RSI-Based Trading Strategy

In this trading strategy, we utilize the Relative Strength Index (RSI) indicator to make automated decisions when buying and selling stocks. The RSI helps us identify potential market trends and make informed trading choices.

Assumptions

• Time Frame: The algorithm backtests its strategy using historical data from the past year.
• Initial Account Balance: The algorithm starts with an initial account balance of $100,000.
• RSI Calculation Period: The RSI indicator is calculated using a period of 14 days.
• Market Close: All shares are bought using the closing price of the stock.

*To change these assumptions, scroll to the bottom and go to RSI Strategy with custom parameters.

Buying Shares (RSI Below 30 - Oversold)

• RSI Below 30: When the RSI of a stock falls below the threshold of 30, it's considered "oversold," indicating the stock's price has significantly decreased.
• Buy Signal: The algorithm generates a "buy signal" when this condition is met, suggesting it's a good time to buy the stock.
• Execution: Once the RSI hits 30, the algorithm buys a share every day as long as the RSI remains under 30.

Selling Shares (RSI Above 65 - Overbought)

• RSI Above 65: When the RSI of a stock rises above the threshold of 65, it's considered "overbought," indicating the stock's price has significantly increased.
• Sell Signal: The algorithm generates a "sell signal" when this condition is met, suggesting it's a good time to sell the stock.
• Execution: When the RSI hits 65, the algorithm sells all open shares of the stock.

The key advantage of this strategy is automation, which can save time and reduce emotional biases. However, it's important to remember that no trading strategy is risk-free. Proper risk management and diversification are essential for successful trading.