S&P 500 Mean Reversion Using IBS and RSI

S&P 500 Mean Reversion Using IBS and RSI 2024

ByOddmund Groette Trading strategies

Below is a trading strategy backtested on SPY or the S&P 500:

The classical mean reversion strategy in the S&P 500

In plain English the strategy reads like this:

Trading Rules

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The equity curve since January 2000 looks like this (starting with 100 000 in equity and allocating 100% of equity to every trade, ie. compounding, but taxes are not deducted):

 

The stats are like this:

How does the strategy perform if we invert it, ie. reversing the parameters? This is how the equity line performs:

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FAQ:

– What is the classical mean reversion strategy in the S&P 500?

The classical mean reversion strategy in the S&P 500 involves specific criteria based on Internal Bar Strength (IBS) and Relative Strength Index (RSI) to determine trading signals.

– What are the statistical results and performance of this mean reversion strategy in the S&P 500?

The strategy’s performance can be analyzed using various statistical measures, including win rates, drawdowns (periods of losses), and annual returns. These metrics provide insights into the historical performance of the strategy.

– How does the strategy perform if you invert the parameters or reverse the conditions?

The article includes an equity curve that demonstrates the performance of the strategy when the parameters are reversed or inverted. This information can help traders understand the importance of the chosen criteria.

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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