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Combining Mean Reversion And Trend Following (12% Annual Returns)

ByOddmund Groette Trading strategies

Let’s show you a very simple strategy combining mean reversion and trend following to give you a backtested result of 12% per year.

Combining Mean Reversion And Trend Following

Combined, the two types of strategies returned the following result for SPY, the ETF that tracks the S&P 500:

A line chart displays long-term portfolio equity growth for a combined trading strategy.
Discover how Combining Mean Reversion And Trend Following (12% Annual Returns) drives portfolio growth.

Strategy Type: Trend and mean reversion.

Market: SPY (dividends included).

Performance (SPY)

  • No. of trades: 206
  • Average gain per trade: 2.2%
  • Win ratio: 45%
  • Profit factor: 3.5
  • Annual returns (CAGR): 12%
  • Exposure/time in the market: 80%
  • Risk-adjusted return: 15% (CAGR divided by time spent in the market (.8))
  • Max drawdown: 29%

Trading Rules

Let’s start with the rules for the trend-following part:

🔒 These trading rules are for members only.

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I’ve got an Msc from Heriot-Watt University, Edinburgh (1996), in addition a to a business administration degree the Norwegian School of Management (BI – 1994). Did my mandatory military service in between.

After university, I worked two years as an auditor (1996-1998).

I co-founded Aksjeforum.com in 1998/99 - one of the first websites about trading and investing in Norway. It was later acquired by Digi.no in 2001.

I have written 4 books about trading (in Norwegian). One of them has sold 30,000 copies, a record for a financial book in Norway.

From 2001 until 2018 full-time independent prop trader (Series 7 in 2001) and investor.

2018-today: Investor, writer, analyst.

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