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Replying to message 30236
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Posts: 210

Joined: 4/2/2006
Location: South Africa

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Subject : Ehlers Rocket RSI indicator S&C May 2018
Posted : 1/11/2019 2:22 AM
Post #30236

HI all,

Was testing some RSI smoothing and came across this one in S&C which I (re)coded for OT. Way I see it so far - this one is some ways off getting to Alpha Centauri, but maybe I'm missing some optimisation and/or entry filters to create an effective strategy. Eyeballing a couple charts to me indicates that its very indicator period specific per symbol rather than a general period. Maybe someone could throw OT2019 optimation at it to see what improves as a better period #Param than its default.

"In RocketRSI—A Solid Propellant For Your Rocket Science Trading - a May 2018 S&C article, author John Ehlers introduces a new take on the classic RSI indicator originally developed by J. Welles Wilder. Ehlers begins by introducing a new version of the RSI based on a simple accumulation of up and down closes rather than averages. To this he applies a Fisher transform. He tells us that the resultant output is statistically significant spikes that indicate cyclic turning points with precision."

In Easylanguage code the suggested trading system is defined as:
if RocketRSI crosses below -OBOSLevel then
Buy PositionSize shares next bar at Market
else if RocketRSI crosses above OBOSLevel then
SellShort PositionSize shares next bar at Market ;

I'm tending to side with the WealthLab comments "From our brief encounter with this new indicator, it seems that its applicability greatly depends on finding the dominant cycle period. The “$64,000 question” is whether this cycle actually exists in the data, and how stable it is over time."
Also an interesting observation they picked up was Its only exit rule is to “exit after fixed bars” (where fixed bars is a parameter).

Qnatacuala discovered: Note we used “crosses below 2.00” for the exit condition, rather than “crosses above 2.00.” This lets the winning positions ride further, and resulted in a better overall return in our backtesting.
Thus their system modification is
Entry: Buy at market open
Condition: Indicator crosses value (RocketRSI crosses below -2.00)
Exit: Sell at market open
Condition: Indicator crosses value (RocketRSI crosses below 2.00)

But since we're using OT lets see what optimisation can do... Also it looks like we'll need to figure out the optimal length of a n-bar stop as well.

Have fun,

Attached file : RocketRSI_Omnitrader_Example1.png (116KB - 71 downloads)
Attached file : RocketRSI_Omnitrader_Example2.png (80KB - 76 downloads)
Attached file : EhlersRocketRSI.txt (2KB - 61 downloads)

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