Overnight Short Trading Strategy

Below is a potential short strategy in the S&P 500:

Short= C>Ref(C,-1) AND Ref(C,-1)>Ref(C,-2) AND Ref(C,-2)>Ref(C,-3) AND ADX(5)>35 AND RSI(2)>90


If the close is higher for the third time in a row, 5 day ADX is bigger than 35 and RSI(2) is bigger than 90, then go short on the close.

Exit/cover on tomorrow’s open.


This is the equity chart tested on SPY:

The initial capital is 100 000 and 200 shares of SPY traded throughout the test. No commissions and slippage.


The profit factor is 1.81.


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– What are the specific conditions for initiating a short strategy in the S&P 500 as described?

The short strategy requires three consecutive days of higher closing prices, a 5-day ADX above 35, and an RSI(2) exceeding 90.

– What does the equity chart signify in the context of the strategy tested on SPY?

The equity chart showcases the performance of the strategy with an initial capital of $100,000, trading 200 shares of SPY, and assuming no commissions or slippage.

– Can you explain the profit factor and its significance for this strategy?

The profit factor, which is 1.81, indicates the strategy’s overall profitability. A profit factor above 1 implies that the strategy generated more profit than loss.

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