In this article I explain the RSI technical analysis indicator. I then test the indicator on historical stock market data in order to analyse its effectiveness.
In the 2011 academic paper “Another look at trading costs and short-term reversal profits“, the authors (De Groot et al) speculate that a simple mean reversion strategy in US stocks is able to significantly outperform the market. The strategy seems to have promise, especially when used in a rotational setting with smart allocation.
A number of students on my trend following course have mentioned a couple of different trailing stop ideas, so I thought I would put them to the test and see how they perform. Following is an exploration into two different methods; an idea from Nick Radge and a chandelier stop from Charles Le Beau.