Simple trading model that generates an average of 14% per year

[Troy Bombardia]

This model is really simple:

1. Buy SSO (2x S&P 500 ETF) when the S&P makes a "golden cross" (50sma rises above 200sma).
2. Sell SSO (close your long position) when the S&P makes a "death cross" (50sma falls below 200sma).

Only take long positions. Don't take short positions.

The backtest and data are here https://bullmarkets.co/trading-model-that-generates-14-per-year-free/

 

[lawrence-lugar]

This model is really simple

1. Buy SSO (2x S&P 500 ETF) when the S&P makes a "golden cross" (50sma rises above
2. Sell SSO (close your long position) when the S&P makes a "death cross" (50sma falls below

Sounds like the kind of trading system being sold and pitched at in local seminars held in hotels.
A whole plethora of moving average trading systems and signals... when it crosses this boundary or that boundary buy/sell.

I can't imagine nothing in trading is truly that basic and simple. You have got to be a fool if you think it's that easy to virtually print money from the market. Succeeding in the market...is like being able to play Tetris, and cook a meal, and exercise all at once. It's basically a dynamic, ever-changing process or many variables to consider while remaining open-minded and malleable.

I remember attending a trading seminar some time around the mid-2000's, after seeing an ad in the newspaper.
It was held in a Holiday Inn. They gave free breakfast. On my way there, I witnessed a car crash. Talk about irony and maybe a divine sign.
That trading seminar in 2004, combined with the 2008 market crash...magically led me to where I am today, a SuperTrader.

 

[Xela]

Only take long positions. Don't take short positions.

That might do ok, in a fairly steadily rising market?

Simple trading model that generates an average of 14% per year

How much per year, on average (over the same period as the one tested), would you have made just by buying the S&P on January 1st, holding it until December 31st and not "trading" at all? That would appear to be one starting-basis, perhaps, for deciding whether or not to be impressed?

 

[Jack1960]

You will lose your shirt with this one if you are trading it. You can make money with this if you are a vendor selling snake oil.

 

[Xela]

You will lose your shirt with this one if you are trading it.

If it says "long only" and is limited for its "backtesting" only to a steadily rising market, it might only lose the sleeves and collar, not the whole shirt, if that kind of market continues? (Nonsense though it clearly is ...).

 

[maler]

I looked at how the unlevered rule did in the S&P starting with 1928 up to now.
Not bad for such a simple rule when compared to a simple buy and hold of the index.
The downsides I see: many more taxable events and missing one third of the dividends
(the strategy is long roughly 2/3 of the time). The upsides are lower drawdowns (worst was 20.5% vs 86.2%)
and a better sharpe (0.49 vs 0.39).
It can make sense for a long term tax exempt investor.

 

[rolando87]

Sigh another bullshit system. Here's why it won't work:

1.Decay... there is no free lunch here it costs money to lever 2X and you pay for it in rebalancing costs, fees etc. All those costs will eat into your returns substantially. In fact you're not meant to buy and hold levered ETFs.

2. That fact that he "backtested" SSO going back to 1950's is comical. NEWS FLASH: ETF's didn't exist until the 90s. So I'm curious what kind of backesting he did.

 

[HobbyTrading]

2. That fact that he "backtested" SSO going back to 1950's is comical. NEWS FLASH: ETF's didn't exist until the 90s. So I'm curious what kind of backesting he did.

The spreadsheet which he posted on his website calls the SSO price data "hypothetical SSO". He has constructed the prices himself, using SPX as input.

 

[HobbyTrading]

How much per year, on average (over the same period as the one tested), would you have made just by buying the S&P on January 1st, holding it until December 31st and not "trading" at all? That would appear to be one starting-basis, perhaps, for deciding whether or not to be impressed?

He mentions on his website that this strategy does not beat a buy&hold strategy in terms of average annual return. However, he writes that this strategy has less volatility, resulting in less drawdowns. But no evidence or calculation is provided to back up that statement.

 

[padutrader]

this will work in a strongly trending market with steep moving averages.

such market occurs 5-10% of the time.
so it makes much better sense to Fade the moving average cross: ie when the crossover generates a buy signal SELL
with a stop
or when the crossover generates a buy crossover signal look for some other sort of sell signal and take that