Thursday, February 5, 2015

Feb RSI3MA3 buy/sell signals

A mechanical system can remove the emotion from trading.  I showed you DPO and how it aligns with stock prices. Problem is it trails price by half a cycle (if we are using 22 TDs then the DPO is 11 days behind as it averages days before/after the midpoint.

Many use RSI and looks for crossing of the lower levels like 30 as a buy point and higher levels as a sell point.   If we use smaller parameters and a smoothing average we can use crossings of these as buy/sell points.  Here is RWM using a parameter of "3" and a MA of "3":

Of course no mechanical system is perfect, so we will use "stop loss" and "limit" orders to minimize the effect of bad signals...

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