The long-only mean-reversion strategy for trading SPY and QQQ is based on two popular indicators.
The strategy rules are available with a purchase of the strategy bundle.
Backtest settings
Name of strategy: MRFREE
Timeframe: Daily (adjusted data)
Markets: SPY and QQQ ETFs
Strategy type: Long-only mean-reversion
Position size: 100% of available equity.
Commission: $0.01/share
Execution: All trades are executed at the open of the next bar
Backtest range: 01/3/2003 –12/29/2023
Note that the strategy is not optimized for the highest annualized return.
Equity curve, yearly returns, and drawdown profile
The annualized return is 9.4%, and Sharpe is 0.77. The win rate is 69.1%.
Performance Summary
| STRATEGY | |
| CAGR | 9.4% |
| MDD | -22.9% |
| VOLATILITY | 12.1% |
| SHARPE | 0.77 |
| TRADES | 910 |
| WIN RATE | 69.3% |
| AVG. BARS IN TRADE | 4.4 |
| EXPOSURE | 30.0% |
Strategy rules
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About the risks of mean-reversion strategies
Mean-reversion methods are risky since the trades typically go against the short-term trend. Stop-loss orders cannot be employed efficiently because, in the majority of instances, they destroy profitability.
Mean-reversion strategies are only good for experienced traders who know how to manage risk and are willing to take on big risks.
When using a profitable mean-reversion strategy, inexperienced traders may lose money because they are afraid to act on signals that are risky at first but pay off in the long run.
Disclaimer: No part of the analysis in this blog constitutes a trade recommendation. The past performance of any trading system or methodology is not necessarily indicative of future results. Read the full disclaimer here.
Charting and backtesting program: Amibroker. Data provider: Norgate Data
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