RSI(2) On QQQ (Nasdaq)

Last Updated on May 15, 2021 by Oddmund Groette

Back in 2016, I published an article on using short-term RSI (relative strength index) on SPY.

In this article, we add another indicator (the IBS) and test it on Nasdaq/QQQ.

What is a good RSI for Nasdaq/QQQ?

RSI is a mean-reversion indicator and thus the strategy works best with a low reading on the RSI.

What is a low reading? In general, that is reading below 30. The lower the number of days used in the calculation, the more sensitive and volatile the RSI is.

In this article, we use only two days for the RSI. This means a low reading on the RSI is required

What is a good reading of the IBS for Nasdaq/QQQ?

Just like the RSI, the IBS is a mean-revertive indicator. Thus, we need to have a low reading, preferably below 0.3 or lower.

Combing RSI and IBS on Nasdaq/QQQ

RSI and IBS work very well together.

How well? As you can see from the equity chart below, it works pretty well:

  1. RSI(2) must be lower than 10.
  2. IBS must be lower than 0.2.
  3. If both 1 and 2 are true, then enter at the close.
  4. Exit at the close when today’s close is higher than yesterday’s high.
RSI(2) works even better on QQQ than on SPY.

The numbers look like this:

Buy and hold returns 7.87%, while the strategy returns 13.79%, a pretty big difference. Even better, the strategy has performed very well in four bear markets (2000-2002, 2008/09, 2018 and Covid-19 in March 2020).

If you find this article useful, you might want to have a look at our landing pages for a lot of other trading strategies and edges:

 

Disclosure: We are not financial advisors. Please do your own due diligence and investment research or consult a financial professional. All articles are our opinions – they are not suggestions to buy or sell any securities.