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October 2006 Stocks and Commodities Traders Tips


Relative Spread Strength As A Long-Term Cyclic Tool

Original article by Ian Copsey
AIQ Code by Richard Denning

The AIQ code for Ian Copsey’s Relative Spread Strength Indicator (RSS) together with the code for the Rapid RSI is in the EDS file below. I devised a simple trading system to test the RSS indicator:

  1. Enter a long position when the indicator is less than 30.
  2. Exit the long position when the indicator is greater than 70 or five days.
  3. Enter a short position when the indicator is greater than 95.
  4. Exit the short position when the indicator is less than 30 or five days.

I used the NASDAQ 100 list of stocks to run the test from 10/11/02 to 8/11/06 on a daily end-of-day basis. The following figure shows the results of the long and short sale back tests. Initially I tried the default parameters for over-bought and over-sold of 70 / 30. The 30 level showed profitable results but the 70 level for the short sales did not. In order to generate a profitable set of trades on the short side, I had to increase the over-bought level to 95.

EDS Code for Relative Spread Strength
RSS.EDS

Click here to see the TRADE-BY-TRADE results.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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