Cumulative IBS Indicator

Inspired by Larry Connors’ Cumulative RSI(2) (found in this post), and the results of my Cumulative DV2 (found in this post) I decided to test out how a Cumulative IBS indicator would work. The formula for IBS can be found here, and the cumulative IBS is the X-day simple moving average of the IBS. This is a frictionless test on SPY from 1/1/2000 – 12/26/2012. I tested the cumulative IBS using default parameters from the original post I found over IBS (Long if IBS < 45 & Short if IBS > 95).

Equity curves for cumulative 1-9 day IBS. Starts at 1-day in the top left and ends at 9-day on the bottom right. It counts from left to right, meaning that the top middle picture is the cumulative 2-day IBS.

Equity curves for cumulative 10-18 day IBS. Follows same structure as above.

We can see the equity curves of the cumulative IBS reinforces the conclusion in the cumulative DV2 post.

Here are the individual graphs in anyone is interested:

2-day

3-day

4-day

5-day

6-day

7-day

8-day

9-day

10-day

11-day

12-day

13-day

14-day

15-day

16-day

17-day

18-day

1. Toby says:

For those of us new to your blog, would you please provide details on how the Cumulative IBS Indicator is calculated. Googling the term provided little information.

The equity curves are very impressive.

Thanks, Toby

1. Of course, thank you for your suggestion. The formula for IBS = (Close-Low)/(High-Low). The Cumulative IBS is just the X-day moving average of the IBS. I edited the post to accommodate future readers.

Wil

1. sid says:

Hi Wil,
I really the research you post. I look forward to reading more. I am trying to replicate these results for SPY. But when I take a X-day average (X>3), I don’t see values greater than 95, so the strategy is just stuck in a long trade. I pretty sure I am calculating IBS and its SMA correctly. So, its the strategy rules. Do you have any suggestions?
Thanks,
Sid

2. Hey Sid,
I was a bit vague about my system entry/exits. The system enters the market whenever the indicator is below 45, and exits whenever the indicator is above 45. The system shorts the market whenever the indicator is above 95, and exits whenever it is below 95. If there are no values of 95 or above, it should only indicate that there are no short positions taken, not that the long position never exits.
Best,
Wil