Connors 2RSI

Strategy Intent

Trading Criteria Details
Market Suitability Bear or sideways market when volatility is low
Difficulty Advanced
Strategy Type Pullback Trading
Take Profit
DCA
Positive DCA
Pending Orders
Trailing Stop Loss
Published
Demo Server

Note:

  1. Click the cloud icon to view the demo server for this strategy;
  2. Note if the cloud icon is showing in red it means the demo server is not available right now;

Strategy Overview

  • This strategy does fewer trades but aims for better quality trades.
  • This strategy implements the Connors 2 Period RSI Pullback strategy.
  • Pullback trading is one of the most popular forms of trading amongst traders. It has been used in the Forex, Options, Equity and Commodities markets for many years by both Day Traders and Swing Traders alike.
  • A pullback, also referred to as a retracement or consolidation, is a small temporary fall in a trading pairs price from its peak in a prevailing upward trend.
  • This strategy is based on 20 years of backtesting data done in the financial markets by Laurence A. Connors in his book titled How Markets Work - a quantitive guide to Stock Market behaviour. In his subsequent books entitled the Connors Research Trading Strategy Series he describes the 2 Period RSI Pullback strategy. Details on their research can be found here.

Entry Criteria

  • The strategy consists of 9 basic rules, 8 of which are to do with the entry criteria, some of which we cannot directly reproduce, so we have had to adapt these rules to suit ProfitTrailer's current capabilities and for intraday trading as follows:
    • Rule 1. The trading pair must be in a long term uptrend according to the 200 day moving average;
    • Rule 2. The trading pair must have high volume;
    • Rule 3. The trading pair must have good volatility according to the 100 day moving average;
    • Rule 4. The trading pair must be in a strong uptrend;
    • Rule 5. The trading pair is currently down in price;
    • Rule 6. The trading pairs price must be down at least a defined percentage;
    • Rule 7. The 2 period RSI must be below 20;
    • Rule 8. Buy on a lower intraday price opportunity;
  • You will need to purchase Connor's books to see the original rules if you want to compare these.
  • It uses trailing buy to ensure we buy as close to the bottom of the trade cycle as possible.

Trade Management

  • The strategy applies the 2% and 10% rules of trading.
  • Position size is limited to 2% of risk capital per trade.
  • Only 5 trading pairs are active at any time to ensure no more than 10% of total risk capital is employed in trading at any time.
  • A trailing stop loss is employed rather than a fixed stop loss.
  • Take profit is employed to prevent loss of profits.

Exit Criteria

  • The strategy consists of 9 basic rules, the 9th of which is to do with the exit criteria:
    • Rule 9. Exit the trade when the 2 period RSI is over 70.
  • This strategy makes use of the same Pending Orders and Positive DCA that the Spanish Cross strategy introduced so please refer to the Spanish Cross documentation here for how the 3 stage closed loop process works.
  • Whilst this new strategy uses the same 3 stage closed loop process, it’s triggers for entry and exit to these stages are different to those of the Spanish Cross strategy.
  • Read the strategy notes below to understand how Pending Orders are now being used to add to your position sizes.

Strategy Tips

  • This is an advanced strategy best suited to a Bear or oscillating / sideways market but will work in all market conditions.
  • The key to this strategy is to ensure you do not overextend yourself by getting your max trading pairs and initial cost right to suit your trading budget.
  • This strategy will work slowly but diligently to pick good quality trading pairs based on 8 separate rules, so patience is needed to let the bot do this in a Bear or oscillating/sideways market.
  • This strategy relies on having working capital so bigger but fewer, better quality trades.
  • Why is the Golden Cross (50/200) indicator using the 5 minute chart timeframe?
    • The short answer: The Connors 2RSI strategy looks to take advantage of Intraday fear by stalking pullbacks.
    • The long answer: Day traders commonly use smaller time periods like the 5 minute and 15 minute charts to *stalk* intra-day golden cross breakouts as entries to trades. Stalking is when you use a longer term trade setup and look at that same trade setup on a shorter time frame to pick up quick moves (trade entries / exits), in this case pullbacks (a result of Intraday Fear) which can happen quite quickly. Part of the reason they use smaller timeframes is they are trying to avoid falling knives (large pullbacks that happen extremely quickly). The Golden Cross (50/200) indicator is the most widely used indicator amongst hedge funds / institutional traders, in fact if you look at the finance news on TV most likely they will be showing a daily chart with the golden cross showing. It is the best long term trend indicator you can use.
  • The Connors 2RSI Day Trading strategy is a real-world trading strategy in use today by many traders. It is based on the rules in Larry Connors book and is my interpretation of his 9 rules and ProfitTrailers capabilities at the time it was created. We are not able to completely replicate his strategy at present but we have a working strategy that is as close as possible right now.
  • As with all the example trading strategies we provide these are just a starting point to get you going and show what is possible with ProfitTrailer. You are free to change the timing of the indicators to suit your trading style.
  • Pending Order triggers are set negative to allow trading pairs to return to Pairs Log earlier when that trading pair is bought again. This provides capital to the bot to take bigger trades. So don't overextend on your initial purchase price. Start small and see the effect the pending log has on adding to your position sizes.
  • Use the DCA calculator we provide to work these values out covering at least 4 levels of DCA for all your pairs. Once you have those values enter them into this strategy. The DCA calculator also ensures you have a 50/50 split on your trading budget to ensure you have sufficient budget for the sell side of this strategy.


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  • connorsrsi.txt
  • Last modified: 14 days ago
  • by cryptocoyn