Ultimate Algorithmic Trading System

Welles Wilders RSI System p–code
‘Wilders Simple RSI OB/OS system
utilizing a 3 ATR profit objective
and a 1 ATR stop
If rsi(c,14) < 30 then buy this bar on close
If rsi(c,14) > 70 then sellShort this bar on close
If marketPosition = 1 then
If c > entryPrice + 3* avgTrueRange(10) then sell this
bar on close
if c < entryPrice - 1* avgTrueRange(10) then sell this
bar on close
36
If marketPosition = 1 then
begin
If c < entryPrice - 3* avgTrueRange(10) then buyToCover
this bar on close
if c > entryPrice + 1* avgTrueRange(10) then buyToCover
this bar on close
Simple enough!
STOCHASTICS AND AVERAGES AND RSI! OH, MY!
Now don’t get carried away, because the RSI can call an intermediate top/bottom
but it can also be faked out by a strong trend move. If you simply use it as an
overbought/oversold indicator, you will be disappointed. Table 2.2 shows the
performance of the RSI across a portfolio of futures.
Signals can also be generated using the RSI by looking for divergences, failure
swings, and centerline crossovers. Wilder suggests that divergence between an
asset’s price movement and the RSI oscillator can signal a potential reversal. This
divergence occurs when the RSI continues in the opposite direction of the underlying
asset: RSI trends down while price trends upward or RSI trends up while price
trends down.
A bullish divergence forms when the underlying asset makes a lower low and
RSI makes a higher low. RSI diverges from the bearish price action in that it shows
strengthening momentum, indicating a potential upward reversal in price. A bearish
divergence forms when the underlying asset makes a higher high and RSI forms a
lower high. RSI diverges from the bullish price action in that it shows weakening
momentum, indicating a potential downward reversal in price. As with overbought
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