Does the RSI Trading Strategy work? If yes, what is the win rate of the RSI Indicator? Well if you have been following the Trading Rush Channel for a while, you already know if the RSI Strategy works or not, that’s because we have tested it 100 times to find its win rate. But similar to the RSI indicator, there is a new and interesting indicator called the Connors RSI indicator. Does this Connors RSI indicator work? If yes, will it make you more money than the normal RSI trading strategy? In this video, I’m going to test the Connors RSI trading strategy 100 times to find it’s win rate. If you are watching the Trading Rush Channel for the first time, subscribe to the channel, because we test and have tested many different Trading Strategies 100 times to find their win rates. After all, you don’t want to risk your money on a Trading Strategy that doesn’t even work.
The original RSI indicator was developed by J. Welles Wilder, Connors RSI on the other hand is made by Larry Connors, but heavily relies on the work of J. Welles Wilder. On Trading View, this is how the Connors RSI indicator looks like. Unlike the RSI indicator, the Connors RSI has three components called the RSI, Up Down Length, and the Rate of Change. You can say that the Connors RSI is more of a tool, that is based on the RSI indicator. If it is a good thing or not, we will find that after we test it 100 times.
Just like the RSI indicator, the Connors RSI also ranges from 0 to 100, but in this indicator, the RSI line is called the CRSI line. Now the original RSI indicator came with the default over bought and over sold levels of 70 and 30 respectively. On Trading View, the Connors RSI also comes with the default levels of 70 and 30, but the creator of the Indicator Larry Connors, doesn’t recommend using those levels. Instead, Connors recommends using the 90 and 10 as the over bought and over sold levels. Furthermore, Conner also mentions that the higher the CRSI value goes above the 90 level, the higher is the chance of making a big profit. Similarly, the lower the CRSI value goes below 10, the higher is the probability of price making a big move in the entry direction.
Here’s how the Connors RSI Trading Strategy goes.
If you have watched other Trading strategy videos on the Trading Rush Channel, you know I always recommend using the 200 period moving average to find the long term trend. Well, guess what. Larry Connors also recommends using the 200 period moving average with the Connors RSI trading strategy. So in this video, we don’t have to modify the CRSI Trading Strategy at all, because it already uses the false signal filters just like we do on this channel.
So the buy signal, is when the price and the candle is completely above the 200 period moving average, and the CRSI is coming out of the over sold zone, which is 10 and below.
Similarly, the sell signal is when the price and the candle is completely below the 200 period moving average, and the CRSI is coming out of the over bought zone, which is 90 and above.
Now I have seen many people recommending not using a stoploss with this strategy. But if you have watched my video where I took 100 trades with stoploss and without stoploss, you know not using a stoploss is a very bad idea, especially if you are a new trader. If you haven’t watched that 100 trades Stoploss vs No Stoploss video, go watch now to see what can happen to your account balance if you don’t use a stoploss in trading.
Since the Connors RSI gives many signals in a shorter amount of time, while backtesting, In the long setup, I have set the stoploss slightly below the pullback. Similarly, in a short setup, I have set the stoploss slightly above the pullback.
With the default CRSI settings, I have tested the Connors RSI Trading Strategy 100 times, and here’s what happened.
Number 1. Unlike the original Relative strength index, the Connors Relative strength index gives a lot of entry signals. Since it already uses a 200 period moving average to filter false signals, some losing trades were avoided. The Connors RSI trading strategy was tested 100 times with the help of the Trading Rush App. You should test your Trading Strategy with the Official Trading Rush App as well. It saves a lot of time while backtesting a strategy because it calculates the profit graph, the win rate, and other useful data in just one click. Download it now from the Play Store or using the link in the description.
As you can see in the Trading Rush App, the profit graph goes up at the start because the entry signals given by the Connors RSI strategy were working. Price was reversing after reaching the over bought and over sold zones.
Number 2. While backtesting, the entry signals that were right, sometimes had a very high profit potential. If you are a trader that trails the stoploss to catch the big move, you can make a big profit when the Connors RSI gives a correct entry signal. But as you already know, trailing a stoploss requires a good amount of patience and emotional discipline. If you are a new trader, it is a good idea to stick to the fixed profit and stoploss orders to take advantage of the consistent profits.
Number 3. Since I have used the 1.5 to 1 reward risk ratio while testing other strategies 100 times, I have used the same reward to risk ratio here as well. But while backtesting, I noticed that the Connors RSI was giving entry signals that were too early. When the entry signal was right, the 1.5 times profit target was easily achieved because the stoploss was very small. But because of the way to early entry signals, the stoploss was easily hit most of the time. The Connors RSI trading strategy simply gives a lot of entry signals that are way to early than the actual price reversal.
So, after testing the Connors RSI trading strategy 100 times, I got the win rate of approximately 39 percent. Which is to be honest, is one of the worst win rate we have gotten in the strategies tested 100 times series. If you look at the profit graph in the Trading Rush App, you will notice that the profit line doesn’t appear to be going in one way like some of the other strategies we have seen on this channel. It looks more like the trades were taken randomly. For example, if we compare it with the Profit graph of the simple moving average crossover strategy, you can tell that the strategies like the SMA crossover gives way better and consistent profit than this. In the backtest, I lost 7 trades in a row, and won 4 in a row. The starting balance was 10000, and at one point the account balance was up by 850, but then everything came down as I took more trades. At the end, the account in the Trading Rush App was down by 250. The original RSI trading strategy that we tested 100 times, had way better win rate than this. So it is a good idea to stick with the regular RSI trading strategy, instead of risking your money on this thing.
That’s all. Now you know more about the Connors RSI trading strategy. Like the video if you liked it. Subscribe and ring that notification bell to see more trading strategies tested 100 times. After all, you don’t want to use a strategy that does not work at all. Download the Official Trading Rush App using the link in the description, and thanks to all the amazing Patrons who support the Trading Rush Channel on Patreon. You make these videos possible.
