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S&P 500 Mean Reversion Using IBS and RSI (Classical Mean Reversion Strategy S&P 500)

Below is a simple and easy trading strategy to implement in SPY or the S&P 500:

The classical mean reversion strategy in the S&P 500

In plain English the strategy reads like this:

  1. IBS (internal bar strength) must be lower than 0.25 (using daily bars).
  2. RSI (21) must be below 45.
  3. If 1 and 2 are fulfilled, go long at the close.
  4. Exit when close is higher than yesterday’s close.

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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