The Internal Bar Strength (IBS) Indicator - Trading Strategies, Rules

The Internal Bar Strength indicator (IBS) has worked remarkably well for over two decades. We can only guess why, but the stock market has been highly mean-reverting during this period, and this has, of course, given the IBS a nice tailwind.

We make the following trading rules:

1. IBS= (Close-Low)/(High-Low);

2. Buy= IBS<0.2 ;

3. buyPrice=C ; //buy on the close

4. Sell= IBS>0.8 ;

5. sellPrice=C ; //sell on the close

We buy on close if IBS is lower than 0.2, and we sell any day later when the IBS closes above 0.8. An incredible simple IBS strategy and IBS trade!

Despite its simplicity, it has yielded excellent results from SPY’s inception in 1993 until today (assuming 100 000 invested in 2000 and 100% exposure of equity since then — i.e. compounded results)

The equity curve (compounded) is shown below

You can find more info about this trading strategy here:
https://www.quantifiedstrategies.com/internal-bar-strength-ibs-indicator-strategy/

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