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4 day RSI Volatility strategy

When I test out systems I sometimes stumble upon edges that I had no intention of testing, and this is such an edge that I found years ago for the OMXS30 index.


It's so simple that it's stupid. Just enter a long trade when volatility is exceptionally high (determined by Bollinger Bandwidths), if RSI4 is below 40.


And then exit the trade in 5 days or when RSI4 is above 75.


Entry conditions

  1. The 4 day Bollinger Bandwidth is above 0.07 (volatility is exceptionally high)

  2. And the 4 day RSI value is below 40


Exit conditions

  1. The 4 day RSI value is above 75

  2. Or 5 trading days have passed


Here's the equity chart


It's a smooth equitycurve with long periods of inactivity and with only 1 major drawdown.


Statistics (Aug 1997 - today)

  • 65.31% winrate

  • 147 trades

  • 2156 points gained

  • 361 points max drawdown

  • 12.91% time in market

  • 2.15 Gain/Loss Ratio

  • Positive returns in 26 of 27 years


I think it's worth nothing that you're getting better returns with this strategy than a buy & hold strategy, and that is with only 12.91% time in market. Combine this swing strategy with some other strategies to leverage your capital when the strategy is not in market, and you will overachieve the index without doubt.



The ProRealTime™ code

DEFPARAM CumulateOrders = False

FourDayRSI = rsi[4](close)

IF FourDayRSI <= 40 and BollingerBandWidth[4] > 0.07 THEN
BUY 1 SHARE AT MARKET
ENDIF

IF onmarket and ((FourDayRSI > 75) OR (BarIndex - TradeIndex >= 5)) THEN
SELL AT MARKET
ENDIF

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