Interesting Statistics, Trading the SPY

The following information is for educational and entertainment purposes only. Rio Verde Trading and the author make no claim that anyone can or will achieve similar results in their trading.

In developing my proprietary trading system I did extensive back testing, sometimes called paper trading. In addition, going forward, I track all trades that develop in the exchange traded funds that I use, even if I do not take every trade that develops.

Because there is a high level of correlation between most stock indexes, trade signals tend to trigger for several ETFs at the same time. I rarely trade more than one ETF at a time. When multiple trade signals develop my first choice is to trade SPY (S&P 500 Stock Index) because it has the most consistent performance from back testing.

Today I would like to show a brief summary of the SPY performance derived from back testing of my proprietary trading system.

I have back tested SPY from 26 January 1998 to 11 December 2014.

Total trades in back test 237. Average win per trade $1.18 per share.

There were 211 winning trades which equals 89%. 26 losing trades equaling 11%.

The largest winning trade closed on 13 November 2008, with a profit of  $25.29 per share. The largest losing trade closed on 7 January 2008, with a loss of $15.19 per share.

58% of all trades lasted one day. 26.2% of trades lasted two days. 11% of all trades lasted three days.

Another interesting statistic is that in the last major market correction of 2007-2008, my trading system outperformed the SPY.

In 2007 SPY had a  loss of -6.38, while the trading system had a gain of 19.26.

In 2008 SPY had a loss for the year of -54.54, while the trading system had a profit of 36.84.

It is a characteristic of this trading system that it performs better in bear markets than bull markets. It makes a nice contrarian trading system.

Remember all the above information was derived from back testing, not from actual trading. Real money trades will always perform less because of commissions, slippage, bad fills and inevitable mistakes. My actual trading performance, for all the trades I have made since utilizing this system, is that 74% of all trades closed with a profit.