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Triple RMI Strategy

Lets investigate a trading strategy. In this post we’ll cover a strategy called RMI. We will explain the logic and later we’ll include examples and cover some back testing.

What is RMI

The Relative Momentum Index (RMI) — a moving average-based overbought/oversold indicator that can remain overbought or oversold for much longer periods than its fellow members of the oscillator family — is a factor we often consider when forming trade recommendations. Unlike the more commonly observed Relative Strength Index (RSI), which measures short-term instances in which stocks are overbought (or oversold) that might cause a temporary interruption in the prevailing trend, a high RMI level can often be an indicator of a positive price trend that can persist for many months.

 

As with the RSI, the value of the RMI oscillates between zero and 100. The calculations for the two indicators are essentially variations on a theme, with the security’s average gains stacked up against its average losses to determine the general price trend.

The formula to calculate RSI is based on the security’s average one-day gain over the past X days divided by the average one-day loss over this same number of days (with 14 being a very popular value for X). Generally speaking, RSI values above 70 are viewed as an “overbought” indicator, wherein the stock is predicted to retrace some recent gains, while RSI values below 30 are considered “oversold,” with the shares then expected to move off their lows.

The key differences in the RMI calculation as compared to its RSI counterpart are the time frame during which average gains and losses are measured, as well as the overall lookback period. Rather than comparing one-day gains and losses, a typical RMI calculation is based on the stock’s average five-day gains over the past X days divided by the average five-day losses over this same period. And whereas 14 is the most popular “X” value for RSI, the RMI most frequently uses 20 for this variable.

https://www.schaeffersresearch.com/content/bgs/2016/03/07/tricks-to-trading-with-the-relative-momentum-index

 

Currently Investing on a strategy that runs RMI on 3 different frequencies:

Fast RMI needs to resemble the shortest (minute) frequency of the market. (15-40 min)

Medium RMI needs to approx (hours) frequency of the market. (240 – 480 min)

Slow RMI is for the Daylength Frequency ( 800 – 2000 – 3000 ?)

Backtesting is always based on few trades, So measure, and keep frequency in mind.
Its an ambition , to make a script that analyses this, and self adjusts, sets itself to the rythm of the market.

Currently the logic of the script is :
F = 1 and M = 1 and S = 1 —> Entry
F = 1 and M = 1 and better entry than before ? —> Entry

The aggressive version uses S as a guideline to determine Condition requirements :

condition requirement S > HI | S > 0 | S < 0 | S < HI
LONG F * | F | FM | FMS
SHORT FMS | FM | F | F *

* on out

 

Link to TradingView Strategy

https://www.tradingview.com/script/H0TCNaXU-CMYK-RMI-TRIPLE/

 

Credits to MVPMC for creating the amazing script