Daily Trading Edge #26
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):
- Today’s close is a Bearish Engulfing pattern candlestick
We have quantified all candlesticks in a separate product which you find by clicking here.
Results
Trading performance if exit after N-days:
There are many trades and the pattern looks decent. Can it be improved?
Improved Trading Edge
Sometimes the Bearish Engulfing pattern happens when it’s “overbought”. Let’s add a filter that the 5-day RSI must be below 45:
It improves up until 5 days, but not after that. If we exit after 3 trading days we get the following equity curve:
