Tested the IBS trading system (no, not irritable bowel syndrome!)

I spent the weekend backtesting the Internal Bar Strength (IBS) indicator as a mean-reversion strategy on QQQ. I’ve seen it mentioned lately and wanted to see how it actually holds up. They really should have thought about a different name for it but...

The basic idea I tested was simple: buy when IBS drops below 10 (price closing near the daily low) and sell when it moves above 90 (price closing near the high). I ran it on daily QQQ data from 2010 through 2025.

The results were better than I expected. It came out to around a 15% annualized return with a 74% win rate over 164 trades. Market exposure was only about a third of the time, so you're sitting in cash quite a bit. The drawdown was only around 6 to 7%, which looks pretty good compared to buy-and-hold during the same window.

What caught my attention most was how patient the strategy is. Most systems I’ve tried stay in the market constantly. This one seems content to wait for those sharp dips and then exit quickly on strength.

There are definitely some things I’m still thinking about. It clearly benefits from trending environments, and the number of trades per year is on the low side. I also haven’t added realistic slippage or commissions yet, and I'd like to see how it behaves in other sectors or ETFs.

Curious if anyone else has tested IBS setups and what thresholds or variations you've found useful.