Today we test Larry Connors‘ R3 strategy and we continue backtesting the trading strategies Larry Connors and his team published in 2009 in a book called High Probability ETF Trading. All the strategies were tested on a basket of 20 liquid ETFs.
We backtest the following trading rules:
- The close must be above the 200-day moving average.
- The 2-day RSI drops three days in a row and the first day's drop is from a reading below 60.
- The 2-day RSI is today below 10.
- If number 1 to 3 is true, then enter at today's close.
- Exit on today's close if the 2-day RSI is above 70.
These are all the rules to Connor's RSI strategy, and the formula is pretty simple. Connors added an aggressive version as well: Whenever the position closes below your entry point, add a second unit.
The equity curve for the S&P 500 looks like the image shown below(SPY, compounded).
If you like to know the code of Connors’ strategy plus the code for all the other free strategies, click here (Connor has also used Amibroker extensively):
https://www.quantifiedstrategies.com/larry-connors-r3-strategy/