$SPY Volume Reverter Strategy

This $SPY ( ▲ 0.72% ) Volume Reverter Strategy has demonstrated consistent performance over two decades, delivering an 8.3% annualized return while being invested only ~20% of the time, and navigating steadily through various market conditions. Let’s look at how this strategy operates with systematic rules - no discretion required.

Introduction to the SPY Volume Reverter Strategy

The SPY Volume Reverter strategy is designed to trade the SPY (SPDR S&P 500 ETF), on a long-only basis using the daily bar with defined entry and exit rules.

DISCLAIMER: This is not financial advice. Results are hypothetical, do not indicate future results, and do not represent returns any investor actually attained. All materials and all associated media are provided for the general public for educational, informational, and entertainment purposes only. We are not securities brokers/dealers, financial/investment advisers, analysts, planners, lawyers, tax advisers or accountants. The information contained herein and all associated media is not and should not be regarded as “marketing material” of any kind or an offer or a recommendation to buy or sell securities. We do not solicit any action. We do not consider the particular investment objectives, financial/legal/tax situations, or needs of individuals, and therefore none of the information we provide should be relied on as tailored or personal advice or recommendation.

Backtest Results and Performance

How has the SPY Volume Reverter strategy fared over time? We backtested this strategy from January 2nd, 2004 to January 31st, 2025, spanning 21 years. Here are some of the key statistics:

• Total Return: 4.4x 

• Rate of Return (Annualized): 8.3%

• ROR (Last 5 Years): 9.4%

• Sharpe Ratio: 0.86

• Maximum Drawdown: -15.7%

• Trade Frequency: 221 trades over the period

• Win Rate: 62.9%

• Expectancy: 0.80% per trade.

• Average Exposure: 20.3%

• Exposure-Adjusted Return: 41.1%

The equity curve shows a steady upward trend over the 21-year period, albeit with expected drawdowns mirroring market volatility.

The largest Maximum Drawdown is -15.7%, which occured in 2009.

This table presents yearly and monthly percentage returns, along with total annual returns and annual maximum drawdowns (MaxDD). Here are the key takeaways:

• Highest Annual Return: 2008 (+40.6%)

• Worst Annual Return: 2023 (-1.7%)

• Only 1 down year in 21 years! 20 out of the 21 completed years (2004-2024) had positive returns.

Entry and Exit Rules