Intermarket Trading Strategies
The relative strength (RS) technique is a popular and useful tool for comparing one investment against the overall market. But few individuals ever manage to use the technique effectively, because they fail to incorporate RS into a comprehensive trading strategy.
BUY THE DIPS (BTD)
This system is similar to the Relative Strength (RS) for stocks. The difference between the two systems is that the RS system looks for stocks that outperform the market whereas the BTD looks for strong stocks in an uptrend and triggers a buy signal during a temporary correction or dip.
All systems are available for the Metastock, Amibroker and Multichart platforms.
This is how the system performed on the Russell 3000 stocks during the 3 year period from 3/1/12012 to 3/1/2015 (US date format). To test the systems I used Amibroker Pro with the following parameters:
Initial trading capital = $200,000
Capital per trade= $20,000 (Equal dollar units) and no margin.
Max. Open positions: 15
Commissions: $0.01 per share
Volume filter: Limit position to 10% of trading volume
Test date: March 1st,2015
Entry & Exit next day at the open.
And here is how the systems performed on more recent data when tested on the RUSSELL1000 and SP-500 component stocks