Back Testing A Simple Trading Strategy

Was backtesting a simple trading strategy using R based on the following key parameters:

  1. Selected security : Maybank (Malaysia)
  2. Time period: 1 Jan 2011 – till 23 June 2017
  3. Single technical indicator test
  4. Test 1 – Price crossover based on 50D Simple Moving Average (buy signal: buy when closing price of Maybank crosses above SMA, and sell when prices closes below SMA)
  5. Test 2 – Price crossover based on 50D Simple Moving Average (with transaction costs at 1.0%)
  6. Test 3 – Price crossover based on 200D Simple Moving Average
  7. Test 4 – Price crossover based on 200D Simple Moving Average (with transaction costs at 1.0%)
  8. Test 5 – Buy & Hold Strategy

MBB linechart.png

Note: Blue line (50 Day SMA) and pink line (200 Day SMA)

The summary of results are shown below. It shows that the Buy & Hold strategy appears to be more superior than of the 50D and 200D SMA price crossover strategies.

results

Transaction costs exacerbated the mediocre results of the two simple trading strategies 50D and 200D SMA.

Performance Graph.png

Next experiment – need to fine-tune the trading strategy (including use of multiple technical indicators), in order to outperform the Buy & Hold strategy.

DISCLAIMER: THIS IS A PERSONAL BLOG AND SHALL NOT BE RELIED IN WHATSOEVER MANNER BY ANYONE. ALL ARTICLES CONTAINED IN THIS SITE ARE STRICTLY FOR INFORMATION AND ILLUSTRATIVE PURPOSES ONLY AND DOES NOT PURPORT TO SHOW ACTUAL RESULTS. IT IS NOT, AND SHOULD NOT BE REGARDED AS INVESTMENT ADVICE OR AS A RECOMMENDATION REGARDING ANY PARTICULAR SECURITY OR COURSE OF ACTION. SOURCES USED IN THIS SITE HAVE NOT BEEN INDEPENDENTLY VERIFIED FOR ACCURACY, COMPLETENESS AND TIMELINESS. YOU SHOULD SEEK INDEPENDENT AND PROFESSIONAL INVESTMENT ADVICE IN REGARD TO YOUR INVESTMENT DECISIONS. THE AUTHOR MAY HOLD POSITIONS IN THE SECURITIES MENTIONED IN THE ARTICLES

Author: Ken Utau

Markets Observer + Food Lover

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