These Netflix (NFLX) signals traded as directed would have performed around 4.6 times better than buy-hold with an ROI of 1291% for the period 15-Aug-16 to 18-Sep-18
These trading signals for NFLX were selected from over a million backtest results 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.
For the 528 day (2.1 year) period from Aug 15 2016 to Sep 18 2018, these signals for Netflix (NFLX) traded both long and short would have yielded $129,107 in profits from a $10,000 initial investment, an annualized return of 252.1%. Traded long only (no short selling) the signals would have returned $64,042, an annualized return of 160.4%. 79.4% of time was spent holding stock long. The return would have been $27,969 (an annualized return of 89.2%) 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 65 buy signals and 36 sell signals for this particular NFLX strategy .These led to 22 round trip long trades of which 15 were profitable, and 21 short trades of which 18 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 15% for long-short and 14% for long only. This compares to 25% for buy-hold. The reward/risk for the trading long and short was 12.36 vs. 2.94 for buy-hold, an improvement factor of around 4.2 If traded long only, the reward/risk was 8.44. 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.