S&P 500 Mean Reversion Using IBS and RSI

Below is a simple and easy trading strategy to implement in SPY or S&P 500:

  1. IBS (internal bar strength) must be lower than 0.25 (using daily bars).
  2. RSI (21) must be below 45.
  3. If 1 and 2 are fulfilled, go long at close.
  4. Exit when close is higher than yesterday’s close.

The equity curve since January 2000 looks like this (starting with 100 000 in equity and allocating 100% of equity to every trade, ie. compounding, but taxes are not deducted):

 

The stats are like this:

How does the strategy perform if we invert it, ie. reversing the parameters? This is how the equity line performs:

 

Disclosure: I am not a financial advisor. Please do your own due diligence and investment research or consult a financial professional. All articles are my opinion – they are not suggestions to buy or sell any securities.