Larry Connors RSI-2 Strategy Diagram
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Larry Connors' RSI-2 buys panic and sells euphoria, but only on the side the slower average allows: a two-period RSI marks the extreme, a 50-period SMA decides the direction, and a 5-period SMA times the exit. The diagram works on five-minute candles to match the packaged intraday history.
Strategy Overview
- RSI with a length of two reacts to a single candle, so a reading under 6 or over 95 marks a short burst of selling or buying rather than a lasting condition.
- The slow SMA is a direction filter: longs are taken only above it and shorts only below it, which keeps the diagram on the side of the larger move.
- A position is opened only from flat, and the fast SMA closes it as soon as price steps back over that average, so trades usually live one or two candles.
- A protection block adds a percentage stop and target, keeping the distances portable across instruments.
Entry and Exit Rules
- Long entry: RSI(2) is below the long entry level, the close is above the slow SMA and the position is flat. The order buys the shared volume at market and opens the long.
- Short entry: RSI(2) is above the short entry level, the close is below the slow SMA and the position is flat. The order sells the shared volume at market and opens the short.
- Exit: A long is closed when the close returns above the fast SMA and a short when the close falls below it; the 1% stop or the 2% target closes the position earlier if price reaches one of them first.
Parameters
| Parameter | Default | Description |
|---|---|---|
| RSI Length | 2 | Averaging length of the Relative Strength Index; two candles by design. |
| Fast SMA Length | 5 | Length of the fast SMA that times the exit. |
| Slow SMA Length | 50 | Length of the slow SMA that decides which side may be traded. |
| RSI Long Entry | 6 | RSI level under which a long is allowed. |
| RSI Short Entry | 95 | RSI level above which a short is allowed. |
| Take Profit, % | 2 | Take profit distance from the entry price, in percent. |
| Stop Loss, % | 1 | Stop loss distance from the entry price, in percent. |
| Volume | 1 | Order volume, in lots. |
| Candles | 00:05:00 | Candle time frame the whole diagram works on. |
Diagram Details
- The candle block feeds the RSI, both moving averages and a converter that reads the close price of every finished candle.
- Six comparison blocks carry the rules: two put RSI against its entry levels, two put the close against the slow SMA and two put the close against the fast SMA.
- Both entry ANDs also take the flat-position check, and the entry blocks are set to open a position, so a signal never adds to a trade that is already running.
- The exit blocks are set to close a position, so each of them acts only when a position of the opposite side exists, and every own trade is routed into the protection block so its stop and target follow the real position.
Usage
Import the .json file into Designer, run it in the backtester on historical data, then adjust the parameters or the blocks themselves to fit your instrument before trading it live.