GOOGL (Alphabet Inc.) Signals – Weekly

These Alphabet Inc. GOOGL signals were selected from 1,240,000 backtest results for their reward/risk and parameter sensitivity characteristics. While backtests don't typically provide reliable signals which can always be counted on moving forward, many swing traders find value in knowing what buy and sell signals would have worked over time.

GOOGL Signals Weekly

For the 528 week (10.1 year) period from Jul 7 2008 to Aug 17 2018, these signals for Alphabet Inc. (GOOGL) traded as directed would have yielded $525,656 in profits from a $10,000 initial investment, an annualized return of 48.3%. The long-side profit (buy/sell only, no shorts) for the signals was $175,257, an annualized return of 33.5%. If you had bought and held the stock for the same period the profit would have been $35,599 (an annualized return of 16.2%). The trading style was Long & Short, meaning that you would be long or short the security at all times.

For this type of strategy, not every signal is acted upon and signals are often reinforced. If you are long in the security, buy signals can be ignored, for example. Similarly if you are short you can ignore sell signals. For this particular GOOGL strategy there were 471 buy signals and 101 sell signals.These led to 68 long trades of which 54 were profitable, and 67 short trades of which 41 were profitable.

This is a weekly strategy; weekly OHLC data is used to derive all signals and there is at most one buy and sell signal and one trade per week. Drawdown (the worst case loss for an single entry and exit into the strategy) was 36% vs. 50% for buy-hold. Using drawdown plus 5% as our risk metric, and annualized return as the reward metric, the reward/risk for the strategy was 1.18 vs. 0.29 for buy-hold, an improvement factor of around 4.0

GOOGL Trading Strategy (Weekly)

Here is a Google Inc (GOOGL) trading strategy with once a week intervention which would have performed significantly better than buy-hold over the last 10 years. Annualized return was 31.5% vs. 16.5% (returning $149K for 10K outlay vs $36.7K, compounded), drawdown was 40.2% vs. 62.4%, so reward/risk was better.

The buy and cover signal (see table below) was present every week where the price dropped 0.03% below the last price the stock was sold at which happened 174 times over the course of the 528 weeks of the analysis, and usually happened the week following a sell/short.

The sell and short signal happened every week the stock price rose 8.13% or more above the open price of the current week. This happened only 29 times, so there is a strong buy-side bias to this strategy. All trading would have been done at the open of the week following the signal.

The equity curve for this GOOGL trading strategy shows that the stock was held short (the red bands in the background) for small periods, typically a week.

The scan below shows how the annualized return changed, had the buy and sell parameters changed. At 2.35% buy point, the algorithm gets stuck, resulting in a loss. This is characteristic of trading strategies which reference buy or sell prices. At 1.5% sell point and below, the algorithm made a loss, but returns for all buy points above that were positive, for the 0.03% buy point.

One nice characteristic this algorithm had was consistent returns for each of the 132 week  periods in the backtest. You can see from the table below that the annualized return was between 28% and 34.8% for every period. Compare that with buy-hold which ranged from -4.6% to 26%

You can also see this characteristic on the scans for each quartus:

You can download the list of trades in .xlsx format: GOOGL.W Trades.

As of Sept 16th 2015, the algorithm is long, awaiting a sell signal if the price hits 708.933. Last sell price was 654.34.

Please note, while this is an interesting backtest result, it is not a suggestion to trade this way. As always I don’t know how this strategy will fare in the future, but will track it from time to time.

Andrew

This post was edited 12/28/15 to correct an error in the short-side returns.


Update Oct 21st 2016

This strategy has pretty much followed buy-hold long:

GOOGL Trading Strategy Update Oct 21 2016

GOOGL Trading Strategy Update Oct 21 2016