SPY/S&P 500: Yesterday Was A Down Day And Today Opens Down

Last Updated on June 19, 2022 by Quantified Trading

Some weeks ago I wrote about a potential daytrading strategy in XLP. This is a similar test done in SPY:

  1. Yesterday the formula (c-l)/(h-l) must have been lower than 0.1.
  2. Today SPY opens down.

If these two simple criteria are fulfilled, then go long at the open and hold until close.

This is the result from 2005 until the present:

P/L #Fills Avg.
19.75% 84.00 0.24%

Here is the equity curve:

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  • Hello Oddmund
    Thank you for yet another interesting post. I have noticed that you several times use the formula (c-l)/(h-l). Could you please explain what information the result gives you about a given period?

    Best regards,
    Juksefant

      • What I mean is what information do you get from the mentioned formula? Does a low value indicate a momentum in any direction? And why must the value be lower than 0.1? Is this a value you have retrieved from backtesting this specific strategy, or is it a more general indication? I am spending quite some time trying to develop an easy set-and-forget trading system, and I find your formula very interesting even if I don’t quite understand how or when to use it. I hope this make my question clearer.

        • The formula is (close-low)/(high-low). The lower the value, the more return next day. This works pretty much on every ETF. This is a mean reversion formula.Buy on low values, sell on high values, but short is of course much tougher. The value 0.1 is derived from backtesting. I would suggest youo test this in Excel to get a better grasp of it. To see it yourself is much better!