Trading Edge #56
Instrument/asset
S&P 500 (SPY)
Trading rules
We make the following trading rules:
(The trading rules of the edge read like this (please also backtest yourself – you might find a way to improve it)):
- Today was a down day; and
- Today is either Monday or Tuesday; and
- Last trading day was either Thursday or Friday, meaning it was three non-trading days in between.
Results
Trading performance if exit after N-days (100 000 and compounding since SPY’s inception in 1993):
The table illustrates that the best edge is after only one day. If we exit at the close the next day we get the following equity curve:
The strategy has worked really well, but not over the last couple of years.