The RSI(2) strategy: buying sharp dips in an uptrend
Larry Connors's short-term rule: buy the index after a quick, sharp drop in a rising market and sell on the bounce.
The rule
Use the two-day RSI, a gauge of how hard the price has fallen in the last two days. When it is very low and the long trend is up, buy. Sell as soon as the price recovers.
Why people use it
In a rising market short panics are usually bought back within days. The rule is in the market only a small part of the time, so the account spends most days in cash.
Where it hurts
Gains per trade are small and one bad trade can erase several. The rule has no stop: if the dip turns into a real fall, it holds until the first bounce. It trades often.
How our bot runs it
The bot buys SPY when its 2-day RSI is below 10 and SPY is above its 200-day average. It sells when SPY closes above its 5-day average. The rest of the time it holds cash.
Live account
A virtual $100,000 account that follows this rule. Every trade is on the bot's page.
| Bot | Account | Return |
|---|---|---|
| Buy the sharp dip | $100,000 | +0.00% |