Tradestation Automated Swing Trading Strategy for Russell 2000

The strategy trades the Russell 2000 on a daily bar chart. It tries to catch a big move to the upside or the downside.
It has no profit target and can catch some really big profits.
The loss is limited by a strict stop loss which is different for the long and short side.

Automated Swing Trading Strategy for Russell 2000 on Tradestion.

SwingTradingStrategy_Performance_Graph_Russell_2000The advantages of the strategy:

  • Profit Factor around 1.85
  • Average Trade Net Profit around 500 US$
  • 13 winning years in a row without a losing year
  • Average monthly return around 950 US$,
  • Average yearly return around 11,500 US$ per contract
  • Testing Period from 2005 to 2013 (sample size very big)
  • Out of sample data confirm the sample data
  • Including Slippage and Commission of 25 US$ per round torn
  • No compounding, only with one contract

The advantages of the market:

  • The market is a very liquid. Therefore no spread and low slippage.
  • Trade hours from 8 p.m. to 6 p.m. This means, that you have little or no opening gap.
  • Trading an index reduces the risk compared to equities because you trade a market. A good or bad news for a stock can result in large price movements or gaps, because the liquidity dries out or the release of the news is outside the trading time.
  • The Russell 2000 delivers a broad daily trading range. This is very important because only then we have the chance to earn enough money. As a trader we get on average only a fraction of the daily trading range.

 

What is the strategy about?

The strategy trades the Russell 2000 on a daily bar chart. It tries to catch a big move to the upside or the downside. It has no profit target and can catch some really big profits. The loss is limited by a strict stop loss which is different for the long and short side.

The entry is mainly based on the RSI Indicator which is developed by Welles Wilder and well known.

The RSI is a technical momentum indicator that compares the magnitude of recent gains to recent losses in an attempt to determine overbought and oversold conditions of an asset. It is calculated using the following formula:

RSI = 100 – 100/(1 + RS*)

*Where RS = Average of x days’ up closes / Average of x days’ down closes.

The RSI ranges from 0 to 100. An asset is deemed to be overbought once the RSI approaches the 70 level, meaning that it may be getting overvalued and is a good candidate for a pullback. Likewise, if the RSI approaches 30, it is an indication that the asset may be getting oversold and therefore likely to become undervalued.

To improve the strategy it has some additional filters to determine whether to enter a trade or not.

Furthermore the strategy contains some proprietary exit strategies to improve the overall results.

Please note, that the strategy does contain an additional individual and scalable stop loss.

The Performance report contains the default values. These values have been very good in the past and for the out of sample time.

 

The Performance

The Performance table

Performance_Table_STS_RSI_TF

The table shows the good values that were mentioned above.

The Performance Graph – Equity curve line

SwingTradingStrategy_Performance_Graph_Russell_2000

The line goes relative consistent up. That is, what we want to see.

As you can see, all the years the strategy delivers good money. The % Gain is based on a initial account balance of 100,000 US$.

Periodic_Returns_Annual_STS_RSI_TF

The settings tell you, that it also includes slippage and commission:

Settings_STS_RSI_TF

Your Next step

Check it out!

You can try it on the TradeStation AppStore for free!

Please leave a comment on Tradestation® about the strategy.

Thanks a lot.