Thursday, March 09, 2017 11:28:38 AM
Backtesting Two Short-term Mean-Reversion Strategies
The table below shows backtest results for two strategies. The first buys when RSI(5) crosses above 30 and sells when RSI(5) crosses below 70. The second buys when RSI(5) crosses above 30 and sells when price closes below the Chandelier Exit (22,1). There are no stop-losses, just exits. The backtest runs a little over 16 years and includes two bear market periods. The strategy only trades long positions and only trades when the S&P 500 is in a long-term uptrend (50-day EMA is above 200-day EMA). Short positions DO NOT add value and the S&P 500 is the ONLY index we need for broad market timing.
The results are pretty good, especially for the strategy using the Chandelier Exit (Compound Annual Return of 11.46% and a Maximum Drawdown of 17.84%). The Win% was high (~80%) and the system was exposed to the market 37% of the time. Note that the S&P 500 was in an uptrend 69% of the time (50-day EMA above 200-day EMA). This means the system was in the market 53% of the tradable timeframe, which was 69%. This may not seem like much, but it was enough to produce good returns with modest drawdowns.
The table below shows backtest results for two strategies. The first buys when RSI(5) crosses above 30 and sells when RSI(5) crosses below 70. The second buys when RSI(5) crosses above 30 and sells when price closes below the Chandelier Exit (22,1). There are no stop-losses, just exits. The backtest runs a little over 16 years and includes two bear market periods. The strategy only trades long positions and only trades when the S&P 500 is in a long-term uptrend (50-day EMA is above 200-day EMA). Short positions DO NOT add value and the S&P 500 is the ONLY index we need for broad market timing.
The results are pretty good, especially for the strategy using the Chandelier Exit (Compound Annual Return of 11.46% and a Maximum Drawdown of 17.84%). The Win% was high (~80%) and the system was exposed to the market 37% of the time. Note that the S&P 500 was in an uptrend 69% of the time (50-day EMA above 200-day EMA). This means the system was in the market 53% of the tradable timeframe, which was 69%. This may not seem like much, but it was enough to produce good returns with modest drawdowns.
Join the InvestorsHub Community
Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
