Failed Bounce Trading Strategy – (A Failed Bounce Is Normally Followed By Rising Prices)

Last Updated on June 19, 2022 by Quantified Trading

The failed bounce trading strategy:  Rob Hanna at Quantifiable Edges had an interesting article some days ago about bounces in the S&P 500. Let’s test his idea and turn it into a testable hypothesis:

The failed bounce trading strategy:

I made some changes to Hanna’s strategy and ended up with these simple rules for the failed bounce trading strategy:

  1. Yesterday’s IBS (Internal Bar Strength) was at least 0.6 or higher.
  2. Yesterday’s low was lower than the lowest low during the five days before.
  3. Today’s close is lower than yesterday’s close.
  4. Exit when the close is higher than yesterday’s high.

The result is like this with 200 shares of SPY traded and 100 000 in initial start capital :

the failed bounce trading strategy

The equity chart looks like this for the failed bounce trading system (not good from 2018):

 

the failed bounce trading strategy

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