The Measure of Potential Profitability in Intraday Trading Utilizing the Relative Strength Index (RSI) with Various Simple Moving Averages (SMA) on the S&P 500.

School Name

Spring Valley High School

Grade Level

11th Grade

Presentation Topic

Mathematics

Presentation Type

Non-Mentored

Abstract

A popular belief among traders is that of the Efficient Market Hypothesis (EMH), which states that a stock price will fully reflect all available information instantaneously (Metghalchi, 2016). This study investigates this theory and the potential profitability regarding an intraday technical analysis strategy utilizing the relative strength index (RSI) and various simple moving averages (SMA). This strategy was used on the S&P 500, and various SMA lengths were utilized to determine which SMA length provided the most profitable strategy. All trades from the various four strategies started on August 22nd, 2023, and continued until 30 trades were completed for each strategy. These trades were conducted using buy and sell signals, exemplified in Figure 1. After all 30 trades had been completed, the SMA 20 group was found to be the least profitable, with a total profit of -$1.83. The SMA 100 group was the most profitable with $24.13. The SMA 60 group profited $23.74, and the SMA 140 group profited $22.04. A one-way Analysis of Variance (ANOVA) test was conducted on the various groups. It was found that the difference between the four group's trades was not statistically significant. The p-value was less than the alpha value of 0.05, failing to reject the null hypothesis of there being no significant difference between the various strategies' profitability. The four groups were compared to control buy-and-hold strategies and it was concluded that the shorter-length SMA strategies (20 and 60) were effective in downward trending conditions on the S&P 500. The profitability of the longer-length SMA strategies (100 and 140) was found to be equal to or worse than the buy-and-hold strategies in upward trending conditions on the S&P 500. There are many specific ways of modifying the strategy that could be taken and experimented with, such as the period length of the price chart, the type of market, the type of SMA, and the specific settings regarding the RSI and SMA.

Location

RITA 367

Start Date

3-23-2024 11:15 AM

Presentation Format

Oral and Written

Group Project

No

COinS
 
Mar 23rd, 11:15 AM

The Measure of Potential Profitability in Intraday Trading Utilizing the Relative Strength Index (RSI) with Various Simple Moving Averages (SMA) on the S&P 500.

RITA 367

A popular belief among traders is that of the Efficient Market Hypothesis (EMH), which states that a stock price will fully reflect all available information instantaneously (Metghalchi, 2016). This study investigates this theory and the potential profitability regarding an intraday technical analysis strategy utilizing the relative strength index (RSI) and various simple moving averages (SMA). This strategy was used on the S&P 500, and various SMA lengths were utilized to determine which SMA length provided the most profitable strategy. All trades from the various four strategies started on August 22nd, 2023, and continued until 30 trades were completed for each strategy. These trades were conducted using buy and sell signals, exemplified in Figure 1. After all 30 trades had been completed, the SMA 20 group was found to be the least profitable, with a total profit of -$1.83. The SMA 100 group was the most profitable with $24.13. The SMA 60 group profited $23.74, and the SMA 140 group profited $22.04. A one-way Analysis of Variance (ANOVA) test was conducted on the various groups. It was found that the difference between the four group's trades was not statistically significant. The p-value was less than the alpha value of 0.05, failing to reject the null hypothesis of there being no significant difference between the various strategies' profitability. The four groups were compared to control buy-and-hold strategies and it was concluded that the shorter-length SMA strategies (20 and 60) were effective in downward trending conditions on the S&P 500. The profitability of the longer-length SMA strategies (100 and 140) was found to be equal to or worse than the buy-and-hold strategies in upward trending conditions on the S&P 500. There are many specific ways of modifying the strategy that could be taken and experimented with, such as the period length of the price chart, the type of market, the type of SMA, and the specific settings regarding the RSI and SMA.