These YANG signals traded as directed would have performed around 56.3 times better than short-hold with an ROI of 3,547% for the period 18-Aug-16 to 21-Sep-18
The trading signals for YANG 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 YANG signals
For the 528 day (2.1 year) period from Aug 18 2016 to Sep 21 2018, these signals for YANG traded both long and short would have yielded $354,655 in profits from a $10,000 initial investment, an annualized return of 458.1%. Traded long only (no short selling) the signals would have returned $34,367, an annualized return of 103.9%. 25.9% of time was spent holding stock long. The return would have been $6,305 (an annualized return of 26.3%) if you had short sold 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 149 buy signals and 217 sell signals for this particular YANG strategy. In turn, these led to 20 round trip long trades of which 19 were profitable, and 21 short trades of which 20 were profitable. This is a daily strategy, meaning that 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 22% for long-short and 13% for long only. This compares to 80% drawdown for buy-hold and 28% drawdown for short-hold. The reward/risk for the trading long and short was 17.14 compared to 0.80 for short and hold, a factor of 21.5 improvement. If traded long only, the reward/risk was 5.74. 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.