These Square (SQ) signals traded as directed would have performed around 2.9 times better than buy-hold with an ROI of 2039% for the period 22-Aug-16 to 25-Sep-18
The trading signals for Square (SQ) were selected for their reward/risk and parameter sensitivity characteristics. Backtests don't always generate reliable signals which can be counted on moving forward but many traders find value in knowing what buy and sell signals would have worked well in the past.
Returns for the Square (SQ) signals
For the 528 day (2.1 year) period from Aug 22 2016 to Sep 25 2018, these signals for Square (SQ) traded both long and short would have yielded $203,931 in profits from a $10,000 initial investment, an annualized return of 332.5%. Traded long only (no short selling) the signals would have returned $124,566, an annualized return of 246.5%. 87.6% of time was spent holding stock long. The return would have been $70,942 (an annualized return of 171.8%) if you had bought and held the stock for the same period.
Signals and Trades
Not all signals are acted upon and signals are often reinforced in this type of strategy. If you are long in the security, buy signals are not acted on, for example. Similarly if you are short you must ignore sell signals. There were 485 buy signals and 57 sell signals for this particular SQ strategy .These led to 43 round trip long trades of which 36 were profitable, and 43 short trades of which 25 were profitable. This is a daily strategy; daily OHLC data is used to derive all signals and there is at most one buy and sell signal and one trade per day.
Drawdown and Reward/Risk
Drawdown (the worst case loss for an single entry and exit into the strategy) was 13% for long-short and 13% for long only. This compares to 30% for buy-hold. The reward/risk for the trading long and short was 18.86 compared to 4.94 for buy-hold, a factor of 3.8 improvement. If traded long only, the reward/risk was 13.98. We use drawdown plus 5% as our risk metric, and annualized return as the reward metric.
The backtests assume a commission per trade of $7.
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