Trend Following System
Posted: June 20th, 2009 | Author: admin | Filed under: Uncategorized | Tags: 401k Accounts, Bear Market, Bear Markets, Bull And Bear, Constance Brown, ETF Market Timing, Losses, Market Timing, Market Timing Mutual Funds, Performance Results, Relative Strength Index, Rsi, RSI Trend Following System, Signals, Spy, Stock Market Timing, Trades, Trend Follow System, Trend Following System, Welles Wilder | No Comments »This Trend Following System is derived from the work of Constance Brown. In her book Technical Analysis for the Trading Professional she discusses RSI trading zones for both bull and bear markets. RSI (Relative Strength Index) is a very popular indicator developed by Welles Wilder. It measures gains vs. losses over a defined period and is traditionally used to signal overbought and oversold markets. The formula can be found on several sites on the web so I won’t go into detail here. What Constance points out in her book is that in a bear market the RSI will not typically trade above 60 and in a bull market the RSI will usually stay above 40.
What I have done with this is applied a 14 period RSI to a weekly chart of the SPY. SPY is ETF of the S&P 500. A long signal is generated when the RSI closes above 60 for the week. We will remain long until the RSI closes below 40 for the week. Signals are generated on Friday and trades were taken at the open on Monday. I realize that in most 401k accounts trades are done on the close. This should not significantly change the results.
Caution: This is a rather large file and may be slow in loading.
SPY CHART W/ RSI Trend Following System
Trend Following System Trade Dates
Past performance is not necessarily an indication of future performance. Hypothetical or simulated performance results have certain inherent limitations. See full disclosure on disclosure page.