Comparing Six Trading Systems

trading systems

trading systemsIt occurred to me this week that there was an incredibly simple system that I had neglected to include in this experiment. Since we’re only in the second week of this experiment, I decided to add the new system as System 6.

After two weeks of trading, four of our six systems have posted positive returns, one has a slight loss, and the other system has not yet taken a position. Obviously, two weeks means absolutely nothing in terms of results, but it has been interesting to actually start collecting results.

Here is how each of the systems has performed so far:

System 1 – Buy & Hold (+.57%)

trading systemsThe SPY closed the week at 169.11, which is 18 cents above our purchase price from last Monday’s close. Tuesday and Wednesday were rough days for the general market, and Friday looked to be another down day before rallying back to finish in positive territory. For all of the excitement this week, the overall move wasn’t very significant.

Since this is a buy and hold system, we don’t have any options but to sit and see what happens next week. Anyone trading this system just has to sit around hoping for higher prices.

System 2 – IBD Market Calls (+.57%)

trading systemsAfter logging distribution days on Tuesday and Wednesday this week, it looked like this market was heading for a correction, or at the very least a shift to uptrend under pressure. Things weren’t quite as bad as they felt though, and IBD left their market condition at confirmed uptrend. Therefore, we didn’t make any adjustments to System 2 this week.

With four distribution days on the Nasdaq and 2 for the S&P 500, there is a good chance we see a change if there is any more distribution in the coming week. Unless we see severe distribution, that change will likely just be to uptrend under pressure, so there is a good chance we won’t be making any trades in this system next week.

System 3 – 10/100 Moving Average Crossover System (+.57%)

trading systemsDown days on Tuesday and Wednesday brought the SPY right to its 10 day SMA line. It lost the line intraday both Thursday and Friday, but was able to recover and close above the line on both days. In order to get a sell signal, we need to see the 10 day line cross the 100 day line. As long as the price is trading above the 10 day line, that just isn’t going to happen.

While the price is still closing above the 10 day line, the line does appear to be rounding off. If this continues, we may be headed for a sell signal, but until we actually see the lines cross, our position will remain long.

System 4 – 89/13 Day Breakout System (-.04%)

trading systemsSystem 4 was late to the party last week. Since it didn’t receive its first entry signal until Thursday, it did not have as much of a cushion as the other systems did to handle the down days on Tuesday and Wednesday. With the said, the SPY is still almost 5 full points above its 13 low, which would be our exit point.

Just like System 3, System 4 is unlikely to trigger a sell signal this coming week unless the market really falls hard. Anything can happen, however, so our job is to watch the price action and react to what happens according to the rules of each system.

System 5 – 3 Day High/Low Mean Reversion System (+0%)

trading systemsSystem 5 looked like it might be on its way to a buy signal when it lost its 5 day SMA line on Wednesday, but it closed back above the line on both Thursday and Friday. As long as the price is closing above both the 200 and 5 day lines, there won’t be any action in this system. Of course, no action is always better than negative action.


System 6 – 200 Day SMA System (+.57%)

trading systemsSystem 6 is new this week, but since I had all of the data, I was able to back up its start date to match the others. This system will simply hold a long position when the SPY is above its 200 day moving average. It will either go to cash or short the market when the price drops below the 200 day moving average.

For now, the price is well above the 200 day line, so there are not likely to be any moves to be made here anytime soon.