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Performance of Eight SPY Trend-following Strategies in 2018

Trend-following is not one particular strategy but an array of strategies with often divergent performance. In this article we list 2018 performance results for eight popular trend-following strategies applied to SPY.

The eight basic strategies are listed below:

Rules Timeframe Name
Long: SMA(50) > SMA(200) Exit: SMA(50) < SMA(200) Daily 50D200L
Long : SMA(50) > SMA(200) Short: SMA(50) < SMA(200) Daily 50D200LS
Long: C > SMA(200)
Exit:  C < SMA(200)
Dally 1D200L
Long:  C > SMA(200)
Short: C < SMA(200)
Daily 1D200LS
Long: C > SMA(12)
Exit:  C < SMA(12)
Monthly 1M12L
Long:  C > SMA(12)
Short: C < SMA(12)
Monthly 1M12LS
Long: C > SMA(12)   Delay 1 month
Exit:  C < SMA(12)   Delay 1 month
Monthly 1M12_1L
Long:  C > SMA(12)   Delay 1 month
Short: C < SMA(12)   Delay 1 month
Monthly 1M12_1LS

All positions are established at the open of the next bar. The last two strategies establish all positions with delay of one month.  Equity is fully invested with $0.01 commission per share used in all backtests. Again, these are basic strategies.

Results for 2018

Strategy Return Max. Drawdown
50D200L +1.2% -10%
50D200SL +6.9% -10%
1D200L -2.7% -12%
1D200SL -1.2% -17%
1M12L -7.5% -16%
1M12LS -10.5% -19%
1M12_1L +6.4% -7%
1M12_1LS +17% -7%

Maximum return was realized by 1M12_1LS due to avoidance of December plunge. Worst performance was realized by 1M12LS because of the December plunge.

Average return is +1.2% and standard deviation is 8.9% due to the high variability in returns of the different strategies considered.

As it may be seen from the above results based on these basics strategies, it does not make sense to talk about trend-following as a specific strategy. Performance often depends on how specific price action patterns affect signal generation of a specific strategy. Last year 1M12_1LS happened to be the best performer. Next year it may be the worse. No one can predict which strategy will perform best in any given period.

Trend-following is not a specific strategy but a wide spectrum of strategies with different performance depending on price action. When some people talk about trend-following in general, they usually have little actual experience with the specifics that actually are important but they treat it as a vague strategy. Next time you hear someone saying trend-following is a good strategy ask them the following question:

Which trend-following?

Because trends and trend-following are not the same thing.

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Charting and backtesting program: Amibroker


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