This is perhaps the simplest afl trading system in which the afl code can be understood by non-programmers also. We carefully define the Buy, Sell, Short and Cover rules; where Short and Cover are symmetrically opposite if Buy and Sell.
The RSI is perhaps the most popular momentum indicator among traders. By calculation, it compares the increase in prices versus the decrease in prices. It reaches the overbought level (70) when there is upwards momentum and the trend is strong. When there is downward momentum, it goes to an oversold level (30). Before going to the oversold level, level 40 indicates that bulls have mostly extinguished in the market. We will use the default period 14 suggested by Welles Wilder.
Since we are using purely momentum to time our trades, any filter for sideways market is not required.
We try to buy when a) momentum is strong b) exit when momentum is weak.
Strategy Logic
Buy: When RSI crosses above 70 level
Sell: When RSI crosses below 40 level
When RSI gives Buy, it will send LE in Call and LX in Put. When RSI gives Sell, it will send LE in Put and LX in Call.
Amibroker Settings
Step 1: Make sure you have completed Jump Start setup
Step 2: Download AFL from here. In Amibroker, Go to Formula editor and paste the AFL here.
Step 3: Right Click on the chart and go Parameters to adjust the inputs of the strategy.
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