Daily TA - AEX
Profiting from Panic – A Mean Reversion Study
Quantitative Strategy Report: AEX Mean Reversion Sniper
Strategy Overview
The AEX Sniper is a quantitative mean-reversion strategy designed to capitalize on extreme short-term market panic. It utilizes statistical deviations (Z-Scores) to identify "oversold" conditions in the AEX Index. The core thesis is that the price of a major index acts like a rubber band: when stretched too far away from its average (SMA20), it tends to snap back to its mean.
Core Execution Logic
Entry Trigger (The Panic Buy): A long position is initiated when the Z-Score falls below -2.0. This indicates that the price is trading more than 2 standard deviations below its 20-day moving average—a state historically associated with temporary exhaustion of selling pressure.
Primary Exit (Mean Reversion): The position is closed once the price touches or exceeds the 20-day Simple Moving Average (SMA20).
Integrated Risk Management
To ensure long-term capital preservation, the strategy employs two critical "fail-safes":
Statistical Stop-Loss: If the market enters a systemic crash and the Z-Score drops below -3.5, the position is liquidated immediately to prevent catastrophic drawdowns.
Time Decay Exit: If the mean reversion target is not met within 30 trading days, the position is closed to free up capital and avoid "dead money" during prolonged sideways trends.
Performance Analysis (10-Year Backtest)
Based on the provided simulation from 2016 to 2026:
Win Rate (78.0%): Out of 50 trades, the vast majority closed in profit, proving the reliability of the AEX to return to its mean.
Profit Factor (2.22): For every €1.00 risked, the strategy generated €2.22 in gross profit.
Compounded Growth: An initial capital of €100,000 grew to €150,017, representing a 50% total return with significantly lower market exposure time compared to a "Buy & Hold" approach.
Visual Breakdown
Price & Execution (Top): Shows the candlestick patterns with green triangles (Buy) and red triangles (Sell). Notice how entries often occur at local bottoms.
Statistical Momentum (Middle): The Z-Score bars highlight volatility. Red bars signal the "Sniper" entry zone.
Strategy Equity (Bottom): Displays the steady, stair-stepping growth of the portfolio. The flat periods represent times when the strategy is in cash, avoiding market volatility.
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