forXareessentiallyeliminatingthisrule,i.e.everypossiblepricewouldbeinthebottom100%oftherange.WeincludedthisvaluesothatyoucouldseetheresultsofnotusingRule3.Rule4allowsustoenterthetradeatanoptimalprice.WeretakinganalreadyoversoldstockasmeasuredbyConnorsRSIandthenwaitingforittobecomeevenmoreoversoldonanintradaybasis.Becausetheintradaypricedropisoccurringforasecondconsecutiveday,itsoftenaccompaniedbyagreatdealoffear.Moneymanagersgetespeciallynervousandoftentelltheirheadtraderstojustgetmeoutaftertheyvemadethedecisiontosell.Thispanichelpscreatetheopportunity.Rule5providesawelldefinedexitmethod.Fewstrategieshavequantified,structured,anddisciplinedexitrules.Rule5givesyoutheexactparameterstoexitthetrade,backedbyovertwelveyearsofhistoricaltestresults.Aswithallotherstrategyparameters,weselectinadvancethetypeofexitthatwewilluse,andapplythatruleconsistentlyinourtrading.Noteveryoneisavailabletoclosetheirtradesrightasthemarketisclosing.Therefore,inourtestingweclosedalltradesthedayaftertheExitsignaloccurred.Tosimulateplacingamarketorderatarandomtimeduringthatday,weuseanexitpricethatisequaltotheaverageoftheopen,high,lowandclosefortheday:ExitPrice=(Open+High+Low+Close)/4
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Usingthedifferentvariationsoftherulesabovehashistoricallygeneratedanextremelyhighpercentageofwinningtrades.WelltakeanindepthlookatthetestresultsinSection3,butfornowheresaquickpreviewofthetop20strategyvariationswhensortedbyhighestwinrate:Top20VariationsByHighestWinRate
#Trades
Avg%P/L
WinRate
EntryCRSI
ClosingRange Limit%
ExitCRSI
278 14.8% 86.0% 5 25 10 50278 16.9% 84.9% 5 25 10 70318 13.3% 84.0% 5 50 10 50317 15.0% 83.0% 5 50 10 70415 11.2% 82.9% 5 25 8 50414 12.7% 82.9% 5 25 8 70325 12.9% 82.8% 5 75 10 50328 12.8% 82.6% 5 100 10 50324 14.6% 81.5% 5 75 10 70327 14.5% 81.4% 5 100 10 70481 11.6% 81.1% 5 50 8 70483 10.3% 81.0% 5 50 8 50493 9.9% 79.9% 5 75 8 50498 11.2% 79.9% 5 100 8 70491 11.2% 79.8% 5 75 8 70500 9.8% 79.6% 5 100 8 50626 9.4% 77.6% 5 25 6 70629 7.9% 77.1% 5 25 6 50652 9.4% 76.8% 10 25 10 50788 8.7% 76.0% 10 50 10 50
Findingaquantified,backtestedstrategythatproducesaprofiton75%oftradesignalsissomewhatunusual;having20differentvariationsthatallgeneratewinners7686%ofthetimeisatestamenttothepowerandconsistencyoftheConnorsRSIS&P500tradingstrategy!
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Nowletsseehowatypicaltradelooksonachart.Fortheexamplebelow,welluseastrategyvariationthatrequirestheConnorsRSIvaluetobebelow10andtheclosingpricetobeinthebottom25%ofthedaysrange.Thelimitorderwillbeplaced6%belowtheSetupdaysclosingprice.WewillexitwhenConnorsRSIclosesabove70.Intermsofourstrategyrulesabove,thatmeansW=10,X=25,Y=6,andZ=70.
Figure1:ISRGTrade
ThechartaboveisforIntuitiveSurgical,Inc.,whosesymbolisISRG.Inthechart,thetoppaneshowsthepricebarsinblack,andtheverticalbluegraylinemarksthecurrentlyselecteddaywhichalsohappenstobetheSetupday.Thegreenuparrowmarkstheentryday,andthereddownarrowindicatestheexitday.ThelowerpaneshowsConnorsRSIasablueline.Nowwellconfirmthateachofourentryandexitconditionswerecorrectlymet.Rule1requiresthatthestockbeamemberoftheS&P500,whichISRGis.Basedonourstrategyparameters,Rule2requirestheConnorsRSI(3,2,100)valuetobebelow10ontheSetupday,whichitis:thevalueshownonthechartontheentrydayis9.14.
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Rule3statesthatthestockmustcloseinthebottom25%ofthedaysrange.Theclosingrangecanbecalculatedas: ClosingRange =(CloseLow)/(HighLow)
=($489.89$483.38)/($517.44$483.38)=6.51/34.06=19%
SinceallthreeSetupruleshavebeensatisfied,weenteralimitorderforthenexttradingday.Ourselectedstrategyvariationtellsustousealimitof6%belowtheSetupdaysclosingprice,sowewouldusealimitpriceof: LimitPrice =Closex(1Limit%) =$489.89x(1.06) =$489.89x0.94=$460.50Wecanseeonthechartthatonthedayafterthesetupoccurs,thepriceofISRGfallswellbelow$460,soourlimitordergetsfilledatthelimitpriceof$460.50.Ontheverynexttradingday,March18,2013,thepriceofISRGclosesat$485.52,resultinginaConnorsRSIvalueof75.33.Sincethisisaboveourexitthresholdof70,weexitthetrade.NoticethattheredSellarrowactuallyappearsthenextday,March19th.Asexplainedpreviously,thisisbecauseourtestingsimulatesanexitusingamarketorderthedayaftertheexitsignaloccurs.Inthisinstance,theaveragepriceof$481.24ontheexitdayisslightlylessthantheclosingpriceonthesignalday,sowaitinguntilthenextdaytoexitourtradeactuallycostusabitofourgain.However,westillcapturedaprecommissionprofitof4.5%injusttwodays: Profit =Gain(orLoss)/CostBasis =($481.24$460.50)/$460.50 =$20.74/$460.50=4.5%
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Letslookatanotherexampleusingthesamestrategyparameters.ThechartbelowisforLincolnNational(LNC),andusesthesameconventionsasthepreviouschart.
Figure2:LNCTrade
TheSetupdayforthistradewasSeptember21,2011,adaywhichtriggeredmanysetupsforthisvariationofthestrategy.AsperRule1,LNCisamemberoftheS&P500,andasperRule2theConnorsRSIvalueclosedbelow10withavalueof7.31.Althoughwecouldcalculatetheclosingrange,itisveryeasytoseefromthechartthattheclosingrangeisextremelylow.Theclosingpricewasonlytwocentsabovethelow,onadaythatthetotalpricerangewasadollarandahalf($17.69$16.19).Alittlementalarithmetictellsusthattheclosingrangewaslessthan2%,verifyingwhatoureyesalreadyknew.Therefore,Rule3hasbeensatisfiedandallofourSetupconditionshavebeenmet.WeplacealimitorderonSeptember22ndusingalimitpriceof$15.24,whichis6%belowtheSetupdaysclosingpriceof$16.21.Sincetheintradaypricefellbelow$15.00,ourordergetsfilledandweenterthetrade.ThenextdaytheintradaypriceofLNCrallies,butultimatelyclosesbelowourentryprice.Interestingly,theConnorsRSIvaluerisesslightlydespitethedecreaseinprice,butisstillwellbelowourexittargetof70.
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OnSeptember26th,thepriceofLNCrisessufficientlytocausetheConnorsRSIvaluetocloseat73.47,whichtriggersourexit.Wegetoutofthetradethenextday,whentheaveragepriceis$16.33.Unlikethefirstexample,inthiscaseweactuallybenefitfromclosingthetradethedayaftertheexitsignaloccurs,astheclosingpriceonthesignaldaywas$15.61.Ourtestinghasshownthatthisistypicalbehaviorformanyrobuststrategies.Whencomparingastrategyvariationthatexitstradesattheclosewithonethatexitsthenextdayusingaverageprice,thelongtermresultsaregenerallyquitesimilar.Individualtradesmayperformbetterunderonescenariothantheother,butovertimethesedifferencestendtoaverageout.
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Ourfinalexampleinthissectionwillusestrategyparametersthataredesignedtogetinandoutoftradesquicklyandfrequently.WellstilllookforaConnorsRSIvalue(W)below10ontheSetup,butwelluseaclosingrange(X)of50,alimit(Y)of2%,andanexitthresholdforConnorsRSI(Z)of50.
Figure3:MTGSingleDayTrade
ThechartaboveisforMGICInvestments(MTG).AlthoughMTGwasremovedfromtheS&P500inOctober2008,atthetimeofthistradeitwasstillamember.ThuswehavesatisfiedRule1.TheConnorsRSIvalueontheSetupdayis3.45,meetingourRule2criterionofavaluelessthan10.Theclosingpriceisequaltothelow,makingourclosingrangeequaltozeroandsatisfyingRule3.HavingmetallourSetupcriteria,weentera2%limitorderonJune24thatapriceof$7.55.ThelowpriceonJune24thwas$7.28(belowourlimitprice),soourorderwasfilled.Noticewhathappensnext:thepriceonJune24thclosesat$8.14,resultinginaConnorsRSIvalueof68.44,whichiswellaboveourexitthresholdof50.Thereforeweclosethetradethenextdayatanaveragepriceof$8.32,recognizingatidygainofover10%inapproximately24hours.Hadwebeenexecutingourexitsatthecloseratherthanonthedayfollowingtheexitsignal,wewouldhaveheldthistradeforlessthan7hours!Nowthatyouhaveagoodunderstandingofthetrademechanics,welllookatthehistoricaltestresultsfordifferentvariationsofthestrategy.
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Section3TestResults
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Wecanneverknowforsurehowatradingstrategywillperforminthefuture.However,forafullyquantifiedstrategysuchastheConnorsRSIS&P500TradingStrategydescribedinthisGuidebook,wecanatleastevaluatehowthestrategyhasperformedinthepast.Thisprocessisknownasbacktesting.Toexecuteabacktest,wefirstselectagroupofsecurities(sometimescalledawatchlist)thatwewanttotestthestrategyon.Inourcase,thewatchlistconsistsofpastandpresentmembersoftheS&P500.Nextwechooseatimeframeoverwhichtotest.Thelongerthetimeframe,themoresignificantandinformativethebacktestingresultswillbe.ThebacktestsforthisGuidebookstartinJanuary2001andgothroughtheendofMarch2013,thelatestdateforwhichwehavedataasofthiswriting.Finally,weapplyourentryandexitrulestoeachstockinthewatchlistfortheentiretestperiod,recordingdataforeachtradethatwouldhavebeenentered,andaggregatingalltradedataacrossaspecificstrategyvariation.OneofthekeystatisticsthatwecangleanfromthebacktestresultsistheAverage%Profit/Loss,alsoknownastheAverageGainperTrade.Sometradersrefertothisastheedge.TheAverage%P/Listhesumofallthegains(expressedasapercentage)andallthelosses(alsoasapercentage)dividedbythetotalnumberoftrades.Considerthefollowingtentrades:
TradeNo. %GainorLoss1 1.7%2 2.1%3 4.0%4 0.6%5 1.2%6 3.8%7 1.9%8 0.4%9 3.7%10 2.6%
TheAverage%P/Lwouldbecalculatedas:Average%P/L=(1.7%+2.1%4.0%+0.6%1.2%+3.8%+1.9%0.4%+3.7%+2.6%)/10Average%P/L=1.08%Average%P/Listheaveragegainbasedoninvestedcapital,i.e.theamountofmoneythatweactuallyspenttoentereachtrade.Forshorttermtradeslastingthreetotentradingdays,mosttraderslookforanAverage%P/Lof0.5%to2.5%acrossalltrades.Allotherthingsbeingequal,thelargertheAverage%P/L,themoreyouraccountwillgrowovertime.Ofcourse,allotherthingsareneverequal!Inparticular,itsimportanttoconsidertheNumberofTradesmetricincombinationwithAverage%P/L.Ifyouuseapproximatelythe
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sameamountofcapitalforeachtradethatyouenter,youllmakealotmoremoneyontentradeswithanaverageprofitof4%pertradethanyouwillononetradethatmakes10%.AnotherimportantmetricistheWinningPercentageorWinRate.Thisissimplythenumberofprofitabletradesdividedbythetotalnumberoftrades.Inthetableabove,7ofthe10tradeswereprofitable,i.e.hadpositivereturns.Forthisexample,theWinningPercentageis7/10=70%.WhydowecareaboutWinRate,aslongaswehaveasufficientlyhighAverage%P/L?BecausehigherWinRatesgenerallyleadtolessvolatileportfoliogrowth.Losingtradeshaveawayofclumpingup,andwhentheydothat,thevalueofyourportfoliodecreases.Thisisknownasdrawdown.Thosedecreases,inturn,canmakeyoulosesleeporevenconsiderabandoningyourtradingaltogether.Iftherearefewerlosers,i.e.ahigherWinningPercentage,thenlossesarelesslikelytoclump,andyourportfoliovalueismorelikelytogrowsmoothlyupwardratherthanexperiencingviolentupanddownswings.
***LetsturnourattentiontothetestresultsforthedifferentvariationsoftheConnorsRSIS&P500TradingStrategy.First,wellsortthetestresultstoshowthe20variationsthatproducedthehighestAverage%P/L.Top20VariationsBasedonAverageGain
#Trades
Avg%P/L
AvgDaysHeld
WinRate
EntryCRSI
ClosingRange Limit%
ExitCRSI
278 16.9% 3.2 84.9% 5 25 10 70317 15.0% 3.3 83.0% 5 50 10 70278 14.8% 2.3 86.0% 5 25 10 50324 14.6% 3.4 81.5% 5 75 10 70327 14.5% 3.4 81.4% 5 100 10 70318 13.3% 2.3 84.0% 5 50 10 50325 12.9% 2.4 82.8% 5 75 10 50328 12.8% 2.4 82.6% 5 100 10 50414 12.7% 3.4 82.9% 5 25 8 70481 11.6% 3.5 81.1% 5 50 8 70491 11.2% 3.6 79.8% 5 75 8 70415 11.2% 2.4 82.9% 5 25 8 50498 11.2% 3.6 79.9% 5 100 8 70647 11.0% 4.1 75.6% 10 25 10 70483 10.3% 2.4 81.0% 5 50 8 50808 10.2% 4.3 75.1% 10 75 10 70816 10.2% 4.2 74.9% 10 100 10 70779 10.1% 4.2 75.5% 10 50 10 70493 9.9% 2.4 79.9% 5 75 8 50500 9.8% 2.4 79.6% 5 100 8 50
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Belowisanexplanationofeachcolumn.#TradesisthenumberoftimesthisvariationtriggeredfromJanuary1,2001March31,2013.Avg%P/Listheaveragepercentageprofitorlossforalltrades,includingthelosingtrades,basedoninvestedcapital.Thetop20variationshaveallshownpositivegainsrangingfromjustunder10%tonearly17%overthe12+yeartestingperiod.WhentheAverage%P/Lisbrokendownonanannualbasis,15ofthese20variationsshowpositiveresultsforall13years!Onceagain,thatspeakstotheconsistencyofthestrategy.AvgDaysHeldistheaveragetradedurationexpressedasanumberofdays.Inallcasesitslessthanaweek,andinseveralvariationsitslessthan3days.Win%isthepercentageofsimulatedtradeswhichclosedoutataprofit.Mostofthetop20variationshavewinratesover75%,withseveralinthemid80s.Thisisahighpercentageofprofitabletradesinaworldwheremanytradersareaimingfor60%.EntryCRSIcorrespondstoRule2ofthestrategy,whichstatesthattheConnorsRSIvaluemustbebelowtheentrythreshold.RecallthatwetestedwithConnorsRSIthresholdsof5and10.Asyoumightexpect,thelowerConnorsRSIvaluesdominatethelist.ClosingRangecorrespondstoRule3ofthestrategy.Aclosingrangeof25isthemostrestrictivecriterion,whileaclosingrangeof100encompassesallpossiblescenariosfortheclosingprice,andthuseffectivelyneutralizesRule3.Limit%isrelatedtoRule4ofthestrategy,anddeterminesthelimitpricethatwillbeusedtoenterthetrade.Wetestedlimitsof2,4,6,8and10%belowtheSetupdaysclose.ExitCRSIistheConnorsRSIvaluethatmustbeexceededtosignalanexit.Notethatthemorestringentexitcriterion(higherConnorsRSIexitthreshold)generallyproduceslongertradedurations.Welldiscussthisinmoredetailinafuturesection.
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Next,letslookatthestrategyvariationsthathavehistoricallyhadthehighestrateofprofitabletrades.Thesearethesamevariationspresentedinthepreviouschapter,butwithsomeadditionalcolumnsinthetable.Top20VariationsByHighestWinRate
#Trades
Avg%P/L
AvgDaysHeld
WinRate
EntryCRSI
ClosingRange Limit%
ExitCRSI
278 14.8% 2.3 86.0% 5 25 10 50278 16.9% 3.2 84.9% 5 25 10 70318 13.3% 2.3 84.0% 5 50 10 50317 15.0% 3.3 83.0% 5 50 10 70415 11.2% 2.4 82.9% 5 25 8 50414 12.7% 3.4 82.9% 5 25 8 70325 12.9% 2.4 82.8% 5 75 10 50328 12.8% 2.4 82.6% 5 100 10 50324 14.6% 3.4 81.5% 5 75 10 70327 14.5% 3.4 81.4% 5 100 10 70481 11.6% 3.5 81.1% 5 50 8 70483 10.3% 2.4 81.0% 5 50 8 50498 11.2% 3.6 79.9% 5 100 8 70493 9.9% 2.4 79.9% 5 75 8 50491 11.2% 3.6 79.8% 5 75 8 70500 9.8% 2.4 79.6% 5 100 8 50626 9.4% 3.7 77.6% 5 25 6 70629 7.9% 2.4 77.1% 5 25 6 50652 9.4% 2.6 76.8% 10 25 10 50788 8.7% 2.6 76.0% 10 50 10 50
All20ofthetopvariationshavehistoricallyproducedaprofitonover75%oftheidentifiedtrades!CombinedwiththeinformationpresentedintheprevioussectiononAverage%P/L,youcanseethatwehaveastrategythathistoricallyhaswonconsistentlywhileproducingexcellentedges.
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Section4SelectingStrategyParameters
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InpreviouschapterswehavedescribedthedifferentvalueswetestedforstrategyparameterssuchasConnorsRSIentrythreshold(W),closingrange(X),entrylimit%(Y)andConnorsRSIexitthreshold(Z).Inthissectionwelldiscusssomethingstoconsiderasyoudecidewhichvariation(s)touseinyourtrading.Letstalkconceptuallyaboutentriesandexitsforamoment.Bothentryandexitrulescanbethoughtofintermsofhowstricttheyare,i.e.howeasyordifficulttheyaretoachieve.Youmightalsosaythatstrictnessisameasureofhowfrequentlyorinfrequentlytheruleconditionsoccur.ForoscillatorssuchasConnorsRSI,valuesthatareclosertotheextremes(0and100)aremorestrict(lesslikelytooccur)thanvaluesthatareinthemiddleoftherange.Stricterentryruleswillbesatisfiedlessfrequentlythanmoreleniententryrules,andthusastrategythatreliesonthestricterruleswillgenerallygeneratefewertradesthanastrategywhoseentryrulesaremoreeasilysatisfied.Witharobuststrategy,therewardforfewertradesisusuallyahighergainpertrade,onaverage.Ifyoubuyaslightlyoversoldstock,itsmostlikelytohaveamoderaterebound.Butifyouwaitforthestocktobecomeextremelyoversold,thechancesaremuchhigherthatitwillhaveasignificantbounceandcreateabiggerprofit.Incontrasttoentryrules,thestrictnessofexitruleshaslittleeffectonthenumberoftradesgeneratedbythestrategy.However,justliketheentryrules,stricterexitrulestypicallyresultinhigheraverageprofits.Why?Becausestricterexitrulestendtokeepyouinyourtradesforalongertime,givingthestockmoretimetoexperiencethemeanreversionbehaviorthatwereattemptingtoexploitwithastrategyliketheConnorsRSIS&P500TradingStrategy.Thus,forentriesthetradeoffisbetweenmoretradesandhighergainspertrade,whileforexitsthetradeoffisbetweenshortertradedurationsandhighergainspertrade.
***
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NowletsturnourattentionbacktothestrategydescribedinthisGuidebook.Inthetablebelow,wecompareeightvariationsofthestrategythatallusethesamelimitentry(6%)andthesameexitmethod(ConnorsRSI>70).OnlytheConnorsRSIentrythresholdandClosingRange(theSetupvariables)aredifferent.VariationswithConstantLimit%andExitConnorsRSI
#Trades
Avg%P/L
AvgDaysHeld
WinRate
EntryCRSI
ClosingRange Limit%
ExitCRSI
626 9.4% 3.7 77.6% 5 25 6 701629 5.7% 4.4 71.6% 10 25 6 70731 8.2% 3.8 75.9% 5 50 6 70
1953 5.1% 4.5 70.1% 10 50 6 70751 7.9% 3.8 75.5% 5 75 6 70
2061 5.0% 4.5 69.8% 10 75 6 70761 7.9% 3.9 75.6% 5 100 6 70
2087 4.9% 4.5 69.7% 10 100 6 70NoticethatthefirsttwoentriesinthetablehaveidenticalstrategyparametersexceptforEntryConnorsRSIthreshold.Thefirstentryusesastricterrequirementof5,andhasgenerated626tradesignalssince2001,withanAverage%P/Lof9.4%.Thesecondvariationusesamorelenientcriterionof10fortheConnorsRSIthreshold,andhasgenerated1629tradesignalswithanAverage%P/Lof5.7%.Thesamepatternholdstruewhencomparingthethirdandfourthentries,thefifthandsixthentries,andthefinaltwoentries.WeseethatthepatternalsoholdstrueifwecomparealltheentrieswiththesameConnorsRSIentrythreshold,thatis,thefirst,third,fifthandseventhentriesinthetable.AstheClosingRangebecomesmorelenient,thenumberoftradesincreaseswhiletheAverage%P/Ldecreases.Likewiseforentries2,4,6and8.
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ItshouldcomeasnosurprisethatthepatternemergesagainwhenweholdallparametersconstantexcepttheLimit%usedtodeterminethelimitentryprice.IfwekeeptheSetupconditionsconstant,thentherewillobviouslybemorestocksthatexperienceapricedropof2%orgreaterthenextdaythantherewillbethosethatdropbyatleast6%.VariationswithDifferentLimit%Entries
#Trades
Avg%P/L
AvgDaysHeld
WinRate
EntryCRSI
ClosingRange Limit%
ExitCRSI
779 10.1% 4.2 75.5% 10 50 10 701181 7.6% 4.3 72.8% 10 50 8 701953 5.1% 4.5 70.1% 10 50 6 703593 3.1% 4.7 68.4% 10 50 4 708052 1.5% 4.9 66.6% 10 50 2 70
Wehaveconfirmedthatstricterentryrulesresultinfewertradesbuthigheraveragegains.Nowletslookattheexits.HereweagainholdtheSetupcriteriaconstant,butfortwodifferentLimit%valueswevarytheexitthreshold:VariationswithDifferentConnorsRSIExitThresholds
#Trades
Avg%P/L
AvgDaysHeld
WinRate
EntryCRSI
ClosingRange Limit%
ExitCRSI
1181 7.6% 4.3 72.8% 10 50 8 701196 6.5% 2.7 72.4% 10 50 8 503593 3.1% 4.7 68.4% 10 50 4 703652 2.6% 2.7 66.9% 10 50 4 50
ThefirsttwoentriesbothuseaLimitof8%,andaswepredictedearlier,theyvegeneratedverysimilarnumbersoftradesignals.However,thevariationthatusesthestricterConnorsRSIexitthresholdof70hasanaveragetradedurationof4.3days,ascomparedtothe2.7dayaveragedurationofthevariationusinganexitthresholdof50.Alsoasexpected,theAverage%P/Lisslightlylowerwiththemorelenientexitthreshold.Thesamepatterncanbeseenwiththelasttwoentries,whichbothuseaLimitof4%.Armedwiththisinformation,youwillnowbeabletoselectstrategyparametersthataremostlikelytoproducethenumberoftradesignals,averagegains,andtradedurationthatbestcomplementyouroveralltradingplan.
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Section5UsingOptions
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PleasenotethattheoptionssectioninthemajorityoftheConnorsResearchTradingStrategySeriesisthesamebecausethestrategysetupsofteninvolvelargemovesinbriefperiodsoftime.Inouropinion,andconfirmedfromfriendswhoareprofessionaloptionstraders(onewithoverthreedecadesofexperience);thereisonebestwaytotrademoveslikethese.Optionstradinghasbeenamajorgrowthindustryoverthepast5yearsinthemarkets.Thisisbecausespreadshavetightened,liquidityhasincreased,andtheabilitytoeasilytradecomplexoptionshasneverbeensimpler.Wellnowfocusonapplyingoptionstradingtotheshorttermmarketmoveswehavejustlearned.LikeeverythingelseinthisGuidebook,therearedefinitiverulesastohowtoexecuteanoptionstradewhenastrategysignaltriggers.Hereiswhatweknowbaseduponthedata:
1.Themajorityofthemovesfromentrytoexithavebeenheldaveryshortperiodoftime(210tradingdays).
2.Theaveragegainspertradehavebeenlargewellbeyondthenormaldistributionofpricesoverthatshortperiodoftime.
3.Ahighpercentageofthemoveshavebeencorrect.Whenwelookatthistypeofbehavior,itcanleadtomanystrategiesbutonestrategystandsout(andthishasbeenconfirmedbyprofessionaltraders).Thestrategyistobuyfrontmonth,inthemoneylongcalls.Whyfrontmonthinthemoneylongcalls?Becausetheywillmovemostcloselytothestockitself.Andthecloseranoptionmoveswiththestock,thegreaterthegainwillbeonapercentagebasiswhenthemoveiscorrect.Herearetherules.
1.Asignaltriggers.2.Buythefrontmonthinthemoneycall.Ifyouweretonormallybuy500sharesofthestock,
buy5calls(every100sharesshouldequalonecall).3.Exittheoptionswhenthesignaltriggersanexitonthestock.
Letsgofurther:1.Whatdoesinthemoneyexactlymeanhere?Inthiscaseitsdefinedasonetotwostrikepricesinthemoney.Ifthestockpriceisat48,buythe40or45calls.
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2.Whatdoesfrontmonthmean?Becausetheholdingperiodissoshort,youwanttotradetheoptionswhosemonthlyexpirationistheclosest.Iftheclosestmonthis7tradingdaysorlessfromthefrontmonthsoptionexpirationdate(meaningthesecondThursdaybeforeorcloser)usethefollowingmonthastheonetotrade.3.WhathappensifIminthepositionanditexpiresyetthesignalforthestockisstillvalid?Inthiscase,rolltothenextmonth.Youretradingthestocksignalssoyouwanttohaveexposuretothatsignal.4.Whataboutliquidityandspreads?Theressomediscretionhere.Thereisnohardandfastruleastowhatexactlyliquiditymeansinoptions.Manytraderslookforminimumvolumeand/oropeninteresttodetermineliquidity.Assumingthereisactivevolumeintheoptions,lookatthespreads.Iftheoptionistrading3.00bid3.30offer,thespreadis10%.Canyoureallyovercomea10%spread?Notlikely.Nowcomparethistoanoptionthatstradingat3.25bid3.30offer.Thisisfarmoreacceptableandtradable.5.Whataretheadvantagesofbuyingcalloptionsinsteadofthestock?Assumingthespreadsandliquidityarethere,theadvantagesarelarge:
1.GreaterpotentialROIoncapitalinvested.2.Lessmoneytiedup.3.Lesspointsatrisk.Thismeansifastocksignalsat50,itcanloseupto50points.Theoptions
canonlyloseuptothepremiumyoupaid.So,ifyouboughtthe45calls,theriskisonlythepremium.
4.Theresgreaterflexibility.Forexample,letssaythestocktriggeredabuysignalat50andyoupaid$5.50forthe45calls.Ifthestockimmediatelymoveshigher(letssayto56);youhavechoiceshere.Youcanexit,oryoucanrollintothe50callsgettingmostofyourmoneyoutandnowturningthisintoanearlyfreetradeifyoubelievethatpriceswillcontinuetorun.
Therearenumerousexampleslikethisandyoucanfindthesetypesofstrategyopportunitiesinmostoptionsbooks.Buttradinganythingexoticordifferentthansimplybuyingthecallsisagainsttheadviceofthemanyprofessionalsweposedthisquestionto.Inconclusion,optionsprovidetraderswithagoodalternativetobuyingthestockoutright.Thestructuredmethodologyforourstrategiesis:frontmonth,inthemoney,withequivalentsizing(1optionper100shares),andexitingwhenthesignalexits.Theaboveoptionsstrategy,inmanyexpertsopinion,isthebestandmostefficientstrategybaseduponthehistoricaldatafromthesesignals.
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Section6AdditionalThoughts
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1.AsyouhaveseenthroughoutthisGuidebook,theConnorsRSIS&P500TradingStrategyhashadlargequantifiededgeswhenappliedinasystematicmanner.2.Thereareliterallydozensofpotentialvariationsforyoutouse.Byadjustingtheinputvariablesdescribedintherules,youcancustomizehowthestrategywillperformforyou.Wantmoretrades?LookatvariationswithahigherConnorsRSIentryvalueorClosingRange.Biggeraveragereturns?Checkoutthevariationsthathavethestrictestentrycriteria(lowentryvalueforConnorsRSIandhighLimit%)andlongestdurations(ConnorsRSI70exitmethod).Wanttogetinandoutoftradesmorequicklytoreduceovernightriskandfreeupyourcapitalforothertrades?TrythevariationsthatutilizetheConnorsRSI50exitmethod.3.Whataboutstops(andweincludetheanswertothisinallourStrategyGuidebooks)?WehavepublishedresearchonstopsinotherpublicationsincludinginourbookShortTermTradingStrategiesThatWork.Whatwehavefoundisthatstopstendtolessenperformanceandinmanycasestheycompletelyremoveedges.Yes,itfeelsgoodwhenastockkeepsmovinglowerandlowerandastopgotyouout.Ontheotherside,theresearchwhichisbackedbyuptotwodecadesoftestresultsonmanyshorttermtradingstrategiessuggeststhatstopsgethitoftenandaccumulatemany,manylosses.Fewtradingstrategiescanovercometheseaggregatedlosses.Formanytradersstopsareamust.Psychologicallyitallowsthemtotaketrades,especiallydifficulttrades.Whetheryouusethemornotisapersonalchoice.Onthewholethough,theedgesyouseeinthisstrategyandmanyothershorttermstrategiesarelowerwhenstopsareappliedtothem.Againthisisapersonalchoiceonlyyoucanmakeforyourself.Weknowsuccessfultradersinbothcamps.4.Slippageandcommissionwerenotusedinthetesting.Factorthemintoyourtrading(theentriesareatlimitpricessoslippageisnotanissue)andmakesureyouretradingatthelowestpossiblecosts.Mostfirmsarenowallowingtraderstotradeforunder1centashare,soshopyourbusiness,especiallyifyouareanactivetrader.Theonlinebrokeragefirmswantyourbusiness.WehopeyouenjoyedthisadditiontotheConnorsResearchTradingStrategySeries.Ifyouhaveanyquestionsaboutthisstrategypleasefeelfreetoemailusatinfo@connorsresearch.com
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Appendix:TheConnorsRSIIndicator
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LarryConnorsandConnorsResearchhavebeendeveloping,testing,andpublishingquantifiedtradingstrategiessincethemid1990s.Duringthattime,wehavehadtheopportunitytoevaluateagreatnumberofdifferenttechnicalindicatorsandtoassesstheireffectivenessinpredictingfuturepriceaction.Nowwevetakenthenextstepandcreatedanindicatorofourown:ConnorsRSI.Inthischapterwewilldescribetheindicatorandprovidedetailsonitscalculation.ConnorsRSIisacompositeindicatorconsistingofthreecomponents.TwoofthethreecomponentsutilizetheRelativeStrengthIndex(RSI)calculationsdevelopedbyWellesWilderinthe1970s,andthethirdcomponentranksthemostrecentpricechangeonascaleof0to100.Takentogether,thesethreefactorsformamomentumoscillator,i.e.anindicatorthatfluctuatesbetween0and100toindicatetheleveltowhichasecurityisoverbought(highvalues)oroversold(lowvalues).BeforewediscusshowtocalculateConnorsRSI,letsreviewWildersRSI.RSIisaveryusefulandpopularmomentumoscillatorthatcomparesthemagnitudeofastock'sgainstothemagnitudeofitslossesoversomelookbackperiod.Wilderhimselfbelievedthat14periodswastheideallookback.WeoftenusetheshorthandnotationRSI(14)forthe14periodRSI.TheformulabelowcomputesRSI(14)foraseriesofpricechanges:
IfwewantedtocomputeRSIforadifferentnumberofperiods(N),thenwewouldreplace14intheformulaabovewithN,andreplace13withN1.Regardlessofthenumberofperiodsusedinthecalculation,theresultwillalwaysbeanumberbetween0and100.TraderswhouseRSI(14)typicallylookforvaluesgreaterthan70toidentifyoverboughtconditions,andvalueslessthan30toindicateoversoldconditions.OurpreviousresearchhasshownthatusingshorterlookbackperiodsmakesRSImoreeffectiveinpredictingshorttermpricemovements.WehavepublishedmanystrategiesthatutilizeRSI(2),aswellasseveralthatuseRSI(3)andRSI(4).ChangingthenumberofperiodsalsohasaneffectontheRSIlevels
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thatbestidentifyoverboughtandoversoldconditions.Forexample,anRSI(2)valueoflessthan10isusuallyareliableindicatorofanoversoldcondition,whileanRSI(2)valueover90isagoodbenchmarkforanoverboughtcondition.NowletsturnourattentionbacktoConnorsRSI.Asmentionedpreviously,ConnorsRSIcombinesthreecomponents,andasyoumightguess,theyareallelementsthatourresearchhasrepeatedlyshowntohavesignificantpredictiveability:
PriceMomentum:Aswejustdiscussed,RSIisanexcellentwaytomeasurepricemomentum,i.e.overboughtandoversoldconditions.Bydefault,ConnorsRSIappliesa3periodRSIcalculationtothedailyclosingpricesofasecurity.WewillrefertothisvalueasRSI(Close,3).DurationofUp/DownTrend:Whentheclosingpriceofasecurityislowertodaythanitwasyesterday,wesaythatithascloseddown.Ifyesterdaysclosingpricewaslowerthanthepreviousdaysclose,thenwehaveastreakoftwodownclosedays.Ourresearchhasshownthatthelongerthedurationofadownstreak,themorethestockpriceislikelytobouncewhenitrevertstothemean.Likewise,longerdurationupstreaksresultinlargermovesdownwhenthestockmeanreverts.Ineffect,thestreakdurationisanothertypeofoverbought/oversoldindicator.Theproblemis,thenumberofdaysinastreakistheoreticallyunbounded,thoughwecouldprobablyplacesomepracticallimitsonitbasedonpastexperience.Forexample,wemightobservethattherehavebeenveryfewinstancesofeitheranupstreakoradownstreaklastingformorethan20days,butthatstilldoesntgetustoatypicaloscillatortypevaluethatvariesbetween0and100.Thesolutionistwofold.First,whenwecountthenumberofdaysinastreak,wewillusepositivenumbersforanupstreak,andnegativenumbersforadownstreak.Aquickexamplewillhelptoillustratethis:Day ClosingPrice StreakDuration1 $20.00 2 $20.50 13 $20.75 24 $19.75 15 $19.50 26 $19.35 37 $19.35 08 $19.40 1TheclosingpriceonDay2ishigherthanonDay1,sowehaveaonedayupstreak.OnDay3,thepricecloseshigheragain,sowehaveatwodayupstreak,i.e.theStreakDurationvalueis2.OnDay4,theclosingpricefalls,givingusaonedaydownstreak.TheStreakDurationvalueisnegative(1)becausethepricemovementisdown,notup.Thedownwardtrendcontinueson
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Days5and6,whichourStreakDurationreflectswithvaluesof2and3.OnDay7theclosingpriceisunchanged,sotheStreakDurationissetto0indicatingneitheranupclosenoradownclose.Finally,onDay8theclosingpricerisesagain,bringingtheStreakDurationbackto1.ThesecondaspectofthesolutionistoapplytheRSIcalculationtothesetofStreakDurationvalues.Bydefault,ConnorsRSIusesa2periodRSIforthispartofthecalculation,whichwedenoteasRSI(Streak,2).Theresultisthatthelongeranupstreakcontinues,theclosertheRSI(Streak,2)valuewillbeto100.Conversely,thelongerthatadownstreakcontinues,theclosertheRSI(Streak,2)valuewillbeto0.Thus,wenowhavetwocomponentsRSI(Close,3)andRSI(Streak,2)thatbothusethesame0100scaletoprovideaperspectiveontheoverbought/oversoldstatusofthesecuritywereevaluating.RelativeMagnitudeofPriceChange:ThefinalcomponentofConnorsRSIlooksatthesizeoftodayspricechangeinrelationtopreviouspricechanges.WedothisbyusingaPercentRankcalculation,whichmayalsobereferredtoasapercentile.Basically,thePercentRankvaluetellsusthepercentageofvaluesinthelookbackperiodthatarelessthanthecurrentvalue.Forthiscalculation,wemeasurepricechangenotindollarsandcents,butasapercentageofthepreviousdaysprice.Thispercentagegainorlossistypicallyreferredtoastheonedayreturn.Soifyesterdaysclosingpricewas$80.00,andtodayspriceis$81.60,theonedayreturnis($81.60$80.00)/$80.00=0.02=2.0%.TodeterminethePercentRank,weneedtoestablishalookbackperiod.ThePercentRankvalueisthenthenumberofvaluesinthelookbackperiodthatarelessthanthecurrentvalue,dividedbythetotalnumberofvalues.Forexample,ifthelookbackperiodis20days,thenwewouldcomparetodays2.0%returntotheonedayreturnsfromeachoftheprevious20days.Letsassumethatthreeofthosevaluesarelessthan2.0%.WewouldcalculatePercentRankas:
PercentRank=3/20=0.15=15%ThedefaultPercentRanklookbackperiodusedforConnorsRSIis100,orPercentRank(100).Wearecomparingtodaysreturntotheprevious100returns,orabout5monthsofpricehistory.Toreiterate,largepositivereturnswillhaveaPercentRankcloserto100.LargenegativereturnswillhaveaPercentRankcloserto0.
ThefinalConnorsRSIcalculationsimplydeterminestheaverageofthethreecomponentvalues.Thus,usingthedefaultinputparameterswouldgiveustheequation: ConnorsRSI(3,2,100)=[RSI(Close,3)+RSI(Streak,2)+PercentRank(100)]/3Theresultisaveryrobustindicatorthatismoreeffectivethananyofthethreecomponentsusedindividually,andinmostcases,alsomoreeffectivethancombiningthethreecomponentsindependently.
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ReceiveConnorsRSIReadingsforFreefromtheTradingMarketsScreener
http://analytics.tradingmarkets.com/Screener/
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TheS&P500LowVolatilityGrowthPortfolio
AreYouLookingForGrowthInBullMarkets&SafetyInBearMarketsFromYourInvestmentsWithS&P500Stocks?Introducing:TheS&P500LowVolatilityGrowthPortfolioGrowthinaBullMarket,SafetyinaBearMarketYoudon'tneedanintroductiontoS&P500stocks.Butyoumayneedabetterwaytotradethemtomaximizeyourreturns.ThemajorityofmoneyinretirementpensionandretirementaccountsisinS&P500stocks.Thisiswherethesafermoneylikestoinvest.S&P500companiestendtobebiggerandsafercompanies.ManyareFortune500companieswithworldwideoperationssellingproductstomillionsofcustomers.
Whenthestockmarketrises,youwanttoownsolidS&P500stocks.
Whenthestockmarketdeclines,youwanttobeincash.
ThisisexactlywhatTheS&P500LowVolatilityGrowthPortfoliodoesforyou.TheS&P500LowVolatilityGrowthPortfoliodeliverstradingsignalsforS&P500stocks,providingyouanoptimizedbalanceofbothgrowthandsafetyforyourcapital.Inrisingmarketsyouarelongbluechipstocks.Indecliningmarketsyouareincash.WouldyoulikethepotentialtoearnreturnslikethesefromS&P500stocks?SamplesimulatedhistoricalbacktestresultsfromTheS&P500LowVolatilityGrowthPortfolio.
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YouAlreadyLearnedThisOverthePastDecade'BuyandHold'isDead!Youunderstandthatmarketschangeastheyhaveoverthepastdecade.Inordertotakeadvantageofchangingmarketconditions,TheS&P500LowVolatilityGrowthPortfolioisconstantlyreviewed,monitored,andupdatedbyConnorsResearch.ThebacktestresultsindicatethatTheS&PLowVolatilityGrowthPortfolioconsistentlyoutperformstheS&P500on"buy&hold".Sampleequitycurvefor$100KinvestedinTheS&P500LowVolatilityGrowthPortfoliovs.theS&P500.
IfyouwouldliketoseeapresentationonTheS&P500LowVolatilityGrowthPortfolioclickhere.Ifyouwouldliketoorderandhaveimmediateaccesstoitpleaseclickhereorcalltollfree8884848220ext.3(outsidetheUSpleasedial9734947311ext.3).
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TradingwithBollingerBandsAQuantifiedGuideThisSystematicApproachtoTradingwithBollingerBandsBringsYouResultsQuicklyBollingerBandsareusedbyhundredsofthousandsoftradersaroundtheworld.Infact,itsconsideredoneofthemostpowerfultradingtoolsavailabletotraders.Overthepasttwodecadesmanyprofessionaltradersatlargefunds,successfulCommodityAdvisors,andprofessionalEquityTradershavestatedtheyrelyuponBollingerBandsasoneofthemainindicatorsbeforetheytakeatrade.Whentradedcorrectly,BollingerBandscanbeoneofthemostconsistentstrategiesavailableforyourtrading.Nowforthefirsttime,wearemakingavailabletothepublicafullysystematic,quantifiedapproachtotradingwithBollingerBands.ConsistentTradingResultsWhatyouwilllearnwiththisstrategyaredozensofBollingerBandsstrategyvariationswhichhavebeencorrectfrom65.43%uptoover82.74%fromJanuary2001toMay2012.TheTradingwithBollingerBandsAQuantifiedGuidecomeswitha100%MoneyBackGuarantee(asdoalltheGuidebooksinourStrategySeries).IfyouwouldlikemoreinformationonTradingwithBollingerBandsAQuantifiedGuideclickhere.Ifyouwouldliketoorderanddownloaditnowsoyoucanhaveimmediateaccesstoitpleaseclickhereorcalltollfree8884848220ext.627(outsidetheUSpleasedial9734947311,ext.3).
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TheLongPullbacksStrategyIn2005wepublishedwhatweconsidertobeourmostpowerfulshorttermtradingstrategythatweoriginallynamedthe5x5x5Strategy.Manyhundredsoftraderslearnedthestrategyandmanystilluseittoday.Sincethattimewehaveupdatedandimprovedthestrategy,addednewentryparameters,addednewexitstrategies,andhaveupdatedthetraderesultsbeginningfrom20012011.Whatyouwilllearnwiththisstrategyaremanyhundredsofvariationsthathavebeencorrectfrom72.4%uptoover78%formorethanadecade.Andtheaveragegainpertrade(thisincludesallwinningandlosingtrades)hasaveragedover5.6%atradeondozensofvariationsofthestrategy.Youwilllearnhowtoidentifythesetup,select,theentrylevel,wheretoplacetheorderandwheretoexittheorder.ThisisdoneonallliquidUSstocks(anditcanbedoneonglobalmarketsaswell).Andasanaddedbonuswealsoaddedadaytradingcomponenttothisstrategyforthoseofyouwholiketoexitpositionsbeforethecloseeachday.TheLongPullbacksStrategycomeswitha100%MoneyBackGuarantee(asdoalltheGuidebooksinourStrategySeries).IfyouwouldlikemoreinformationonTheLongPullbacksStrategyclickhere.Ifyouwouldliketoorderanddownloaditnowsoyoucanhaveimmediateaccesstoitpleaseclickhereorcalltollfree8884848220ext.627(outsidetheUSpleasedial9734947311,ext.3).
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ETFGapTrading:ADefinitiveGuideIfyoutradeETFsyouwillsoonseethattradingGapsonETFs,whendonecorrectly,canbetheoneofthemostprofitablestrategiesavailabletoyouinETFTrading.TheaveragegainspertradefromtradingthegapsastaughtinthisSeriesrangesallthewayuptoover4%pertrade(asubstantialnumberforETFs).AndweaddedaLeveragedETFsectionwheretheaveragegainsgetabove5.5%trade.HistoricallythemajorityoftheETFGapsetupshavebeencorrect7177%ofthetime.AndliketheLongPullbackStrategieswevealsoaddedadaytradingaspecttotradinggapswhichallowyoutodaytradeETFsbothonthelongandtheshortside.TheETFGapTradingStrategyalsocomeswitha100%MoneyBackGuarantee.IfyouwouldlikemoreinformationontheETFGapTradingStrategyclickhere.Ifyouwouldliketoorderanddownloaditnowsoyoucanhaveimmediateaccesstoitpleaseclickhereorcalltollfree8884848220ext.627(outsidetheUSpleasedial9734947311,ext.3).
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