Scott's Investm...'s  Instablog

No disclosure

Last week I did my first backtest using Ninja Trader on SPY and QQQQ. I began with a backtest of a system detailed in Mebane Faber's The Ivy Portfolio: How to Invest Like the Top Endowments and Avoid Bear Markets, which showed promising results in my limited test when compared to buy and hold.

This second test will be a test of a 200 day moving average system using daily indicators. A long entry is triggered on the open the day after SPY's closing price is above the 200 day simple moving average. The position is exited on the open the day after SPY's closing price is below the 2oo day SMA. The system is monitored daily.

All data is split adjusted but not adjusted for dividends. I hope to have dividend adjustments integrated at some point, but for now the data is not adjusted for dividends. All tests exclude slippage and commissions, which can be significant depending on the frequency a system has you trading, and do not account for any taxes. Both taxes and commissions could be avoided if the strategy was traded in an IRA and trades were made commission-free using a broker like Zecco.com which is now offering 10 free trades per month by simply having a $25,000 balance in a brokerage account. I used 1 share as the default quantity simply because I am interested in percentage returns and returns relative to buy and hold. So in short these results are not necessarily indicative of what you may experience in the real world but can act as a starting point for the validity of a system.

The conclusion from this limited test? Using daily indicators on the SPY has created more trades, is prone to whipsaws, and has not improved returns versus Faber's 10 month SMA system. However, having said that, it has outperformed buy and holding SPY which showed a cumulative profit of 138.28% vs. 164.49% using the 200 day moving average. Keep in mind that dividends are excluded in both performance numbers, and the cash return % when the 200 day moving average system is in cash (not long) is assumed to be 0%.  I will run this same test with different securities in the coming days and publish the results on Scott's Investments.

Performance	All Trades	Long Trades
Total Net Profit	77.11	77.11
Gross Profit	144.88	144.88
Gross Loss	-67.77	-67.77
Commission	0	0
Profit Factor	2.14	2.14
Cumulated Profit	164.49%	164.49%
Max. Drawdown	-21.09%	-21.09%
Sharpe Ratio	0.04	0.04
Start Date	1/1/1993
End Date	9/13/2009
Total # of Trades	69	69
Percent Profitable	33.33%	33.33%
# of Winning Trades	23	23
# of Losing Trades	46	46
Average Trade	1.79%	1.79%
Average Winning Trade	8.06%	8.06%
Average Losing Trade	-1.34%	-1.34%
Ratio avg. Win / avg. Loss	6.02	6.02
Max. conseq. Winners	3	3
Max. conseq. Losers	9	9
Largest Winning Trade	64.87%	64.87%
Largest Losing Trade	-5.22%	-5.22%
# of Trades per Day	0.01	0.01
Avg. Time in Market	59.01 days	59.01 days
Avg. Bars in Trade	40.7	40.7
Profit per Month	0.49%	0.49%
Max. Time to Recover	2516 days	2516 days

Trade-#	Entry price	Exit price	Entry time	Exit time	Profit	Cum. profit	Bars
1	43.97	44.47	2/1/1993	2/16/93	1.14%	1.14%	11
2	44.44	44.44	2/26/1993	4/5/93	0.00%	1.14%	27
3	44.88	44.63	4/13/1993	4/21/93	-0.56%	0.57%	7
4	44.44	44.38	5/12/1993	5/13/93	-0.14%	0.44%	2
5	45.03	44.63	5/20/1993	6/21/93	-0.89%	-0.45%	22
6	44.78	44.63	6/25/1993	7/6/93	-0.33%	-0.79%	7
7	44.84	44.59	7/9/1993	7/23/93	-0.56%	-1.34%	11
8	44.84	46	7/26/1993	3/28/94	2.59%	1.21%	172
9	46.55	45.55	6/15/1994	6/20/94	-2.15%	-0.96%	4
10	46.17	45.7	8/3/1994	8/5/94	-1.02%	-1.97%	3
11	46.03	46.05	8/11/1994	8/12/94	0.04%	-1.93%	2
12	46.38	46.31	8/15/1994	9/21/94	-0.15%	-2.08%	27
13	46.47	46.2	9/29/1994	10/3/94	-0.58%	-2.65%	3
14	46.69	45.83	10/12/1994	11/22/94	-1.84%	-4.44%	30
15	46.16	45.7	12/22/1994	1/3/95	-1.00%	-5.39%	7
16	46.03	62.84	1/5/1995	7/16/96	36.52%	29.16%	387
17	63.75	61.94	7/18/1996	7/24/96	-2.84%	25.49%	5
18	63.63	63.44	7/29/1996	7/30/96	-0.30%	25.12%	2
19	63.67	104.97	7/31/1996	8/28/98	64.87%	106.28%	526
20	106.31	103.12	9/24/1998	9/25/98	-3.00%	100.09%	2
21	107.97	107.72	10/23/1998	10/26/98	-0.23%	99.62%	2
22	108.44	106.56	10/27/1998	10/28/98	-1.73%	96.16%	2
23	110.12	127.75	10/30/1998	9/24/99	16.01%	127.57%	227
24	132.86	128.48	10/7/1999	10/14/99	-3.30%	120.07%	6
25	135.84	135.81	10/29/1999	1/31/00	-0.02%	120.02%	64
26	139.75	135.19	2/1/2000	2/22/00	-3.26%	112.84%	15
27	136.69	135.19	2/24/2000	2/25/00	-1.10%	110.50%	2
28	137.63	136.88	3/1/2000	3/15/00	-0.54%	109.36%	11
29	141.63	135.19	3/16/2000	4/17/00	-4.55%	99.84%	23
30	140.56	140.13	4/18/2000	5/11/00	-0.31%	99.23%	17
31	141.81	138	5/12/2000	5/24/00	-2.69%	93.87%	9
32	140.69	138.81	5/25/2000	5/26/00	-1.34%	91.28%	2
33	142.56	142.94	5/31/2000	7/31/00	0.27%	91.79%	43
34	143.63	145.13	8/1/2000	9/19/00	1.04%	93.79%	35
35	145.69	144.47	9/20/2000	9/21/00	-0.84%	92.17%	2
36	145.94	144.38	9/25/2000	9/26/00	-1.07%	90.12%	2
37	145.47	144.28	9/29/2000	10/2/00	-0.82%	88.56%	2
38	117.7	116.79	1/7/2002	1/8/02	-0.77%	87.10%	2
39	115.33	115.1	3/5/2002	3/6/02	-0.20%	86.73%	2
40	117.36	113.52	3/7/2002	3/26/02	-3.27%	80.62%	14
41	113.98	114.01	4/2/2002	4/3/02	0.03%	80.67%	2
42	88.84	88.3	4/15/2003	4/17/03	-0.61%	79.57%	3
43	89.86	110.75	4/21/2003	7/19/04	23.25%	121.32%	314
44	111.82	109.36	7/21/2004	7/22/04	-2.20%	116.45%	2
45	112.33	111.6	9/3/2004	9/23/04	-0.65%	115.04%	14
46	114.1	111.68	10/4/2004	10/14/04	-2.12%	110.48%	9
47	112.78	114.12	10/28/2004	4/18/05	1.19%	112.98%	118
48	115.74	115.86	4/22/2005	4/25/05	0.10%	113.20%	2
49	115.96	114.86	4/26/2005	4/27/05	-0.95%	111.18%	2
50	116.07	116.3	5/3/2005	5/13/05	0.20%	111.60%	9
51	116.41	119.78	5/17/2005	10/6/05	2.89%	117.72%	100
52	120.58	125.68	11/1/2005	5/24/06	4.23%	126.93%	141
53	126.92	125.58	5/25/2006	6/8/06	-1.06%	124.54%	10
54	127.54	125.45	6/30/2006	7/13/06	-1.64%	120.86%	9
55	126.59	126.58	7/26/2006	8/10/06	-0.01%	120.84%	12
56	127.17	127.63	8/11/2006	8/14/06	0.36%	121.64%	2
57	129.32	144.21	8/16/2006	8/6/07	11.51%	147.16%	244
58	145.94	146.5	8/7/2007	8/13/07	0.38%	148.11%	5
59	147.34	144.37	8/23/2007	8/29/07	-2.02%	143.10%	5
60	145.45	146.52	8/30/2007	9/10/07	0.74%	144.89%	7
61	147.29	147.99	9/12/2007	11/8/07	0.48%	146.06%	42
62	148.19	146.66	12/3/2007	12/4/07	-1.03%	143.52%	2
63	148.63	151.06	12/6/2007	12/12/07	1.63%	147.50%	5
64	148.32	146.61	12/13/2007	12/17/07	-1.15%	144.64%	3
65	148.65	148.54	12/26/2007	12/28/07	-0.07%	144.46%	3
66	142.27	141.81	5/20/2008	5/21/08	-0.32%	143.67%	2
67	94.4	89.47	6/2/2009	6/23/09	-5.22%	130.95%	16
68	89.67	88.59	6/25/2009	7/8/09	-1.20%	128.17%	9
69	90.38	104.77	7/14/2009	9/11/09	15.92%	164.49%	43