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Monday, May 22, 2006

 

NDX 5-day RSI Buy Signal Strategy

There used to be a site (vtoreport.com) that only bought into the market when a buy signal was triggered as follows:

"Buy the Nasdaq 100 Trust (QQQQ) when the 5-day Relative Strength Index (RSI) closes below 30.0.
Sell the Nasdaq 100 Trust (QQQQ) when the 5-day Relative Strength Index (RSI) closes above 50.0.
The Nasdaq 100 Trust is purchased during after-hours trading on the day the RSI buy signal is generated.
The Nasdaq 100 Trust is sold during after-hours trading on the day the RSI sell signal is generated.
The 5-day RSI strategy has a tendency to underperform the buy-and-hold strategy when the market is strong and outperform when the market is weak.
1997 to 2005 Results: NDX "Buy & Hold"up 76.2%, "5 day RSI" up 349.7%
1997 to 2006 Results: NDX "Buy & Hold"up 108.3%, "5 day RSI" up 381.8%
http://www.vtoreport.com/rsi.htm"

It looks like that site is gone now, but they used to post every entry and all the trading results, which were quite remarkable over the last 9 years, as you can see in the summary above. Particularly when the market is weak, as may be the case during much of the coming several years, this strategy has a tendency to outperform the buy-and-hold strategy, being completely out of the market a majority of the time.

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