Trading Edge #30

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):

• But at the close of 5th last trading day of the month; and
• Sell N days later. 

Results

Below is the table if we hold for N days:

If we hold for 7 trading days, ie. sell on the third trading day of the new month, we get the following equity curve since 1993:

Can the strategy be improved?

Yes, as long as the close is not too overbought at the fifth last trading day of the month. 

For example, the chart below is when the 5-day RSI is below 75:

The # trades goes down to 320 (from 371) and the average gain per trade increases to 0.75%.