QQQ Mean-Reversion Strategy Using Internal Bar Strength

Summary

This document describes a long-only mean-reversion strategy for QQQ using Internal Bar Strength (IBS), calculated as the close’s position within the day’s high-low range. It treats a very low reading as a short-term oversold signal: enter at the next market open when the indicator falls below 10, then exit after a close above the prior day’s high.

Position size starts at 100 shares and increases in steps tied to accumulated strategy profit, with a stated default profit increment of $50. The document gives rules and example code, but no backtest, performance statistics, or evidence that the signals are profitable. The author suggests adapting the approach to other indices. The method’s limits include reliance on a brief price pattern, exposure to losses while waiting for the exit condition, and a sizing rule that scales exposure with profits without describing a risk cap or drawdown control.

Key ideas

• IBS measures the closing price’s location within the day’s range.
• A reading below 10 triggers a long entry at the next open.
• The position exits after a close above the previous day’s high.
• Position size increases according to accumulated strategy profit.
• The document provides no performance test or risk controls for the sizing rule.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.