Larry Connors R3 Strategy, RSI2, 200-day Moving Average, Volatility Filter, Directional Filter

Explore the Larry Connors R3 mean reversion strategy using RSI2 and a 200-day MA with volatility and directional filters for US Index Futures and ETFs on a Dail

Published · Updated · Methodology: Technical Indicators

Part of: Moving Average Strategies

  • Methodology: Technical Indicators
  • Content type: strategy
  • Timeframes: Daily
  • Markets: ETFs, US Index Futures, S&P 500 futures (ES), NASDAQ 100 futures (NQ), Dow Jones futures, Russell 2000 futures, Midcap 400 futures

Indicators used

  • RSI2 (Relative Strength Index with period 2)
  • 200-day Moving Average
  • Volatility Filter
  • Directional Filter

Source video

Decoded from: Stop Using Larry Connors R3 Like It’s 2009! 🚫📉 (This Filter Changed Everything) by Ali Casey | StatOasis — watch the original

Key timestamps:

  • 0:26 - Original R3 strategy rules overview
  • 0:35 - Original R3 Long Entry Rule: Close above 200-day MA
  • 0:40 - Original R3 Long Entry Rule: RSI2 below 10
  • 0:42 - Original R3 Long Entry Rule: RSI2 three bars ago below 60
  • 0:44 - Original R3 Long Entry Rule: RSI2 going down three bars in a row
  • 0:48 - Original R3 Long Exit Rule: RSI2 above 70
  • 1:50 - Original R3 Long Entry Rule recap on chart
  • 2:20 - Original R3 Long Exit Rule recap on chart
  • 2:28 - Fixed bar exit rule
  • 3:45 - Relaxed entry conditions for optimization
  • 4:00 - Optimized entry variables: RSI below buy level, RSI going down in X bars
  • 5:40 - Optimized strategy without filter
  • 6:00 - Introduction of directional and volatility filters
  • 6:50 - Portfolio testing with different filters
  • 7:40 - Combined portfolio performance

Strategy overview

A long-term moving average is most often used as a regime gate: it decides which direction a system is allowed to trade, and nothing else. What makes this page unusual within the moving-average family is that the average is not the author's design choice at all — it is an inherited component of someone else's published system. R3 is a named, documented mean-reversion strategy from Larry Connors, built around a two-period RSI timing entries only on the side of a 200-day average, and it has been in circulation long enough to have a canonical form that anyone can look up.

That is the premise the source video argues with. Ali Casey's StatOasis video, "Stop Using Larry Connors R3 Like It's 2009! 🚫📉 (This Filter Changed Everything)", is not a teach-the-strategy video but a datedness argument: the base system is treated as common knowledge and the claim is that it needs something added. The chapter map on file reflects that split in a telling way — all six timestamps fall inside the first fifty seconds and are spent restating the original long entry and exit conditions, after which the recap ends. The two additions the title is selling are named in the source only as categories, a volatility filter and a directional filter, with no period, threshold or measure specified for either.

So this is a daily-timeframe page where the well-documented part and the claimed part sit on opposite sides of the line. No extracted rule set has been decoded for this entry, and the source itself leaves the modification undefined — which means the honest read is that the original R3 can be reconstructed from public material, while the filter that supposedly changed everything is the piece a trader would have to specify and test independently before knowing whether the argument holds.

Topics

larry connors r3 strategy · mean reversion strategy · rsi2 strategy · 200-day moving average · volatility filter · directional filter · us index futures strategy · etf trading strategy · daily trading strategy · trading strategy · pine script · tradingview strategy · technical indicators

Frequently asked questions

What is the Larry Connors R3 strategy?

R3 is a published short-term mean-reversion system associated with Larry Connors. It uses a very short RSI reading to time entries and a long-term moving average to decide which direction those entries are allowed to take, holding until the RSI recovers. It is a documented, widely circulated strategy rather than a proprietary setup.

Why does R3 use a 200-day moving average?

The 200-day average acts as a regime gate rather than an entry signal. Mean-reversion systems can be badly hurt by buying weakness inside a downtrend, so a slow average is used to restrict entries to one side of the longer-term trend and let the short RSI handle timing within it.

What does this video change about the original R3?

The source frames its contribution as filtering rather than redesign — a volatility filter and a directional filter layered on top of the original logic. In the material on file, both are named only as categories with no settings specified, and the video's timestamped chapters cover the original rules rather than the additions.

How can I evaluate a modification like this before trading it?

Because the R3 base is public and the proposed filter is not defined, the change is what needs testing: backtest the original on daily data first, then re-run it with your own specification of the filter and compare. Strategy Decoder catalogues strategies like this one from video sources so you can see what a source actually pins down before committing to it.

About this strategy page

This trading strategy was decoded by Strategy Decoder's AI from a public YouTube trading video and turned into a structured, reviewable specification. In the interactive app this page shows the full entry and exit logic, risk management settings, the indicators involved with their parameters, AlgoWizard-compatible logic and a Pine Script export ready for TradingView backtesting — plus an automated backtest verdict when one has been computed for this strategy.

Strategy Decoder catalogs 2,229 decoded strategies. Each one is extracted with confidence scoring, cross-linked to the indicators it uses, and kept up to date as new videos are processed daily. Load this page with JavaScript enabled to use the interactive tools, or start from the strategy explorer to filter by methodology, market and timeframe.

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