Trading Edge #46
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 is an inside day; and
- Yesterday was a down day of at least 1%; and
- Today’s close is higher than yesterday’s.
Results
Trading performance if exit after N-days (SPY since 1993):
If we sell (exit) after 5 trading days we get the following equity curve:
The edge can be improved if we put in a trend filter, for example ADX(5).