Intermarket Trading Strategies

Chart Formations

Systems

Custom Indicators

RELATIVE STRENGTH

SYSTEM PERFORMANCE

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.
I used the relative strength concept to developed two strategies: RS for stocks and RS for Exchange traded funds (ETF).
To develop the RS systems I used a proprietary custom relative strength indicator to select the strongest stocks or ETF relative to the overall market. Testing the RS stock system on the Russell 3000 stocks during the past 3 years an annual return of 38%, a profit factor of 2.17 and a maximum trade drawdown of -$8700. By comparison the IWM ETF produced over the same time period an annual return of 14% and a devastating drawdown of -$38000.
A detailed performance report and the portfolio equity are depicted below.

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.
The basic premise of this system is that a strong growth stock which experiences a small correction will continue an established uptrend. The BTD system is available in 2 versions. For the latest version 4.0 I used a completely different algorithm. You can see a comparison of all systems at the bottom of the page. 

All systems are available for the Metastock, Amibroker and Multichart  platforms.
To purchase the appropriate version for your software just click on the tabs at the left.

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

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