Daily Trading Edge #22

Instrument/asset

S&P 500 (SPY)

Trading rules

The trading rules of the edge read like this (please also backtest yourself – you might find a way to improve it):

• It’s the first trading day of the month; and
• The close sets a new 5-day high.   

Results

Trading performance if we exit after N-days since SPY’s inception in 1993:

The performance over the next days is significantly worse compared to not setting a new 5-day high (which is rather strong). 

Let’s change the trading rules:

• It’s the first trading day of the month; and
• The close does NOT set a new 5-day high. 

The results improve: