These SPDR S&P 500 (SPY) signals (weekly) traded as directed would have performed around 6.7 times better than buy-hold with an ROI of 1,229% for the period 04-Aug-08 to 14-Sep-18
The featured trading signals for SPDR S&P 500 (SPY) 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.
Returns for the SPDR S&P 500 (SPY) signals
For the 528 week (10.1 year) period from Aug 4 2008 to Sep 14 2018, these signals for SPDR S&P 500 (SPY) traded both long and short would have yielded $122,873 in profits from a $10,000 initial investment, an annualized return of 29.2%. Traded long only (no short selling) the signals would have returned $54,282, an annualized return of 20.2%. 93.0% of time was spent holding stock long. The return would have been $18,390 (an annualized return of 10.9%) 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 424 buy signals and 33 sell signals for this particular SPY strategy .These led to 24 round trip long trades of which 19 were profitable, and 23 short trades of which 17 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 and Reward/Risk
Drawdown (the worst case loss for an single entry and exit into the strategy) was 14% for long-short and 14% for long only. This compares to 47% for buy-hold. The reward/risk for the trading long and short was 1.51 compared to 0.21 for buy-hold, a factor of 7.3 improvement. If traded long only, the reward/risk was 1.05. 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. Returns have been adjusted for the worst case effects of 40 dividends