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Al_Gorithm
Posted : Wednesday, September 05, 2018 7:54:45 PM

Gold Customer Gold Customer

Joined: 6/30/2017
Posts: 1,172

Hi Bruce,

Sorry, we've talked about this before, but I don't usually use RSI and I keep forgetting ...

What's the difference between RSI and Wilder's RSI?

Thanks!

StockGuy
Posted : Wednesday, September 05, 2018 10:26:46 PM

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Joined: 9/30/2004
Posts: 9,147

How are RSI and Wilder's RSI different?

In RSI, RS uses a simple average of the up and down closes. In Wilder's RSI, RS uses Wilder's smoothing which is a different form of exponential averaging.

Wilder's smoothing = Previous MA value + (1/n periods * (Close - Previous MA))

http://help.tc2000.com/m/69404/l/747071-rsi-wilder-s-rsi

 

Al_Gorithm
Posted : Thursday, September 06, 2018 7:51:22 AM

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Joined: 6/30/2017
Posts: 1,172

Thanks, StockGuy!

The coffee is still kicking in. I need to go back through my posts ... I just remembered pasting the specs for the RSI that Larry Connors uses and (I think) Bruce responded with which RSI that was.

I'm just setting up a workspace based on some research Larry did, and I want to make sure my RSI matches his, before I invest time (and brain cells) testing his setup.

Thanks again.

StockGuy
Posted : Thursday, September 06, 2018 8:56:49 AM

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Posts: 9,147

ConnorsRSI is different than RSI and Wilder's. Bruce should have more information on how.

Bruce_L
Posted : Thursday, September 06, 2018 9:58:47 AM


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Joined: 10/7/2004
Posts: 64,340

The best that can be done currently for the ConnorsRSI is still probably StockGuy's Thursday, January 26, 2017 9:29:15 AM ET post on page 2 of the ConnorsRSI topic.

You can read through the entire topic to see what the ConnorsRSI is all about. It really is an entirely different beast than the plain RSI or Wilder's RSI.



-Bruce
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Al_Gorithm
Posted : Thursday, September 06, 2018 2:11:23 PM

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Joined: 6/30/2017
Posts: 1,172

Sorry guys, the question wasn't regarding ConnorsRSI, it was about the "other" RSI Larry Connors uses in his research. He doesn't use ConnorsRSI exclusivley.

A few weeks or months ago I swear I posted a thread with some verbiage of the RSI I copied and pasted right out of one of his docs. It wasn't ConnorsRSI, and I wanted to see which if the two TC2000 RSI's it matched up with so I could try and recreate his setup.

Can't look right now; maybe this evening. Bruce, if this rings a bell abd you find it before I do, maybe I can get a bottle of champagne to christen that yacht.

Al_Gorithm
Posted : Thursday, September 06, 2018 2:12:22 PM

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Joined: 6/30/2017
Posts: 1,172

lol. My typing sure sucks after a large lunch.

Bruce_L
Posted : Thursday, September 06, 2018 2:17:42 PM


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Joined: 10/7/2004
Posts: 64,340

RSI vs Wilder's RSI - Smackdown!



-Bruce
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Al_Gorithm
Posted : Thursday, September 06, 2018 8:50:04 PM

Gold Customer Gold Customer

Joined: 6/30/2017
Posts: 1,172

Lol. That's the one!! Catchy title, too.

Bruce, thanks for finding this. First chance I had all day to take a breath. Going to bookmark that post so I don't forget again.

For those interested, here's the setup, directly pasted from a free newsletter I got the other day. As I mentioned, it's free so we're not infringing on any copyright or intellectual property issues. And if you've never read any of Larry's stuff, go to TradingMarkets.com and sign up for the newsletter. Connors is all about objective, quantifiable, data-driven research. No hype or BS.

Enjoy!

 
Dear Connors Research Traders Journal Subscriber: 

 

Since the early 1990's when the VIX was launched, traders and researchers have debated whether or not the VIX predicted the direction on the S&P. We've shown in numerous studies, both on a short-term basis to as long as a 12-month basis that when done correctly it does. 

 

While we were doing new VIX research recently, we came across some interesting test results. The test results show evidence that SPY does a very good job of predicting the direction of VIX.

 

Here are the rules on the test that led to this conclusion: 

1. SPY is above its 200-day moving average 

2. The 4 period RSI of SPY is below 30    

3. Sell VIX (I'll explain how in a minute) 

4. Buy VIX back when the 4-period RSI of SPY is above 50. 

 

     

 As you can see for over the past decade, when the above conditions in SPY have existed, VIX has declined exactly 90% of the time on average in under a week. Having researched and tested VIX since 1995, these results somewhat surprised me. I knew VIX led SPY and the correlation was fairly high. I didn't know that SPY led the value of VIX on such a high percentage of the times and to its extent.  

 

We're going to go further with this research. In the meantime, one of the ways to trade these directional edges is with VIX options. This can be done with ITM puts and with various VIX credit spread positions that can take advantage of both price and time. The VIX options reflect the pricing of the VIX futures. not the VIX index itself so you'll want to take that into account. But, anything that has accurately predicted the direction 90% of the time for over a decade can have trades constructed around it in order to take advantage of those large directional biases.

 

I hope you enjoy and learn from this issue of the Connors Research Traders Journal.

 

 

Larry Connors

Connors Research, LLC. 

 

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