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
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
|Parameter||Strategy||Buy and Hold Total Return|
|Avg. bars in trades||2.6||–|
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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