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PSI5 Mean-Reversion Strategy Performance in Weekly SPY ETF

The PSI5 mean-reversion strategy has outperformed on rick-adjusted basis the buy and hold total return performance of SPY since inception.

The PSI5 mean-reversion strategy is not data-mined but based on a formula from a text in probability theory. The logic of this strategy is available for sale to professional traders and hedge funds subject to acceptance of a non-disclosure agreement. The strategy has  been also effective in trading portfolios of large cap stocks in both daily and weekly timeframes.

PSI5 strategy in weekly SPY ETF

Time-frame: Weekly (adjusted data)
Strategy type: Long-only
Market: SPY
Backtest period: 01/29/1993 – 12/03/2019
Commission per share: $0.01
Position size: Fully invested
Position entry and exit: Open of next bar
Bear market filter: Yes

Strategy performance

Parameter Strategy Buy and Hold Total Return
CAGR 8.1% 9.7%
Max. DD -14.7% -54.6%
Sharpe 0.94 0.58
MAR 0.55 0.18
Win rate 75.1%  –
Trades 265  –
Profit factor 2.52  –
Avg. bars in trades 2.6  –
Exposure 30% 100%

The strategy has outperformed buy and hold on risk-adjusted basis. Maximum drawdown is less than 15% and win rate is more than 75%.

Equity curve with month returns table



The strategy backtest shows only two losing years in 2002 and 2011 with small negative returns. Year-to-date return (12/06/2019) is about 12%.

Charting and backtesting program: Amibroker

Data provider: Norgate Data

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