Performance analysis of the technical analysis method Relative Strength Index (RSI)

Decisions to invest in financial markets are an important and complex process for investors. The idea that strategies that have performed well in the past will continue to do well in the future, and that strategies that have performed poorly will likewise underperform, helps investors understand market risks and make more informed decisions. Therefore, backtesting offers investors an important form of rational behavior in analyzing their portfolios and preparing for downturns. In this context, Relative Strength Index (RSI), one of the technical analysis methods, can help investors obtain information about the similarities and differences in buy-sell decisions and total returns through analyzes based on historical data. The main purpose of this study is to determine the most ideal conditions and high-yield combinations by analyzing past financial data and calculating the most appropriate periods and values in the selected investment instrument. In this way, it is aimed to contribute to investors creating more suitable strategies and increasing portfolio performance. At the same time, it aims to improve the risk management and more informed investment decision-making skills of investors who want to invest in the share market by providing them with a perspective through historical analysis. In this study, historical data will be analyzed using the Relative Strength Index (RSI) method. RSI is a technical analysis indicator widely used to measure price changes of a financial instrument. Analyzing historical data will be used as a basic tool to determine the similarities-differences in the RSI's buy-sell signals and returns total. This analysis aims to evaluate the impact of the RSI on profitability and its level of success on the index in which it is located, according to normal practices, through retrospective tests. Backtesting and technical analysis methods are an important tool for investors. This study aims to provide investors with strategic thinking skills through analyzes based on historical data to increase portfolio performance. At the same time, it aims to contribute to investors' decision-making processes by evaluating the impact and success level of an important technical analysis indicator such as the Relative Strength Index (RSI) on the similarities and differences in buy-sell signals and return total. In the application part of this study, a backward simulation was conducted to evaluate the effect of the RSI indicator on the returns of stocks in the BIST30 index. The simulation covers the period between 01.01.2018 and 31.12.2022. In this process, the stock returns calculated every year and the signals produced by the RSI indicator were compared. According to the results obtained, it has been observed that buy-sell signals created using the RSI indicator generally provide higher returns than stock returns, except for some stocks. However, the effectiveness of the RSI indicator has been limited in some stocks.