Index Rebalance Trading Strategy (Rules, Backtest Findings)

An index rebalance trading strategy is a trading strategy that seeks to exploit the price movements of stocks that are being added to or removed from a major market index.

Index funds, which are passively managed funds that track a specific market index, are required to buy and sell stocks in order to maintain their tracking error within a certain tolerance.

This buying and selling can cause significant price movements in the affected stocks, which can be exploited by traders.

Can we make a profitable trading strategy based on index rebalancing? It turns out we can, so make sure you keep reading. 

We have written hundreds of free trading strategies but the best trading strategies are for sale. 

If you like this strategy, you might also like what we wrote about the imbalance trading strategy where we explained you how we day traded successfully based on market imbalances.