The usual disclaimers apply for the strategies and the analysis on TrendInvestorPro. Past performance does not guarantee future performance. You and you alone are responsible for your investment and trading decisions. Do your own due diligence.
This page is updated at the end of every quarter.
Performance Metrics for RO-Trader-NDX (last close: 31-Dec-24)
The table below shows performance metrics for the Nasdaq 100 Rotation Trader Strategy (RO-Trader-NDX) and $NDX buy-and-hold. RO-Trader-NDX produced returns similar to buy-and-hold (+14.82% vs 14.84%), but the strategy’s Maximum Drawdown (-28.46%) was about half that of buy-and-hold (-53.60%). The Average Drawdown was also significantly lower (-22.84% vs -31.5%). See the green and blue shading. This means the strategy outperformed buy-and-hold on a risk-adjusted basis and avoided big drawdowns. Also note that the strategy was invested 74% of the time and in cash 26% of the time because the market filter was bearish.
The strategy has a long-term Win Rate of 53%, which means 47% of the trades resulted in losses. The average gain (+12.50%) was almost twice as a large as the average loss (-6.29%). This Win Rate and strong Gain/Loss ratio combined to produce a Profit Factor of 1.96, which means the strategy earned $1.96 profit for every $1 loss.
The chart below shows the equity curves for the strategy (green line) and for Nasdaq 100 buy-and-hold (black line). The strategy largely outperforms $NDX buy-and-hold because the equity line is almost always above the buy-and-hold line (black). Note that $NDX buy-and-hold experienced large drawdowns in 2008 (-53%) and 2022 (-35%). In contrast, the strategy’s equity curve (green line) was flat during bear markets and preserved capital by using a market filter.
The next image shows the annual returns for the strategy. The strategy was up 16% in 2024 and ended 2023 with a 7% gain. Overall, there were 3 losing years, 18 winning years and one flat year (2008). The strategy was in cash throughout 2008 because the market filter was bearish. Note that these returns do not include dividends or interest earned on cash. The average return over the entire period is +14.8% per year (blue line) and the Annual Sharpe Ratio is .90, which reflects the risk-adjusted return.
The next image shows the drawdowns over the entire period (blue line). Drawdown is the percentage decline from an equity high. Even though the equity curve and annual returns look good, there will be drawdowns and doubts along the way. Nasdaq 100 stocks are more volatile than S&P 500 stocks. As such, this strategy experienced four drawdowns in the 18-20 percent range. The most recent double-digit drawdown occurred this summer (-22%) and the strategy ended 2024 with an 11.39% drawdown.
The next image shows the monthly return breakdown for the strategy. Hashmarks (-) show when the strategy was in cash because the market filter was bearish. The last line shows monthly performance for 2024. The strategy was profitable in seven of the last twelve months. It was up over 20% year-to-date in November, but suffered a loss in December.
Trading a strategy is a long-term endeavor, not a brief undertaking. There will be ups, downs, periods of outperformance and periods of underperformance. We cannot judge performance using days, weeks or even a few months. Long-term endeavors require a minimum of six months before passing judgement. Past performance does not guarantee future performance, but this dual-momentum strategy should keep its edge as long as the momentum edge persists in the US equity market.
Testing Criteria
– Performance metrics are based on backtesting with historical constituents.
– Buy and sell signals are based on closing prices at the end of the week.
– Entries and exits are based on opening prices at the beginning of the week.
– Each buy/sell includes a .10% charge to account for slippage and commission.
– Each entry position is sized to be 10% of the portfolio
– The strategy holds a maximum of ten positions.
– Returns do NOT include dividends or interest earned from cash.
The usual disclaimers apply for the strategies and the analysis on TrendInvestorPro. Past performance does not guarantee future performance. You and you alone are responsible for your investment and trading decisions. Do your own due diligence.