XLP Swing Strategy

XLP: Consumer Staples ETF

Continuing with my study of stocks with the same general characteristics, this high expectancy XLP swing strategy is a Long Only trade. Average Time in Market is 28 days per trade.

Trade Statistics

  • Company Name: Consumer Staples Select SPDR ETF
  • Symbol: XLP
  • Time Period Tested: 1 Jan 2009 – 3 July 2014
  • Number of trading days: 1396
  • Number of trades from this signal: 53
  • Number of winning trades: 33
  • Number of losing trades: 20
  • Average Win per winning trade: $1.48
  • Average Loss per losing trade: -$0.65
  • Max Win per Share traded: $2.16
  • Max Loss per share traded: $0.86

Trade Overview

My goal was to select stocks which are relatively stable in price so as to minimize the opportunity for nasty surprises. I screened for stocks with a 52 Week Price Range between $10-$100, a Market Cap greater than $500M, and Average Daily Volume greater than 1M shares and which pay a dividend.

This trade is a Long Only strategy. The basic setup is to begin watching the stock after it has closed below its 25 Day Simple Moving Average (25D SMA) and then – once it closes above that price – Buy at the Open on the next day.

I set a Stop-Loss trigger of 2.5% and a profit target of 5%. Once either target was hit, I automatically closed the trade at that price. If I used a trailing stop, I could possibly improve the profitability of this trade, but I did not do any testing or calculations with that in mind.

  • The maximum number of consecutive losing trades is 5; the maximum drawdown percentage during the period tested is 10%.
  • The maximum number of consecutive winning trades is 9.
  • The expectancy of this trade is 3.72.

Results of Simulations

I ran a simulation using this strategy starting with a $10,000 account. I traded the maximum number of shares allowed for my account size, traded the signal every time it occurred since February 2009, and plowed all profits back into the trading account. By 18 June 2014, the account value was just over $31,000.

This trade has me in the market 1652 days out of 1977 possible days, (83%). I don’t like being in the market that much, but it’s hard to argue with success.

Given my selection criteria, this proves it is historically a fairly safe and predictable trade. (And of course, just because it worked in the past is absolutely no guarantee it’ll work in the future.)

Counterpoint & Conclusion

The market has been on a 5+ year bull run during the time I ran this simulation, so it would make sense that a long-only strategy would prosper. So is it my strategy that made money, or is it merely the bull market that made money? For the sake of fairness, I compared this Long Only strategy to a “Buy & Hold” strategy over the same period of time.

Over the same time period:

  • “Buy & Hold” would be worth a little less than $21,000, for a profit of $11,322
  • This Long Only system would be worth a little more than $31,000, for a profit of $21,000 over the same period
  • “Buy & Hold” had a max drawdown of 10%
  • Long Only had a max drawdown of 10%

This strategy doubles the return on the ole’ “Buy and Hold” strategy, so the result is not merely the result of market performance or general market conditions.

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BBBY Long Swing Trade – Update

I have an update to the BBBY Long Swing trade I posted about previously. I spent a little time playing with different length moving averages as the trigger, and found that a 10 Day Simple Moving Average is a good deal better than the 20 Day average I used in the original strategy. The 10 Day is actually the sweet spot – much better than anything else I tested.

Here’s the Stats:

  • Starting Equity $10,000.00
  • Trades 136
  • Winners 71
  • Losers 65
  • % Winners 52%
  • Avg Win per Share per Trade $2.50
  • Avg Loss per Share per Trade  ($1.07)
  • Max Shares 1000
  • Total Win/Share $177.31
  • Total Loss/Share ($69.46)
  • Avg P/L per Trade $522.76
  • Expectancy 2.55
  • Max Consec Winners 5
  • Max Consec Losers 5
  • Max Win/Share $3.80
  • Max Loss/Share ($1.54)
  • Max Drawdown 8%
  • Days in Market 1060
  • Ending Equity $71,095.51

The negative differences between this trade and the 20 Day swing trade are:

  • This system is in the market more than the 20 Day Swing Trade – 1060 days versus 973 days
  • Average Loss is higher
  • Max Drawdown is slightly higher

All in all, I think this is an improvement on the original strategy, even though it has a slightly higher risk.

As always, if you’d like the details of this trade, drop me a note:

BBBY Swing Strategy

BBBY: Bed, Bath & Beyond

This high expectancy BBBY swing strategy is a Long Only trade. Average Time in Market is just over 8 days per trade.

Trade Statistics

  • Company Name: Bed, Bath & Beyond
  • Symbol: BBBY
  • Time Period Tested: 17 Feb 2009 – 5 June 2014
  • Number of trading days: 1334
  • Number of trades from this signal: 112
  • Number of winning trades: 56
  • Number of losing trades: 56
  • Average Win per winning trade: $2.48
  • Average Loss per losing trade: -$0.87
  • Max Win per Share traded: $3.80
  • Max Loss per share traded: $1.91

Trade Overview

I screened for stocks with a 52 Week Price Range between $10-$100, a Market Cap greater than $500M, and Average Daily Volume greater than 1M shares. I also added a screen for stocks which pay a dividend. One of the benefits of trading equities with dividends is that I can goose my earnings by receiving a dividend payment if I happen to be holding during the ex dividend period. Although the strategy I describe here is not in the slightest dependent on dividends to be profitable, be aware that it is possible to have that bonus apply when trading BBBY using this strategy.

This trade is a Long Only strategy. (I’m working on the Short Only version and hope to publish it next week.) The basic setup is to begin watching the stock after it has closed below its 20 Day Simple Moving Average (20D SMA) and then – once it closes above that price – Buy at the Open on the next day.

I set a Stop-Loss trigger of 2.5% and a profit target of 5%. Once either target was hit, I automatically closed the trade at that price. If I used a trailing stop, I could possibly improve the profitability of this trade, but I did not do any testing or calculations with that in mind.

  • The maximum number of consecutive losing trades is 3; the maximum drawdown percentage during the period tested is 7%.
  • The maximum number of consecutive winning trades is 5.
  • This trade is an excellent illustration of the fact that I don’t have to be right all the time. Even though this trade has winners only 50% of the time, the average winning trade is $2.48 per share, whereas the average losing trade is only $0.87 per share.
  • The expectancy of this trade is 2.84.

Results of Simulations

I ran a simulation using this strategy starting with a $10,000 account. I traded the maximum number of shares allowed for my account size, traded the signal every time it occurred since February 2009, and plowed all profits back into the trading account. By 5 June 2014, the account value was just under $55,000.

This trade has me in the market 934 days out of 1934 possible days. Although the expectancy of this trade is high, the percentage of time in the market balances that out significantly. I prefer trades that keep me out as much as possible, but I don’t turn my nose up at profitable trades, either.

All in all, this is historically a fairly safe and predictable trade. (And of course, just because it worked in the past is absolutely no guarantee it’ll work in the future.) I’m going to spend some more time on this one to try to find a way to be out of the market more but keep the expectancy up.

Counterpoint & Conclusion

The market has been on a 5+ year bull run during the time I ran this simulation, so it would make sense that a long-only strategy would prosper. So is it my strategy that made money, or is it merely the bull market that made money? For the sake of fairness, I compared this Long Only strategy to a “Buy & Hold” strategy over the same period of time.

Over the same time period:

  • “Buy & Hold” would be worth a little more than $29,300, for a profit of $19,322
  • This Long Only would be worth a little more than $54,500, for a profit of $44,500 over the same period
  • “Buy & Hold” was in the market a total of 1895 days
  • Long Only was in the market a total of 934 days
  • “Buy & Hold” had a max drawdown of 9%
  • Long Only had a max drawdown of 7%

Clearly, the success of this strategy is not due to the general market conditions.

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