What Happens After An “Extraordinary” Big Fall in S&P?
What happens after an “extraordinary” big fall in SPY?
- Calculate the average H-L range over the last 25 days (in per cent).
- If the ETF falls more than 2 times this average, enter at close.
- Exit at tmorrows open, tomorrows close or after 3 or 5 days.
- Test period from 2005 until July 2013.
The best exit is simply to exit on tomorrows close. That has the best win ratio and is the least erratic. The other exits seems pretty unstable. Here is the equity curve for SPY from close to open:
48 trades and 31 winners make 0.21% in average. That is pretty good if you ask me.
I assume this is a long only strategy?
Yes.
The high-low is the day’s range. It’s that the value you meant to average or did you mean the average of the True Range (ATR)? Did you analyze this strategy for short trades?
Hi, I averaged H-L, not ATR. I have tested short, but not as good that direction (as to be expected).