PlanB Quant Investing 101 v2

The PlanB Quant Investing 101 indicator is a momentum-based strategy tool designed to identify market entry and exit points by tracking Relative Strength Index (RSI) extremes and subsequent reversals.

Usage

The strategy is designed to capture cyclical market movements by identifying periods of exhaustion and recovery. Users can monitor the signals generated on the chart to determine potential trend shifts based on historical RSI thresholds.

• Buy Signal: Occurs when the RSI has been below a specific threshold (default 50) within the last six months and then experiences a specified bounce (default +2%) from its recent low.
• Sell Signal: Occurs when the RSI has been above a specific threshold (default 90) within the last six months and then drops below a secondary level (default 65).

Details

This tool is an implementation of the quantitative strategy outlined in the "Quant Investing 101" article by PlanB. The logic focuses on the premise that significant price peaks are often preceded by extremely high RSI levels, while bottoms are formed after periods of RSI weakness followed by a confirmed momentum recovery. By looking at a six-month lookback window for RSI extremes, the script filters for significant cyclical shifts rather than minor intraday fluctuations.

Settings

• Sell Level RSI: The threshold the RSI must exceed within the lookback period to prime a sell signal (Default: 90).
• Drop Level: The RSI level the current value must drop below to trigger a sell signal after the Sell Level has been breached (Default: 65).
• Buy Level RSI: The threshold the RSI must fall below within the lookback period to prime a buy signal (Default: 50).
• Bounce Amount: The percentage amount the RSI must rise from its recent low to trigger a buy signal (Default: 2).

FAQ

How do I use the PlanB Quant Investing 101 signals?

The signals are intended for long-term cyclical analysis. A "Buy Signal" suggests a recovery from a low-momentum state, while a "Sell Signal" suggests a reversal from an overextended high-momentum state.

What timeframe is best for this indicator?

As the strategy is based on "Quant Investing 101" principles often applied to monthly or weekly data, it is typically most effective on higher timeframes to capture macro cycles.

How can I access PlanB Quant Investing 101?

You can get access on the LuxAlgo Library for charting platforms like TradingView, MetaTrader (MT4/MT5), and NinjaTrader for free.