3 Down Days – And Gap Up?
Last Updated on November 17, 2020 by Oddmund Groette
Here is a simple mean reversion twist in SPY:
- SPY must be down 3 days in a row (from close to close).
- Entry on close on the 3rd down day.
- Exit the next day open.
Here is the equity curve from 2005 until the present (the pink line is for short but using 4 up days and then go short):
There are 200 fills for long and a respectable 0.18% gain per fill.
For EEM we have this equity curve for exactly the same conditions as for SPY:
The numbers for EEM are slightly better: 0.35% per trade (161 trades).
Is there a reason most of your strategies are on ETFs? Do you not trade anything on individual stocks?
Hi,
Yes I trade individual stocks more than ETFs. But I’m afraid to lose my edge if I publish it.
Hi Oddmund,
Could you explain more in detail what the three steps of this strategy are please?
What are the horizontal and vertical lines of the graphs are?
Thanks
The y-axis are accumulated %. The x-axis is #days in the test.
Hi Oddmund,
I have seen you backtesting swing/overnight strategy on SPY that has historically < 200 trades. Do you think this is statistically significant enough?
I believe you have executed some of them and could probably tell whether this is real edge or not.
Hi, probably not statistically significant, but taking advantage of the risk premium.
Hi Oddmund,
I’m trade similar strategy on individual stocks. Go long after 2 red day candles on MOC and cover on MOO.
Hi, for how long have you traded this strategy?
Hi Oddmund,
An American friend advised me to check out your page. I am amazed to find out that you are Norwegian like me 🙂 It just proves the international scope of trading I guess.
I have a question regarding the 3dayDown strategy above. How would you put this i operation? Use minute data and for example, 30 min before close, as your closing price for the day-end? Another question, which broker and API do you use?
Looking foreward to your next post,
Best regards Snorre
Yes, I’m Norwegian 🙂
This strategy I just buy SPY some seconds before the close.
I’m using IB and their API (I use Excel for sending orders).
Oddmund
Hi Oddmund,
can you explain whats the way the put the MOC order since MOC order have to be put 15 minutes before you know if you are in the 3rd down day ¿¿??
Best regards
Alex
Hi Alex,
You simply have to put in an order just seconds from the close. But with SPY you cal always enter after market close because it’s so liquid.