Does RSI Love Big Stoplosses?

Does RSI Love Big Stoplosses?

June 30, 2023

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This week we’re building a portfolio around a superstar.

Our superstar is a chart that looks good and appears to be robust.

From there, we’re trying to build more versions that can work with our superstar idea to make it even better.

In our last Newsletter, we saw that the RSI indicator worked much better over the past ten years when we tripled the profit target.

Once we do that, does increasing the stoploss improve things also?

For comparison, here’s our Curve from the last Newsletter ($2,800 target, $800 stop per contract on the 30M ES.D):

Now we’ll run a test over the past ten years on the stop. And here’s where it gets tricky.

A $400 stop is actually better over this time period. But the win percentage drops down to only 18%!

Yikes.

So we’ll take the next best result, which is a $1,200 stop. That win rate is 37% and here’s the Curve:

That’s also better than our previous two iterations.

Apparently, RSI works better with a larger target and stop while Bollinger Bands™ work better with a smaller target and stop.

Of course, there are many discussion points we won’t get into. Worrying out in-sample/out-of-sample designations, what parameters to test, when we should re-test in the future, if we should re-test, etc. only leads us down endless (mostly fruitless) rabbit holes.

But, on first glance, our superstar idea shows promise with two different indicators.

And that’s a great way to start building a portfolio.

Talk to you soon.

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