SPY Trading Strategy Using RSI

SPY is very mean revertive and RSI is a mean revertive indicator. Does this mean that RSI works on SPY? In this article, we test an RSI SPY trading strategy.

It turns out that our hypothesis is correct: the RSI works well on SPY. Even better, we improve the strategy by adding one extra indicator.

Before we go on to test the RSI SPY strategy, please make sure that you know what Relative Strength Index (RSI) is and what mean-reversion is:

You might also be interested in our RSI QQQ trading strategy.

RSI SPY trading strategy:

Lets’s make a simple RSI SPY strategy:

The trading strategy is really simple and reads like this in plain English:

Trading Rules

[am4show have=’p2;p3;p58;p59;p130;p138;’ user_error=’Premium Post Access’ guest_error=’Premium Posts’]

  1. If RSI(2) is less than 15, then enter at the close.
  2. Exit on close if today’s close is higher than yesterday’s high.

[/am4show]

Here is the accumulated profit curve from 1993 until today:

RSI SPY Trading Strategy
RSI SPY Trading Strategy

The trading performance metrics look like this:

  • The average gain per trade is 0.48% (583 trades)
  • The win rate is 73%
  • Time spent in the market is 26%
  • Max drawdown is 23%
  • T