I have backtested the results of using the VTO rules on the SPY. One thing that became apparent was that during the bear years even though there were some very profitable trades one would be better off not to risk taking the trade as the markets can stay oversold for a long time. My criteria would be once the 200 DMA starts declining one should forego VTO trades. I suspect once we enter a bear phase one would be better to only trade the Bollinger Band crash trade. The BB trade has been profitable about 98% of the time. However the profitable trades won't be as large as the VTO trade since one is only looking for a bounce back above the lower band.
Here are the results from 03 to the present:
Exiting when the RSI(5) closes at or above 50.
29 profitable 5 losses,
profitable 85% of the time
Ave number of days in the trade 5.2
Average losing trade .48% Average winning trade 1.11%.
Exiting when the RSI(5) closes at or above 70:
30 profitable trades 3 losses,
Profitable 90% of the time.
Average losing trade .93%
Average winning trade 2.09%
The VTO wins 8.5 and 9 times out of 10 and the winning trades average about twice as large as the losing trades. Those are pretty good odds.
I want to note that if you don't follow the rules you will probably turn a postive expectancy into a negative one. Hint the VTO trade from June 26th has not closed yet. If you are going to trade this system you must follow the rules if you want it to consistently produce postive results.
If anyone wants to take a look at the spreadsheet just give me an e-mail.
Democracy may end
2 weeks ago