A Simple Mean-Reversion Strategy for the German Stock Market
The Idea
Traders often use the DAX 40 for intraday mean-reversion strategies. This one goes long on intraday weakness, defined by two classic indicators. It doesn't have any trend filter, but has an upper limit for volatility, to avoid catching knives that fall too aggressively. This strategy includes a stop loss of 0.5 %, which gives fewer winners than losers, but in return, it has a very high risk-to-reward ratio.
Setup for Backtest
Market: DAX
Contract: 1 € per point
Broker: IG
Testing environment: ProRealtime 12
Timeframe: 1 hour
Time zone: CET
No fees and commissions are included.
Result
Total gain: 18 211.7 €
Average gain: 8.4 €
Total trades: 2 162
Winners: 913
Losers: 1 248
Breakeven: 1
Max drawdown: –1 630.5 €
Risk/reward ratio: 1.75
Total time in the market: 42.9 %
Average time in the market: 16 hours, 26 minutes
CAGR (10 000 € in starting capital): 7.69 %
Entry Conditions
IBS is under 0.05
RSI2 is less than 50
50 Period Bollinger Bandwidth is less than 0.06
Exit Conditions
Low is above the last bar's close
Code
ProRealTime
FAQ
Q: Am I free to use this strategy however I want?
A: Sure! But we're happy if you refer to our website and keep the creator's name in the code.
Q: I'm using another platform, can you write the code in another language?
A: No, sorry. We might add code in more languages later to the website, but until then, we recommend you try ChatGPT or something similar to help you rewrite it.
Q: Why does my backtest look different when I run the code?
A: The strategy might give different backtest results for several reasons, like added spread or fees, the wrong time-zone settings, or that you're using another type of contract.
Q: Will I make money if I run this strategy live?
A: We don't know. We're not financial advisors, we're just traders sharing our ideas.
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