Build Your First Strategy: A Step-by-Step Guide
2. Basic Mean Reversion / Sector Rotation
Mean reversion strategies thrive on buying assets that are temporarily cheap and waiting for them to snap back. This guide shows a super simple version using just one metric—the Percent to Long-Term Call Wall—applied to a static universe of broad-market ETFs.
It’s a building block you can copy, test, and improve.
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Pre-select a diversified basket of ETFs covering major sectors, styles, and asset classes:
Sectors: Tech, Utilities, Consumer Discretionary, Healthcare, Energy, Basic Materials, Industrials, Transports, Real Estate
Broad Market: SPY (S&P 500), QQQ (NASDAQ), MDY (Mid-Cap)
Style: Momentum ETF
Non-Equities: GLD (Gold), TLT (Long-Term Bonds)
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Add the “Percent to Long Term Call Wall” metric.
This is the distance from current price to the highest open-interest long-term call strike (the “call wall”).
High % = oversold → plenty of room to rebound toward the wall.
Rank all ETFs and select the Top 4 with the highest % to Call Wall.
Launch and Configure the Backtest
Click "Launch Backtest" and select "Strategy" mode.
Run in "Static" mode to pre-select the stock universe
Positions Minimum : 4
Weighting : Volatility Parity
Max Weight per Position : 50%
Rebalance Interval Every 2 weeks
Backtest Period : 5 years
Analyze the Results
Mean reversion is riskier than momentum—you’re buying weakness after all, and weakness is usually present for a reason.
This version works because it’s diversified across asset classes and uses options-implied price targets sourced from liquid contracts.
Improvements: Adding fundamental filters (e.g., earnings quality, low debt, positive earnings / EPS growth) helps avoid value traps.
Model Screener Link: https://live.signal-sigma.com/invitation/stock-screener/qPB_MUM9
(add this to your profile, then go to Actions > Duplicate)
Model Strategy Link: https://live.signal-sigma.com/invitation/strategy/617NZlqN