Edition

IFTA JOURNAL
2017 EDITION
The RSI (14) model generated 54 sets of buy/sell trades for
the May 1942 to January 1966 time period. The model’s batting
average for success against buy and hold was 22.64%, with
an average trade return at 3.73% compared to buy and hold
at 5.71%. Standard deviation for the model based on trading
data was modestly lower at 10.31% compared to 12.87% for buy
and hold. Maximum drawdown from the trades for the model
was at -7.12% compared to buy and hold at -19.29%, while the
maximum return for the model was 42.70% compared to 51.04%
for buy and hold. The model was long 56% of the time during the
1942–1966 time period (Table 14).
(i.e., one buy and one sell), the RSI (14) model underperformed
buy and hold by 1176.07%. Over the 1978 to 2000 time period,
an initial investment of $1 million generated $3,230,129 for the
RSI (14) model, $2,118,926 adjusted for transaction costs, and
$15,517,369 for buy and hold.
Figure 17. The RSI(14) model output with transaction
costs compared to buy and hold for the period of
November 1978 to January 2000
Table 14. Trading activity for the strategy during the
1942–1966 time period
Relevant examples of the RSI (14) model’s underperformance
to buy and hold during the November 1978 to January 2000 time
period can be seen in the combined yearly returns statistics in
Table 15. The average yearly return for the model was 7.5% less
than buy and hold. The best performing year for the model was
30.44% compared to buy and hold, which was 34.11%. The model
did provide additional risk protection in down markets with its
maximum drawdown value at -5.62% compared to -9.73% for
buy and hold. The standard deviation for the model was lower
than buy and hold by 3.03% (Table 15).
Table 15. Performance of the strategy during the 1978–
2000 time period
RSI (14) Model Backtest Results: Secular Bull
Market From November 1978 to January 2000
Based on the test results, the RSI (14) model underperformed
buy and hold by 1141.67% from November 1978 to January 2000
(Figure 17). Including transaction costs for 56 roundtrip trades
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