As you know by now, I love back-testing my systems. In the past couple of months we’ve back-tested our Stock State Indicator (SSI) system against the S&P 500 as well as developed multiple strategies for outsmarting the DJIA using the SSI.
Today I’ve got a new batch of results to share with you … the most impressive I’ve seen yet.
I keep a custom list of over 1,300 different equities, indices and commodities. I update it every week as part of my market analysis.
We recently completed a study of how our SSI system performed on this database of 1,300 assets. Using our SSI system, we generated nearly 7,500 trades over the 20-year period from 1996 to today. The numbers are pretty impressive.
Here is the table of results:
Over the 20 year period we identified 7,469 individual trades that were generated by the SSI system (SSI entry followed by SSI exit). Of those 7,469 trades, 3,935 of them were winners (52.7%). That’s just better than 50% of the trades.
Barely better than 50% winners might not sound that exciting … but it is when your average winner is 5 times bigger than your average loser! That’s the case here where the average winning trade was +84.3% and the average losing trade was -16.4%. That’s a 5 to 1 win / loss ratio. That’s huge.
Overall, the average gain across all 7,469 trades was 36.6% and the average trade was 495 days … or about 16 months. This number is important actually. It tells me that this system is generating trades that last about a year and a half. That’s a sweet spot for individual investors. We want to hold our investments longer than the average investor does.
Let me share with you one example from our database – Apple, Inc. (AAPL). Here’s the chart showing the SSI based trades on Apple back to 1996:
There have been 8 SSI entry signals in AAPL since 1996 (the last trade is still open). The first SSI entry signal was in March of 1998. Here is the table of all the trades in AAPL:
The average gain in the 7 closed trades was 138.2% and the average holding period was just over 21 months. Sweet!
These kinds of results are very exciting to me. They are further confirmation that the Stock State Indicator system is a solid system for individual investors looking to hold investments for at least 12 to 18 months or more … and to make sure that their winners are bigger than their losers.
Make more. Risk less,
Richard M. Smith, PhD
CEO & Founder, TradeStops