The 5-day low and low of the range trading strategy (S&P 500 mean reversion)
The 5-Day Low of The Range Strategy, with its simple criteria of IBS lower than 0.25 and the close lower than the lowest low of the previous 5 days, has shown remarkable results. Over the period from January 1993 until today, it has yielded 309 winners out of 517 trades, with an average return of 0.46% per tradeāfar exceeding the average return for any 5-day period.
We backtest the following trading rules:
- IBS must be lower than 0.25.
- The close must be lower than the lowest low the previous 5 days.
- If those two simple criteria are met, go long at the close.
- The exit is at the close 5 days later.
This is a very simple strategy. No fancy tools and hardly any calculations.
Below is shown the result from January 1993 until today.
We have statistics including the profit factor between 2005 and 2013 which proves that this strategy has high-profit factor due to low max drawdown. Check here >>
https://www.quantifiedstrategies.com/5-day-low-of-the-range-strategy/