Simply buy on a 60-day (3-month) high breakout and sell on a 40-day (2 month) low breakdown. The system was simple but results were profitable on a 10-yr period. Note that the testing is long biased same with the PSE.
- Stocks are bought on expectations, not facts.
Abitrade's "Caveman System" backtested!
One of our readers, Abi, requested to have his system backtested. He called it the "Caveman System" as it can be executed by anyone.
Simply buy on a 60-day (3-month) high breakout and sell on a 40-day (2 month) low breakdown. The system was simple but results were profitable on a 10-yr period. Note that the testing is long biased same with the PSE.
Simply buy on a 60-day (3-month) high breakout and sell on a 40-day (2 month) low breakdown. The system was simple but results were profitable on a 10-yr period. Note that the testing is long biased same with the PSE.
6 comments:
Proof that even a Caveman can make money in the stock market. Unbelievable.
Caveman! Caveman! :D
Although I would tend to agree that this system is profitable. The backtesting provided is insufficient, so I'm not yet fully convinced.
It seems that it's only been tested on PSEi, which is an index stock. Index stocks are not tradable, and it smoothens out the price movements. How about testing the system on all tradeable stocks for the past 10 years. I'm interested to find out the following metrics:
1. Total number of trades.
2. Number of winning trades
3. Number of losing trades
4. Average gain on winning trades
3. Average loss on losing trades
Good point Jun. I can perform a more detailed test but I apologize because that would take time as some stocks have rights and stock divs which have adjustment in their prices.
abi, yes. the simpler the better. :)
@harley: haha not always. i would consider the turtle system simple and elegant. caveman system is simple and ugly haha it's like comparing a picasso to cave paintings, but yes, both are works of art. :)
@jun: i am also curious about those things! caveman should do well in slow long-term trends and poorly in fast ones. slow index stocks should make him rich. but jockeyed stocks will kill him.*sigh*
Harley, Aby,
Since I had time, I tested it myself. I assumed that the execution price of the trade is on the opening price of the next trading day after the signal is raised.
1. Total number of trades = 1532
2. Number of winning trades = 648 (45%)
3. Number of losing trades = 848 (55%)
4. Average gain on winning trades = 60.18%
5. Average loss on losing trades = -16.26%
6. Average gain/loss per trade = 17.87%
7. Average holding period on winning trades = 238 calendar days
8. Average holding period on losing trades = 97 calendar days
Thank you, Jun!
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