MR-14 · Mean Reversion

Detrended Price Oscillator

Detrended Price Oscillator (DPO) removes longer-term trend by comparing a shifted price to its moving average. This strategy buys when DPO is deeply negative and exits near the zero line.

Mean ReversionOscillator

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At a glance

Best onRange-bound markets

Signal frequencyDaily

Typical holding periodDays

Asset classesIndex, Commodity, FX

Markets tested10

Data through2026-11-10

What the backtest shows

Beat buy-and-hold on 3 of 10 markets by annual return over 5 years.
Had a smaller maximum drawdown than buy-and-hold on 8 of 10 markets.
Best market by Sharpe ratio: DBA (Sharpe 0.68, CAGR 3.8%).
Weakest market: UNG (Sharpe -0.57, CAGR -27.0%).

Equity curve

Detrended Price Oscillator Buy & hold · SPY, 2010-01-04 → 2026-11-10, growth of 1

Score and risk profile

Arena Score: 29.9SPY, 5 years

Return quality · 30%12

Drawdown control · 25%50

Consistency · 20%9

Robustness · 15%38

Significance · 10%62

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

Time in market17%

Ulcer index3.3%

Longest drawdown672 days

Daily VaR (95%)-0.53%

Probability Sharpe > 062%

Beta vs buy & hold0.15

Alpha (annual)-0.9%

Positive months27%

CAGR after 10 bp costs-1.0%

Deflated Sharpe (luck-adjusted)12%

CAGR, 90% bootstrap range-3.9% to 5.3%

Max drawdown, 90% bootstrap range-23.6% to -6.8%

How it held up in sell-offs (SPY)

Period	Strategy	Buy & hold
Q4 2018 sell-off	-4.1%	-19.2%
COVID crash (Feb–Mar 2020)	-1.8%	-33.7%
2022 bear market	+1.9%	-24.5%
Market above its 200-day average (annualized) · 81%	+1.0%	+12.5%
Market below its 200-day average (annualized) · 19%	+13.1%	+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)	0.94
Same parameters in the following 6 months, when traded (Sharpe)	0.44
Default parameters over the same months (Sharpe)	0.41
Parameter re-selections / changes	28 / 13
Parameter settings with a positive Sharpe (full history)	9 of 9
Sharpe across settings: worst / median / best	0.26 / 0.40 / 0.53

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
DBAInvesco DB Agriculture	3.8%	8.8%	0.68	-7.7%	-15.9%	5.7%	65
GLDSPDR Gold Shares	3.5%	16.4%	0.35	-13.9%	-28.3%	11.8%	44
SLViShares Silver Trust	1.6%	15.2%	0.20	-44.5%	-57.8%	26.5%	41
ETH-USDEthereum	-0.3%	-15.1%	0.16	-48.0%	-79.0%	34.6%	60
SPYSPDR S&P 500	0.7%	11.6%	0.14	-7.5%	-24.5%	6.7%	30
BTC-USDBitcoin	-5.8%	2.6%	-0.06	-59.1%	-75.9%	23.4%	27
USOUnited States Oil Fund	-9.0%	20.2%	-0.28	-55.8%	-36.2%	23.7%	13
EURUSD=XEUR/USD	-0.3%	-0.7%	-0.34	-2.5%	-17.2%	0.9%	—
DBCInvesco DB Commodity Index	-4.1%	10.8%	-0.35	-30.6%	-27.3%	10.4%	12
UNGUnited States Natural Gas	-27.0%	-30.7%	-0.57	-81.9%	-93.3%	40.8%	16

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	+3.4%	3.4%	1.37	0.97	-1.5%	5%	8
3 years	+3.4%	1.1%	0.34	0.21	-7.5%	8%	43
5 years	+3.5%	0.7%	0.14	0.10	-7.5%	9%	86
Full history	+70.2%	3.2%	0.47	0.23	-12.7%	8%	248

Rules

Entry

Go long when DPO% < Entry_Level

Exit

Exit when DPO% > Exit_Level

Indicators

SMA(Period)
DPO = Close.shift(Period/2 + 1) - SMA

Inputs

Period = 20
Entry_Level = -2.0
Exit_Level = 0.0

Position sizing

Fixed 100% allocation

Risk controls

Detrending reduces long-cycle bias

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

DPO is a cycle indicator, not a trend indicator

Related strategies

MR-01 · SPY 5Y Sharpe 0.77RSI Mean Reversion MR-05 · SPY 5Y Sharpe 0.43CCI Mean Reversion MR-10 · SPY 5Y Sharpe 0.66Stochastic Oscillator Reversion MR-11 · SPY 5Y Sharpe 0.17Williams %R Reversion MR-12 · SPY 5Y Sharpe 0.43Money Flow Index Reversion MR-13 · SPY 5Y Sharpe 0.00TRIX Reversion

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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.