Larry Connors’ R3 Strategy (It Still Works) | Trading Strategies Explained

Today we test Larry Connors‘ R3 strategy and we continue backtesting the trading strategies Larry Connors and his team published in 2009 in a book called High Probability ETF Trading. All the strategies were tested on a basket of 20 liquid ETFs. The previous articles can be found on our page containing many different quantified trading strategies:

12 years have passed since the book was published and it could be interesting to know if Larry Connors’ trading strategies are still performing well.

Today we look at Larry Connors RSI trading strategy in chapter 4: The R3 Strategy (Larry Connors RSI 2):

The trading rules of R3

The trading rules are pretty simple:

Trading Rules

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  1. The close must be above the 200-day moving average.
  2. The 2-day RSI drops three days in a row and the first day’s drop is from a reading below 60.
  3. The 2-day RSI is today below 10.
  4. If number 1 to 3 is true, then enter at today’s close.
  5. Exit on today’s close if the 2-day RSI is above 70.

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These are all the rules to Connors RSI strategy, and the formula is