Trading Systems - RSI Strategy That Works

Finally, after a few simple testings, I've managed to use RSI as a simple trend-following strategy and it works(on FKLI).  In fact the logic behind it is sound as well, although the backtested result has a profit factor of 2, it is not as impressive compared to other strategies which I have yet to post. 

The idea is that when a market is in a strong uptrend, the daily RSI(14) value will  go above 55, and seldom drop below 45 when retrace downward and when the market is in a strong downtrend, the RSI(14) value  crosses below 45 and seldom reach 55 in upward retracements.

Therefore we could design a system that go Long when the RSI(14) rise above 55 and turn Short when the RSI(14) penetrates below 45.  Lets backtest the idea with Bursa FKLI from Jan 1996 - Sep 2009(continuous front-month EOD data without adjustments) with basic 1 contract.

Here's the performance summary report:

and here's the equity curve (before cost) chart:

*(please note that we have break-even trades here)

In fact, considering that the trading system uses only RSI(14) indicator with default settings and without any complex optimization, the performance is the best so far comparing to those that I've posted such as EMA(3/7), EMA(3/30),MACD without filter, Bollinger Bands and the BBZ system.  It only lost to SMA(10/50) which is the simplest !  The next question is, does it work on FCPO?  What do you think?

Disclaimer: Taken from CFTC RULE 4.41 – HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN EXECUTED, THE RESULTS MAY HAVE UNDER OR OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN.

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WHATEVER YOU READ HERE SHOULD BE USED AS LEARNING AIDS ONLY AND SHOULD NOT BE CONSTRUED AS INVESTMENT ADVICE. IF YOU DECIDE TO INVEST REAL MONEY, ALL TRADING DECISIONS ARE YOUR OWN RESPONSIBILITY.