S&P 500 Mean Reversion Using IBS and RSI: Classical Approach Analysis
The post includes an equity curve that demonstrates the performance of the strategy when the parameters are reversed or inverted. This information can help traders understand the importance of the chosen criteria.
We backtest the following trading rules:
IBS (internal bar strength) must be lower than 0.25 (using daily bars).
RSI (21) must be below 45.
If 1 and 2 are fulfilled, go long at the close.
Exit when close is higher than yesterday’s close.
The equity curve since January 2000 looks like the imaage shown below(starting with 100 000 in equity and allocating 100% of equity to every trade, ie. compounding, but taxes are not deducted)
You can find more info about this trading strategy here:
https://www.quantifiedstrategies.com/sp-500-mean-reversion-using-ibs-and-rsi/