Averaging Down Trading Strategy (Backtest+Performance)
No better than luck
Small profit, too noisy to call an edge
- trades tested
- 329
- per trade after costs
- +10.26bp
- winners
- 67%
- years of data
- 15.9
Daily S&P 500 mean reversion with averaging down: take a half position when the 5-day RSI crosses below 50, add the other half when the 5-day RSI drops more than 5 points from the day before while still below 50, and sell everything when the close is above yesterday's high. A simpler version buys when the 5-day RSI is below 35 with the same exit.
The exact rules we tested
- 01Instrument: SPX | Signal timeframe: 1d | Direction: long
- 02LONG when: rsi5 crosses below 50
- 03Entry: market at next bar open
- 04Stop: none (as taught - the trade closes only on its exit rule)
- 05Exit longs when: close > yhigh
- 06Where rsidrop = rsi5prev minus rsi5