Relative Strength Index (RSI)

Optimization Output Example

Example output from running the optimization code above on a year of S&P data.

Best RSI parameters found:
Period: 6
Model: ExponentialMovingAverage
Oversold threshold: 33
Overbought threshold: 72
Rating: 0.3061068702290076
Best RSI values: [46.05572331735997, 79.50202806065019, 66.12192049272042, ...]

Analysis

The optimized RSI has considerably more buy/sell signals compared to the default RSI parameters. In order to determine whether these additional signals are beneficial, a trading simulation was conducted using both the optimized and default RSI values.

They both started with an intial capital of $1000 and invested 20% of the remaining capital on each trade. Each trade was executed when the RSI crossed the overbought or oversold thresholds, with long positions opened when the RSI dipped below the oversold level and closed when it rose above the overbought level, and short positions opened when the RSI rose above the overbought level and closed when it fell below the oversold level.

The results have been put into the tables below. The optimized RSI strategy yielded a profit of $25.42, wita a $196.28 open position. This outperformed the default RSI strategy which resulted in a loss of $40.01 (with a $180.81 open position).

Optimized Trading Simulation

Default Trading Simulation

Trading Simulation Code

For those who want to run their own simulation to compare results.

fn simulate_trading(best_indicator: &[f64], best_period: usize, close: &[f64], best_oversold: usize, best_overbought: usize) {
    // --- NEW TRADING SIMULATION CODE ---

    println!("
--- Trading Simulation ---");

    let initial_capital = 1000.0;
    let mut capital = initial_capital;
    let investment_pct = 0.20;

    struct Position {
        entry_price: f64,
        shares: f64,
    }

    let mut open_long: Option<Position> = None;
    let mut open_short: Option<Position> = None;

    // Print table header
    println!("{:<5} | {:<19} | {:<10} | {:<10} | {:<12} | {:<15} | {:<10}",
             "Day", "Event", "RSI", "Price", "Shares", "Capital", "P/L");
    println!("{}", "-".repeat(95));


    for i in 0..best_indicator.len() {
        let price_index = i + best_period;
        if price_index >= close.len() { break; }

        let rsi_val = best_indicator[i];
        let current_price = close[price_index];
        let day = price_index;

        // --- Handle Long Position ---
        if let Some(long_pos) = open_long.take() {
            if rsi_val > best_overbought as f64 {
                let sale_value = long_pos.shares * current_price;
                let profit = sale_value - (long_pos.shares * long_pos.entry_price);
                capital += sale_value;
                println!("{:<5} | {:<19} | {:<10.2} | ${:<9.2} | {:<12.4} | ${:<14.2} | ${:<9.2}",
                         day, "Sell (Close Long)", rsi_val, current_price, long_pos.shares, capital, profit);
            } else {
                open_long = Some(long_pos); // Put it back if not selling
            }
        } else if rsi_val < best_oversold as f64 && open_short.is_none() { // Don't buy if short is open
            let investment = capital * investment_pct;
            let shares_bought = investment / current_price;
            open_long = Some(Position { entry_price: current_price, shares: shares_bought });
            capital -= investment;
            println!("{:<5} | {:<19} | {:<10.2} | ${:<9.2} | {:<12.4} | ${:<14.2} | {}",
                     day, "Buy (Open Long)", rsi_val, current_price, shares_bought, capital, "-");
        }

        // --- Handle Short Position ---
        if let Some(short_pos) = open_short.take() {
            if rsi_val < best_oversold as f64 {
                let cost_to_cover = short_pos.shares * current_price;
                let profit = (short_pos.shares * short_pos.entry_price) - cost_to_cover;
                capital += profit; // Add profit to capital
                println!("{:<5} | {:<19} | {:<10.2} | ${:<9.2} | {:<12.4} | ${:<14.2} | ${:<9.2}",
                         day, "Cover (Close Short)", rsi_val, current_price, short_pos.shares, capital, profit);
            } else {
                open_short = Some(short_pos); // Put it back if not covering
            }
        } else if rsi_val > best_overbought as f64 && open_long.is_none() { // Don't short if long is open
            let short_value = capital * investment_pct;
            let shares_shorted = short_value / current_price;
            open_short = Some(Position { entry_price: current_price, shares: shares_shorted });
            // Capital doesn't change when opening a short, it's held as collateral
            println!("{:<5} | {:<19} | {:<10.2} | ${:<9.2} | {:<12.4} | ${:<14.2} | {}",
                     day, "Short (Open Short)", rsi_val, current_price, shares_shorted, capital, "-");
        }
    }

    println!("
--- Final Results ---");
    if let Some(pos) = open_long {
        println!("Simulation ended with an OPEN LONG position:");
        println!("  - Shares: {:.4}", pos.shares);
        println!("  - Entry Price: ${:.2}", pos.entry_price);
        let last_price = close.last().unwrap_or(&0.0);
        let current_value = pos.shares * last_price;
        capital += current_value;
        println!("  - Position value at last price (${:.2}): ${:.2}", last_price, current_value);
    }
    if let Some(pos) = open_short {
        println!("Simulation ended with an OPEN SHORT position:");
        println!("  - Shares: {:.4}", pos.shares);
        println!("  - Entry Price: ${:.2}", pos.entry_price);
        let last_price = close.last().unwrap_or(&0.0);
        let cost_to_cover = pos.shares * last_price;
        let pnl = (pos.shares * pos.entry_price) - cost_to_cover;
        capital += pnl;
        println!("  - Unrealized P/L at last price (${:.2}): ${:.2}", last_price, pnl);
    }

    let final_pnl = capital - initial_capital;
    println!("
Initial Capital: ${:.2}", initial_capital);
    println!("Final Capital:   ${:.2}", capital);
    println!("Total P/L:       ${:.2}", final_pnl);

}

fn main() {
    // Fetch data and perform optimization as shown in the optimization code above
    simulate_trading(&best_rsis, best_period, &close, best_oversold, best_overbought);
    
    // Compare with default parameters
    let default_rsis = relative_strength_index(&close, ConstantModelType::SmoothedMovingAverage, 14);
    simulate_trading(&default_rsis, 14, &close, 30, 70);
}