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In this article, look at how the RSI(2) performs on Nasdaq/QQQ – a mean reversion trading strategy. At the end of the article, we add another indicator to boost performance (successfully).
When we add a second variable the performance improves: The CAGR is 12.75% (buy and hold is 6.4%), the time spent in the market is 14%, there are 196 trades, 75% winners, the average winner is 2.5%, the average loser is 2.18%, the profit factor is 3.15, max drawdown is 19.5%, and the Sharpe Ratio is 2.85. All in all, we would say these are pretty good numbers.
Please click here to read about mean reversion strategy in QQQ.