Performance of PSI5 mean-reversion strategies in 2019 for selected futures portfolio, SPY ETF, Dow 30 and S&P 500 stocks in daily and weekly timeframes.
The trading strategies are based on our mean-reversion PSI5 algo. This algo is not data-mined but based on a formula from a text in probability theory and is available for sale to professional traders and hedge funds after signing a non-disclosure agreement.
For the backtests in this article we used Norgate data. For Dow 30 and S&P 500 index the data include current and past constituents to remove survivorship bias. We highly recommend this data service to those who would like to remove survivoship bias from backtests (we do not have a referral arrangement with the company.)
Time-frame: Daily and Weekly (adjusted data)
Strategy type: Long-only
Markets: SPY, Dow 30 and S&P 500, past and current, futures: ES, ZN, FGSX , FGBL
Backtest period: 01/02/2019 – 12/31/2019
Commission per share: $0.01 for SPY, $0.005 for stocks, $5 each side for futures
Position entry and exit: Open of next bar
Position size: Equity/Max. Open Positions for stocks, One contract for futures
Initial equity: $100K
Results for 2019: Price Action Lab Blog Mean-Reversion Strategies
|Market||Timeframe||Return||Max. Drawdown||Max. Open Positions|
Return ranged from a low of 8.8% for weekly Dow 30 to a high of 17% for daily SPY and 35% for futures. Maximum drawdown ranged from a low of -2.1% for S&P 500 daily to a high of 8.6% for S&P 500 weekly. Note that futures performance is very sensitive to starting date, initial capital and position size methodology.
We are satisfied with the performance of PSI5 algo in 2019 given that the stock market exhibited higher_than_usual momentum in daily returns throughout the year at the expense of mean reversion. This may be seen from our Momersion indicator below.
Momentum shows tendency to remain at higher levels but this may change at any time. Note that high momentum also indicates increasing risks in case of a reversal because it causes faster declines.
For more article about PSI algo click here.
Charting and backtesting program: Amibroker
Data provider: Norgate Data
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