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BOOK YOUR FREE STRATEGY SESSION NOW >>In today's video, we're diving into two fantastic strategies to profit from the S&P 500 while staying protected against unexpected market events.
These mean-reverting strategies have been live for about seven years and operate on both the long and short sides.
On the short side in particular, they've delivered impressive results, especially during unpredictable times like the March 2020 pandemic and the 2008 recession.
Since the start of 2023, these strategies have collectively generated over $60,000.
Curious to know more?
Watch the video now to uncover:
•How these strategies work
•Detailed performance insights
•Average trade statistics for each strategy
Enjoy 😎
Introduction
Welcome to this brand-new video! Today, we'll dive into two strategies for trading S&P 500 futures. The S&P 500, composed of the 500 largest U.S. companies, needs no introduction—it's the most recognized index followed by traders and analysts alike.
We'll explore two strategies from our extensive system database that have proven their worth over time.
We'll break down their performance and see how they work, focusing on how both strategies keep positions open for multiple sessions.
You'll see how both use mean reversion levels as entry rules—levels that clearly are crucial in this market.
One of the coaches at Unger Academy here, let's jump into the first strategy.
First Strategy
This first strategy is straightforward, using the previous session's highs and lows as triggers for entry.
Essentially, we buy when a 15-minute bar closes above the previous session's low.
And we sell when a 15-minute bar closes below the previous session's high.
Trades are filtered with specific rules to maximize efficiency, especially on the short side, since this market tends to be bullish over the long term.
Exits are managed with a stop loss and a take profit. The stop loss is set at $1,300 and the take profit at $4,000, as shown in this trade.
Now, let’s evaluate the equity line of this strategy. As you can see, it’s truly an impressive equity line, especially considering that it’s been out-of-sample for 6-7 years.
Next, let's look at the long and short sides because this strategy has a unique feature.
As you can see, the long side is clearly profitable and recently hit a new equity peak.
But the most interesting thing is that the short side is also very consistent, almost more so than the long side.
This makes it a great strategy, especially since it's challenging to develop an effective short-side strategy in a generally rising market such as the S&P 500.
Using mean-reversion logic with specific filters allows us to profit from the short side too.
Let’s check out the number of trades and the average trade value.
This strategy has executed around 750 trades, slightly skewed between the long and short sides, which is normal.
The average trade is about $300, which is quite good for this market.
The long side’s average trade is slightly higher, but the short side is also quite satisfying.
Of course, this value is certainly enough to cover trading costs including slippage and commissions.
Let's review the annual returns of the strategy.
Here we see the annual performance and one glance is enough to see that the strategy has been profitable almost every year.
We can observe a slight dip in performance in 2019 and 2020, while in 2021 we had negative performance, which coincides with a sideways equity phase.
However, the strategy bounced back in 2022, earning about $15,000. In 2023 it made $18,000, and in 2024 it has made a net profit of $3,000.
So let's wait and see if the strategy will maintain its strong performance in the second half of the year!
Second Strategy
Now, let's analyze the second strategy, which also uses a mean-reverting approach.
Here, too, we buy on weakness, but instead of waiting for the previous day's low to break, as we did in the previous strategy, in this case, we use a more “sophisticated” entry level.
In fact, we calculate the current session's low and subtract an additional amount to enter at a more oversold level.
This percentage is obviously optimized during development.
And since we’re dealing with a market that behaves differently on the long and short sides, given its clear long-term upward trend, we opted for a non-mirror development, setting a different parameter for the long side and the short side.
The exits are managed with a stop loss set at $800 and a take profit set at $3,000.
Let’s evaluate this strategy’s performance, starting with the equity line.
Again, we see a strong, consistent equity line, especially if we consider that this strategy has been out of sample since 2017.
As you can see, here in this phase there was a noticeable drawdown, but the strategy continued to perform well, hitting new equity peaks.
Let’s now analyze the long and short sides. The long side is very consistent.
The short side struggles a bit, especially recently. However, considering the characteristics of this instrument, this result is more than acceptable.
In fact, the short side can be seen as a hedge during turbulent times, as happened in March 2020, a period we know all too well, and during the recession phase in 2008.
Let’s go now and evaluate the average trade.
This strategy makes many more trades than the previous one. There are about 1,800, with only 500 on the short side.
The average trade value is around $140, which is enough to cover trading costs.
The long side average trade is much higher, but the short side, as we said, serves as a hedge during unpredictable events.
Reviewing the annual returns, the first thing that stands out is 2020, when the strategy closed with a gain of $40,000.
And what’s particularly interesting is that this performance is partly due to the short side, creating an equity peak.
Subsequent years, except for 2022, were also profitable, especially 2023 with $33,000.
In this case, too, it’s now time to wait and see how this strategy will perform in the rest of 2024, which is looking very good so far.
Conclusion
Alright, so in this video, we've seen two mean-reverting strategies that allow for profiting in the S&P 500 market using different price levels.
As you know, having different setups and strategies is crucial to work with a well-structured and balanced portfolio.
Want to learn more about what it takes to succeed in the markets? Then click the link in the description and book a free strategic consultation with one of our tutors!
I'll see you in our next video. Happy trading!
We'll help you map out a plan to fix the problems in your trading and get you to the next level. Answer a few questions on our application and then choose a time that works for you.
BOOK YOUR FREE STRATEGY SESSION NOW >>Andrea Unger here and I help retail traders to improve their trading, scientifically. I went from being a cog in the machine in a multinational company to the only 4-Time World Trading Champion in a little more than 10 years.
I've been a professional trader since 2001 and in 2008 I became World Champion using just 4 automated trading systems.
In 2015 I founded Unger Academy, where I teach my method of developing effecting trading strategies: a scientific, replicable and universal method, based on numbers and statistics, not hunches, which led me and my students to become Champions again and again.
Now I'm here to help you learn how to develop your own strategies, autonomously. This channel will help you improve your trading, know the markets better, and apply the scientific method to financial markets.
Becoming a trader is harder than you think, but if you have passion, will, and sufficient capital, you'll learn how to code and develop effective strategies, manage risk, and diversify a portfolio of trading systems to greatly improve your chances of becoming successful.
