Four Down Days And Up?

Last Updated on November 24, 2020 by Oddmund Groette

I did some counting yesterday. Not because I was trying to get some sleep, but rather trying to find some trading strategies. I looked at SPY, the ETF tracking the S&P 500 index. What happens when SPY is down 4 days in a row? Entry is on the close and exit is on the first day with a close higher than the previous bar. Why these rules? I believe you will benefit from buying when the risk premium rises and selling when the risk premium declines. In the long term, you should make money doing this.

Since 1st of January 2005, this has happened 32 times in SPY. There are 25 winners. The total gain is 13.54%. Not the best strategy around, but quite good, IMO.

I also picked some other ETFs randomly:

Ticker #Fills #Wins Total in %
VEU 28 23 19.04
GDX 43 34 35.07
FXI 31 18 9.66
EWA 35 32 36.66
EEM 36 28 30.99

Pretty good results, if you ask me!

Here is the chart of SPY and the equity chart above: