Home Trading strategies S&P 500 Trading Strategies (ES And SPY) – Tactics and Insights

S&P 500 Trading Strategies (ES And SPY) – Tactics and Insights

This article presents some good S&P trading strategies in SPY or SP 500. We publish strategies all the time, some for free (but the best behind a paywall), and below you find a wide range of good trading strategies in SPY / SP500 for free.

Trading Strategies In SPY Or SP500

Here you can find more than 200 trading strategies similar to the above strategies.

S&P 500 is one of the most popular trading vehicles on the planet. And that is for good reason because we rank stocks and indices as the best trading vehicles there are, better than bonds, commodities, and forex.

We believe SPY / SP500 offers some of the best possibilities in trading. In this article, we present you some profitable trading strategies in SPY / SP500.   (Keep in mind that we backtest all we do and don’t publish anything of anecdotal evidence.)

What is S&P 500?

S&P 500 is the most referred to stock index in the world and consists of the 500 biggest public companies in the US, traded on NYSE or Nasdaq. It’s a market-weighted index, meaning the biggest companies influence both the return and the volatility much more than the smaller companies. To give you an example, just think about this: The 25 largest companies make up 35% of the market value in 2022, and Microsoft is weighted as much as the 110 smallest companies combined (!).

How can you trade S&P 500?

The SPDR S&P 500 Trust ETF (SPY), incepted in 1993, is the oldest ETF still trading and is one of the most popular trading vehicles on the planet.

Additionally, you can trade the original S&P futures contract that started trading as late back as 1982. But due to its big size, an electronic mini contract was introduced in 1997.

As the market has gone up and the value increased, a micro contract started trading in 2019. The big contract has a value of USD 250 per point, the mini contract has 50 USD, and the small micro contract has only 5 USD per point.

There are, of course, SPY option contracts as well, but they are dependent on a lot of factors in addition to the underlying index itself (time decay, volatility etc.) and is outside the scope of this article.

Thus, if you are going to trade S&P 500, you’ll most likely trade either SPY or one of the futures contracts. Both of them have their pros and cons, but it’s not the scope of this article to go into depth about that. We trade both of them ourselves.

Why trade S&P 500?

We believe it’s easier to trade stocks than instruments that are heavily influenced by macro events.

By all means, stocks are very dependent on the overall economy, but stocks have a tailwind in the form of productivity gains, increased earnings, and inflation. Besides, stocks show very strong mean reversion, but this might of course end at any time. No trading regime lasts forever!

We argue trading instruments mainly driven by macro events are very difficult to trade. Examples of this include oil and gold, for example. We do trade both of them, but the turnover in trading strategies is high. It’s very thought to find something that is consistent over long periods of time.

Good Trading Strategies In SPY Or SP500

Since this website saw the day of light in 2012, we have published plenty of trading strategies in SPY and SP 500. In this section we’ll provide you with a few of them. We start with the overnight edge:

Night trading – overnight trading

As mentioned above, we regard the overnight edge as one of the best edges in SPY and SP 500. In a previous article, we discussed in-depth about night trading and how you can profit on this edge. Additionally, we have written this article that might help you:

Mean reversion trading in SPY and SP 500

Mean-reversion strategies are perhaps one of the lowest hanging fruits in SPY and SP 500. Take this simple strategy for example:

  • We buy at the close when the 3-day RSI is below 20.
  • We sell at the close when the close is higher than yesterday’s high.

The equity curve of this strategy looks like this (what is a good equity curve?):

Trading Strategies In SPY Or SP500
Trading Strategies In SPY Or SP500

The strategy is invested less than 33% of the time but has managed almost the same return as buy and hold with much smaller trading drawdowns. This means that the trading performance metrics in the form of risk-adjusted returns are much more attractive than just to buy and hold. In addition to our monthly Trading Edges, which is a subscriber service, we have published plenty of free and robust trading strategies. Here are two articles with 13 different strategies which many are SPY / SP500:

Trend-following SPY and SP 500

Does trend following work? Yes, trend following works even in stocks if you use a long-term approach by using the 200-day moving average. Just look at this strategy:

Moving average strategies in general don’t work well on SPY / SP500 because of its nature to revert to the mean. There is a “loophole” if you use a long moving average, for example as we did here by using a 200-day moving average (we have plenty 200-day moving average strategies). A moving average shorter than 100 days doesn’t work at all.

However, trend-following strategies are more efficient in commodities, forex, and bonds. Please also read our article about turtle trading strategies that contains many backtests in commodities.

Good Trading Strategies In SPY Or SP500 – conclusions

Depending on your time frame in trading, you can use both overnight trading, mean-reversion, and trend following. Mean reversion is for the short term, while trend-following is for the long term. As you might imagine, we recommend that you backtest everything you do and don’t rely much on anecdotal evidence. Do your own backtesting and make sure that you have the personality traits (please take a personality test for trading) to follow the strategies in thick and thin. There are many good trading strategies in SPY or SP 500, but you need to make sure you can follow the rules!


– What is the S&P 500, and why is it considered one of the best trading vehicles?

The S&P 500 is a market-weighted index comprising the 500 largest public companies in the US. It is considered a premier trading vehicle due to its influence on market returns and volatility. We elaborate on its significance in our article.

– Why is trading S&P 500 preferred over other instruments influenced by macro events?

We believe trading stocks, especially in the S&P 500, is more straightforward than instruments heavily influenced by macro events. Stocks benefit from factors like productivity gains, increased earnings, and inflation, making them favorable for trading.

– Why is the S&P 500 regarded as a reliable indicator, and what are its unique characteristics?

The S&P 500 is a widely referenced stock index due to its inclusion of the 500 biggest US companies. Its market-weighted nature, where larger companies have a more significant influence, makes it a reliable indicator of market returns and volatility.