Four Consecutive Down Days Trading Strategy: A Guide

What happens when SPY is down 4 days in a row? Let’s test 4 down days in a row trading strategy.

Entry is on the close and exit is on the first day with a close higher than the previous bar.

Four Down Days In A Row Trading Strategy

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 the 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#WinsTotal in %
VEU282319.04
GDX433435.07
FXI31189.66
EWA353236.66
EEM362830.99

Pretty good results, if you ask me!

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

As you can see, the 4 down days in a row strategy works reasonably well.


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What is the “Four Down Days In A Row” trading strategy?

The “Four Down Days In A Row” trading strategy involves entering a trade on the close of a day when SPY or another asset has experienced four consecutive days of decline, and exiting the trade when there is a close higher than the previous day’s close.

Why are these entry and exit rules chosen for this strategy?

These entry and exit rules are chosen because they have proven to work in backtesting. The strategy is designed to leverage changes in risk premium, encouraging buying when risk premium rises and selling when it declines, potentially leading to long-term profitability.

How often has SPY experienced four down days in a row?

Since January 1, 2005, there have been 32 occurrences of SPY having four consecutive down days. 

What does Four Consecutive Down Days mean?

“Four consecutive down days” means that the value of a financial asset has decreased for four days in a row. It suggests a sustained period of decline in the market or for that particular asset.

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