The Internal Bar Strength (IBS) Indicator [Trading Strategies, Rules + Video]

The Internal Bar Strength indicator (IBS) has worked remarkably well for over two decades. We can only guess why, but the stock market has been highly mean-reverting during this period, and this has, of course, given the IBS a nice tailwind.

IBS is simply an indicator where you buy on weakness and sell on strength, the cornerstone of any mean-reverting strategy. It oscillates from zero to one and measures the relative position of the closing price relative to the High and Low. A low internal bar strength value is supposed to be bullish, and a high value is bearish (for the short-term). The assumption is that the market is mean-reverting. We make some examples of internal bar strength strategies.