Internal bar strength on the Nasdaq-100

Micro E-mini Nasdaq-100 (MNQ) · 5-minute bars · 2016 to 2026 · Mean reversion

Marginal: profit factor 1.57 out of sample, not clearly above break-even, t = 1.4.

Profit factor, out of sample: 1.57
Average trade, out of sample: +0.06R
Win rate, out of sample: 57%
Trades, 10 years: 404
Max drawdown: $5,685
Pass odds, median plan: 2.6%

Hypothetical results. These results are based on simulated or hypothetical performance results that have certain inherent limitations. Unlike the results shown in an actual performance record, these results do not represent actual trading. Also, because these trades have not actually been executed, these results may have under- or over-compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated or hypothetical trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profits or losses similar to these being shown.

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Abstract

We backtested the IBS mean reversion rules on Micro E-mini Nasdaq-100 (MNQ) 5-minute bars from 2016-01-11 to 2026-10-30: 404 trades, with commission and a tick of slippage on every market and stop fill. In sample (to 2023-08-03) it made +0.05R per trade with a profit factor of 1.26; out of sample (from 2023-08-04) +0.06R per trade and 1.57 over 120 trades. 16 of the 16 parameter settings we tried were profitable out of sample. Sized at $250 of risk a trade, simulated 50K evaluations passed 0% to 5% of the time across 36 tracked plans.

1Hypothesis

Buy when the day closes near its low (internal bar strength under 0.2) and sell at the next day's close.

If a close near the day's low reflects late selling pressure that reverses, the next day should on average recover.

2Data

Instrument: Micro E-mini Nasdaq-100 (MNQ), traded on the NQ price series (NQ.c.0: front month, rolled on the calendar). CME Globex via Databento.
Period: 2016-01-11 to 2026-10-30: 2,745 sessions, 3,739,235 one-minute bars, built into 210,814 5-minute bars of the regular session (09:30 to 16:00 ET).
Costs: $0.75 commission a contract each way and 1 tick ($0.50) of slippage on every market and stop fill. Limit orders fill when price touches them; market orders fill at the next bar's open and stops at their price, each with one tick of slippage; when a bar touches both the stop and the target, the stop counts.
Position size: About $250 of risk a trade: micro contracts, rounded down, at least one. R is a trade's net P&L divided by its risk at entry.
Out of sample: The last 30% of weekdays: 2023-08-04 on (846 days), after 1,974 in-sample days. The rules were fixed before either side was run.

3Method

Our reading of the publicly described rules; the creator may trade it differently. The rules, exactly as the code runs them:

IBS at 15:55 ET is (price - the session's low) / (the session's high - its low), from 0 (at the low) to 1 (at the high), regular session only.
Entry: if IBS is below entry_ibs (0.2), buy at the next bar's open.
Exit: at 15:55 ET, hold_days (1) sessions later.
Stop: 2 times the 10-day average true range below the entry, for a defined risk.
Size: about risk_usd dollars of risk a trade (micro contracts, rounded down, at least 1 and at most max_contracts).

bot.py, the file the engine ran

1"""Internal bar strength (IBS) mean reversion on Micro E-mini Nasdaq-100 (MNQ), long only.2 3Each session's 15:55 ET price stands in for its daily close; positions are held overnight.4 5Rules:6  1. IBS at 15:55 ET is (price - the session's low) / (the session's high - its low), from 0 (at the7     low) to 1 (at the high), regular session only.8  2. Entry: if IBS is below `entry_ibs` (0.2), buy at the next bar's open.9  3. Exit: at 15:55 ET, `hold_days` (1) sessions later.10  4. Stop: 2 times the 10-day average true range below the entry, for a defined risk.11  5. Size: about `risk_usd` dollars of risk a trade (micro contracts, rounded down, at least 1 and at12     most `max_contracts`).13"""14import qy15 16 17class Bot(qy.Strategy):18    """Buy a close near the day's low, sell it a day later."""19 20    symbol = "MNQ"21    timeframe = "5m"22    session = "rth"23    params = {"entry_ibs": 0.2, "hold_days": 1, "risk_usd": 250, "max_contracts": 50}24    max_position = 5025    overnight = True26 27    def setup(self):28        self.day = None29        self.prev = None30        self.trs = []31        self.held = 032 33    def _size(self, risk_points):34        per_contract = risk_points * self.point_value35        n = int(self.p.risk_usd // per_contract) if per_contract > 0 else 136        return max(1, min(self.p.max_contracts, n))37 38    def on_bar(self, bar):39        if bar.date != self.day:40            self.day, self.dh, self.dl = bar.date, bar.high, bar.low41        else:42            self.dh, self.dl = max(self.dh, bar.high), min(self.dl, bar.low)43        if bar.dt.hour * 60 + bar.dt.minute != 950:44            return45        c = bar.close46        if self.prev is not None:47            self.trs = (self.trs + [max(self.dh, self.prev) - min(self.dl, self.prev)])[-10:]48        self.prev = c49        if self.position.is_long:50            self.held += 151            if self.held >= self.p.hold_days:52                self.close_position("holding period")53            return54        if self.dh <= self.dl or len(self.trs) < 10 or self.orders:55            return56        ibs = (c - self.dl) / (self.dh - self.dl)57        if ibs < self.p.entry_ibs:58            atr = sum(self.trs) / 1059            self.held = 060            self.buy(self._size(2 * atr), stop_price=c - 2 * atr, tag=f"IBS long | f={ibs:.4f}")

4Results

Table 1. In sample (2016-01-11 to 2023-08-03) against out of sample (2023-08-04 to 2026-10-30), after costs.
Statistic	In sample	Out of sample	All
Trades	284	120	404
Net P&L	+$8,128	+$12,348	+$20,476
Profit factor	1.26	1.57	1.39
Average trade	+0.05R	+0.06R	+0.05R
95% interval of the average	0.00 to 0.09	−0.02 to 0.13	0.01 to 0.09
t-statistic of trade R	2.07	1.41	2.51
Win rate	56%	57%	56%
Average win / average loss	1.01	1.16	1.08
Max drawdown	$5,685	$3,854	$5,685
Sharpe ratio (daily, annualized)	1.33	2.35	1.70
Longest losing streak	6	4	6
Long / short profit factor	1.26 / n/a	1.57 / n/a	1.39 / n/a
Average holding time	2093 min	2102 min	2095 min
Commission paid	$428	$180	$608

Cumulative P&LDrawdown from the highOut of sample from 2023-08-04

Drag across the chart to zoom into a period, double-click to reset.

Figure 1. Cumulative P&L after costs and its drawdown from the running high, 2016-01-11 to 2026-10-30, at about $250 of risk a trade. The shaded part is out of sample.

In sample (284 trades)Out of sample (120)Averages

Averages: +0.05R in sample, +0.06R out of sample.

Figure 2. The distribution of trade results in R, as a share of each side's trades. Bars are in sample; the line is out of sample.

In sampleOut of sampleQuintile mean, 95% intervalOLS fitDensity contours

Drag a box to zoom, double-click to reset.

Figure 3. Trade R against the internal bar strength at entry; the dashed line is the OLS fit (r = −0.01, p = 0.91, n = 404; Spearman ρ = 0.00). Out of sample alone: r = 0.05, p = 0.60. Squares are the means of five equal-count bins, with 95% intervals.

5Robustness

We reran the strategy on a grid of 16 settings of its two main parameters, each on the full history with the same split. 16 were profitable in sample and 16 out of sample.

1.59

1.72

1.38

1.35

1.79

1.38

1.26

1.34

1.42

1.13

1.15

1.13

1.38

1.35

1.57

1.51

0.10

0.15

0.20

0.30

IBS entry level across, holding period (sessions) up. Solid outline: the defaults we tested; dashed: the in-sample best.

Hover a cell for both sides of the split.

IBS entry level 0.10 to 0.30 across · Holding period (sessions) 1.00 to 5.00 in depth · Profit factor, out of sample 1.13 to 1.79 as height and shade. Drag or use the arrow keys to turn it.

Drag to rotate; ctrl or ⌘ and scroll to zoom.

Figure 4. Profit factor across IBS entry level and holding period (sessions), as a map and as a surface of the same grid. Values above 4 are drawn at 4.

What would change it

Nothing on the grid clearly helps. Its in-sample best, IBS entry level 0.1 and holding period (sessions) 3, did better out of sample, profit factor 1.79 against 1.57 for the defaults, but over only 56 trades, t = 1.6: too few, or too noisy, to call it a fix.

In-sample yearOut-of-sample year95% interval

Figure 5. Average trade by calendar year with its 95% interval: a year-by-year walk through the history. Lighter bars are in-sample years.

Figure 6. Average trade in three volatility regimes: terciles of the 20-session average of the daily range (% of the open), up to the day before the trade (regular session). The cut-offs use the whole period, so this describes, it doesn't forecast.

Figure 7. Average trade by weekday and by the hour of entry (New York time), with 95% intervals.

Median25th to 75th percentile5th and 95thRuin: down $2,000

Figure 8. 2,000 simulated years of 252 sessions, drawn session by session from the whole backtest (days without trades included), with 48 paths drawn; red paths lost $2,000 at some point. Risk of ruin 28.4% [26.5%, 30.5%]; 74% of years ended up; median ending P&L +$1,749, 5th to 95th percentile −$2,482 to +$6,955.

6Prop-firm implications

The backtest's sessions run through the rules of 36 tracked 50K evaluations: 2,000 runs of up to 60 sessions each, with the drawdown and daily limits checked against each trade's intraday low. Intervals are Wilson 95% intervals of the simulation. A simulation of the past, not the chance that anyone passes.

Plan	Pass	Fail	Out of time	Median sessions
Bulenox 50K Qualification Account (Legacy, Option 1, trailing drawdown)	4.9%	8%	87%	40.5
Bulenox 50K Qualification Account (Legacy, Option 2, EOD drawdown)	4.9%	5%	91%	40
AquaFutures Beginner 50K Evaluation	4.8%	11%	84%	42
Funded Futures Family 50K Evaluation (standard plan)	4.8%	13%	83%	39.5
FundedNext Futures Rapid Pro Challenge 50K	4.8%	13%	83%	39.5
Lucid Trading LucidPro 50K Evaluation	4.8%	13%	82%	39.5
Top One Futures Elite Challenge 50K	4.8%	13%	83%	39.5
Tradeify 50K GROWTH Evaluation	4.8%	13%	82%	39.5
Alpha Futures Zero 50K Evaluation	4.8%	13%	83%	39
Apex Trader Funding 50K EOD Evaluation	4.8%	13%	83%	39

Scale 0 to 10%.

Figure 9. Simulated pass odds by plan, best first, with each plan's fail and out-of-time shares and the median sessions to a pass.

7Limitations

The daily close is approximated by the 15:55 ET price.
Long only, in a market that rose over the period.
A backtest on the past, with fills simulated from one-minute bars; live fills, queues and outages differ.

8Conclusion

Marginal: profit factor 1.57 out of sample, not clearly above break-even, t = 1.4. Nothing on the grid clearly helps. Its in-sample best, IBS entry level 0.1 and holding period (sessions) 3, did better out of sample, profit factor 1.79 against 1.57 for the defaults, but over only 56 trades, t = 1.6: too few, or too noisy, to call it a fix. The result is too close to break-even to tell apart from noise after costs.