So far, I’ve been testing day trading strategies.
Which you’d have to watch for hours per day for trading signals.
Or automate.
And after all that dang work, not one of them beat buy and hold. Ouch.
Recently, I found a strategy claiming to beat buy and hold, without any of that hassle.
They say you can run it manually and in only 10 minutes per month.
Too good to be true? Let’s find out…
Our Test
The rules are so simple, you might chuckle…
Ignore all S&P 500 price action for the whole month, until the close on the last day.
If that closing price is above the 200-day moving average, go long (or stay long if you’re already in a trade).
If it’s below the 200-day moving average, sell (or don’t get in if you’re on the sidelines).
With that in mind, let’s look at our setup a little more closely…
The Trading Truth Test Setup
Since this is a monthly strategy, I used much more data than in previous tests…
The Test Results
The test ended up 152.4x to $ 3.81 million a 59% win rate. Pretty amazing, though that’s over several decades.
The maximum losing streak was $ 46,384.74, or 18.4% (from $ 252,545.60).
That said, the buy-and-hold return was up 403.0x, trouncing our test.
Especially given the tax advantages from long-term capital gains.
Note: I did this analysis in a spreadsheet, with exported TradingView data. If you see any errors, please let me know.
What Test Tweaks We Could Make
One tweak is looking at the slope of the 200-day moving average.
If it’s not pointing up enough, I wouldn’t want to go long.
We could also use some other indicators to see when a pullback is likely, for example, Bollinger Bands or Keltner channels.
What would you test? And what else would you like to see tested?
Comment below!
Which you’d have to watch for hours per day for trading signals.
Or automate.
And after all that dang work, not one of them beat buy and hold. Ouch.
Recently, I found a strategy claiming to beat buy and hold, without any of that hassle.
They say you can run it manually and in only 10 minutes per month.
Too good to be true? Let’s find out…
Our Test
The rules are so simple, you might chuckle…
Ignore all S&P 500 price action for the whole month, until the close on the last day.
If that closing price is above the 200-day moving average, go long (or stay long if you’re already in a trade).
If it’s below the 200-day moving average, sell (or don’t get in if you’re on the sidelines).
With that in mind, let’s look at our setup a little more closely…
The Trading Truth Test Setup
Since this is a monthly strategy, I used much more data than in previous tests…
- Market: the S&P 500 index (using SPY to trade it, assuming SPY existed decades ago and is exactly 1/10th the S&P 500 Index price)
- Timeframe: September, 1941 to April, 2023
- Bar interval: 1 day (for the moving average, even though we’re only making trading decisions at the end of each month)
- Moving averages: 200-day exponential moving average
- Starting Equity: $ 25,000
- Max % of Equity Per Trade: 100% (just like we would with buy and hold, we’re fully investing our capital)
- Commissions, fees and taxes. To keep things super simple, we’re assuming these are all zero.
The Test Results
The test ended up 152.4x to $ 3.81 million a 59% win rate. Pretty amazing, though that’s over several decades.
The maximum losing streak was $ 46,384.74, or 18.4% (from $ 252,545.60).
That said, the buy-and-hold return was up 403.0x, trouncing our test.
Especially given the tax advantages from long-term capital gains.
Note: I did this analysis in a spreadsheet, with exported TradingView data. If you see any errors, please let me know.
What Test Tweaks We Could Make
One tweak is looking at the slope of the 200-day moving average.
If it’s not pointing up enough, I wouldn’t want to go long.
We could also use some other indicators to see when a pullback is likely, for example, Bollinger Bands or Keltner channels.
What would you test? And what else would you like to see tested?
Comment below!