In this post, we explore a simple mean reversion twist in SPY that holds the S&P 500 just one day (from the close to the next day’s open or close). It’s an overnight trading strategy, the lowest-hanging fruit in the stock market .
We backtest the following trading rules:
* SPY must be down three days in a row (from close to close).
* Entry on close on the 3rd down day.
* Exit the next day open.
The equity curve from 1993 for SPY is shown below, which tracks S&P 500, until today (backtest done in Amibroker).
We have a modified version of the strategy explained on our website. Check out how it performs >>
https://www.quantifiedstrategies.com/3-days-down-overnight-trading-strategy/