COMBO-04 · Trend Following

Trend + Mean Reversion Hybrid

Combines trend following with mean reversion. First confirms long-term trend direction, then enters on short-term oversold pullbacks within that trend. Captures trend moves at better entry points.

HybridTrendMean Reversion

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At a glance

Best onTrending markets with pullbacks

Signal frequencyDaily

Typical holding periodDays

Asset classesIndex, Commodity, FX

Markets tested10

Data through2026-11-10

What the backtest shows

Beat buy-and-hold on 4 of 10 markets by annual return over 5 years.
Had a smaller maximum drawdown than buy-and-hold on 10 of 10 markets.
Best market by Sharpe ratio: ETH-USD (Sharpe 0.57, CAGR 11.6%).
Weakest market: UNG (Sharpe -0.67, CAGR -10.7%).

Equity curve

Trend + Mean Reversion Hybrid Buy & hold · SPY, 2010-01-04 → 2026-11-10, growth of 1

Score and risk profile

Arena Score: 45.9SPY, 5 years

Return quality · 30%25

Drawdown control · 25%57

Consistency · 20%45

Robustness · 15%48

Significance · 10%80

Each bar is a percentile against every strategy on the same market and window (100 = best).

Time in market8%

Ulcer index3.9%

Longest drawdown651 days

Daily VaR (95%)0.00%

Probability Sharpe > 080%

Beta vs buy & hold0.10

Alpha (annual)+0.9%

Positive months17%

CAGR after 10 bp costs1.4%

Deflated Sharpe (luck-adjusted)27%

CAGR, 90% bootstrap range-2.3% to 6.1%

Max drawdown, 90% bootstrap range-17.7% to -4.9%

How it held up in sell-offs (SPY)

Period	Strategy	Buy & hold
Q4 2018 sell-off	-3.0%	-19.2%
COVID crash (Feb–Mar 2020)	-2.9%	-33.7%
2022 bear market	-3.0%	-24.5%
Market above its 200-day average (annualized) · 81%	+3.5%	+12.5%
Market below its 200-day average (annualized) · 19%	+0.3%	+19.8%

Sell-off dates follow the US stock market. Above/below the 200-day average uses the previous day's position, so there is no look-ahead.

Out-of-sample check (SPY)

Check	Value
Chosen parameters on their 3-year training windows (average Sharpe)	0.83
Same parameters in the following 6 months, when traded (Sharpe)	0.67
Default parameters over the same months (Sharpe)	0.51
Parameter re-selections / changes	28 / 11
Parameter settings with a positive Sharpe (full history)	9 of 9
Sharpe across settings: worst / median / best	0.08 / 0.42 / 0.56

Out-of-sample periods start on 2013-01-04. Training-window figures are flattered by picking the best of 9 settings; the out-of-sample figure is what the strategy actually earned. A large drop, or a result that depends on one setting, points to overfitting. How walk-forward testing works.

Results by market (5 years)

Market	CAGR	Buy & hold CAGR	Sharpe	Max drawdown	Buy & hold max DD	Volatility	Arena Score
ETH-USDEthereum	11.6%	-15.1%	0.57	-14.1%	-79.0%	15.3%	83
SPYSPDR S&P 500	2.0%	11.6%	0.38	-8.8%	-24.5%	5.5%	46
DBAInvesco DB Agriculture	1.8%	8.8%	0.31	-9.4%	-15.9%	6.5%	42
BTC-USDBitcoin	4.6%	2.6%	0.29	-26.8%	-75.9%	13.6%	65
SLViShares Silver Trust	1.2%	15.2%	0.16	-17.0%	-57.8%	14.8%	44
EURUSD=XEUR/USD	0.3%	-0.7%	0.14	-4.5%	-17.2%	2.2%	72
USOUnited States Oil Fund	-2.1%	20.2%	-0.11	-27.8%	-36.2%	12.3%	23
GLDSPDR Gold Shares	-1.3%	16.4%	-0.17	-16.6%	-28.3%	6.7%	22
DBCInvesco DB Commodity Index	-3.8%	10.8%	-0.57	-21.1%	-27.3%	6.8%	11
UNGUnited States Natural Gas	-10.7%	-30.7%	-0.67	-45.7%	-93.3%	15.5%	—

Strategy metrics use daily returns without trading costs. Buy-and-hold figures are for the same market and window. Rows are sorted by Sharpe ratio.

SPY across time windows

Window	Total return	CAGR	Sharpe	Sortino	Max DD	Win days	Trades
1 year	+2.6%	2.6%	0.48	0.09	-4.4%	3%	6
3 years	+4.4%	1.4%	0.27	0.10	-8.8%	5%	16
5 years	+10.3%	2.0%	0.38	0.15	-8.8%	5%	28
Full history	+61.3%	2.9%	0.55	0.25	-8.8%	6%	104

Rules

Entry

Price > 200 MA (uptrend)
AND RSI < 35 (pullback)

Exit

RSI > 50 (recovered)
OR Price < 200 MA (trend break)

Indicators

Long-term MA for trend
RSI for mean reversion

Inputs

Trend_MA = 200
Short_MA = 20
RSI_Period = 14
RSI_Oversold = 35

Position sizing

Fixed 100% allocation

Risk controls

Only trade in direction of trend

Strategy evidence

Only available, validated bundles appear below. Missing evidence is not a passing validation result.

Evidence coverage

10 / 10 declared strategy–market pairs validated

Notes

Buy the dip in an uptrend
Trend filter prevents fighting the market
Better entries than pure trend following

Related strategies

ADX-01 · SPY 5Y Sharpe 0.43ADX Trend Filter EVENT-01 · SPY 5Y Sharpe 0.89Trend + Macro Filter HMA-01 · SPY 5Y Sharpe 0.06HMA Crossover KC-01 · SPY 5Y Sharpe 0.67Keltner Channel Breakout MOM-01 · EURUSD=X 5Y Sharpe 0.19Time-Series Momentum MOM-05 · FABER-TAA 5Y Sharpe 0.91Faber TAA

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Backtests are historical simulations on daily data and do not include commissions or slippage. They do not guarantee future results and are not investment advice. See the methodology for how every strategy is tested.