The results were incredible. Our test group included about 1,300 tickers (stocks, indices, funds and commodities). Of the more than 9,700 trades that triggered SSI Entry signals, 56% of the trades were winners.
Even better, the average winner outperformed the average loser by an almost 5–1 margin. The average gain per trade going back 22 years was almost 39%. And as exciting as these results are, we think it’s important to provide a little more insight behind the findings.
We originally ran this test in 2016. The initial results were reported here. As you can see, the percentage of winners and the average gains were lower in 2016.
By the way, these results also include all of the stocks that were stopped out when the DJIA dropped almost 3,000 points in February and another 2,000 points in March.
It’s important to remember that these are long-only trades. When a ticker triggers its SSI Entry signal, the “trade” is opened, and when it hits its SSI Stop signal, the “trade” is closed. We use the next day’s closing price to determine our entry and exit prices. This is done so that anyone actually making the trade could get the same price that we use in our testing results.
For an algorithmic system, 56% winning trades is incredible. And to have the winning trades outperform by a 5–1 margin is unheard of on such a large test base over more than two decades.
And there’s more good news in these numbers. Nobody is trading 1,300 tickers. And nobody is pulling tickers out of thin air and trading them blindly.
TradeSmith’s first rule in his roadmap to investing success is:
Education and Research Specialist, TradeStops