This strategy is not a get rich quick scheme. The system does not use leverage, and is very conservative. The goal of the system is to outperform the compounded rate of return of the S&P500 over time and have a lower max drawdown. This is a strictly mechanical system and uses several metrics to determine if the portfolio should be “Risk On” or “Risk Off”. If “Risk On” is indicated then the portfolio is 100% invested in SPY, which is the S&P 500 ETF. If “Risk Off” is indicated then the portfolio is 100% invested in TLT, which is the iShares 20+ Year Treasury Bond ETF. Since this system trades ETF's long only, it is suitable for IRA's. It can be used as a market indicator to determine general market conditions for other strategies. It could also be used to trade options on SPY and TLT.

The system does not trade often, on average once every month or so. When the system is changing from "Risk On" to "Risk Off" or visa versa there can times where the signals alternate back and forth for several days before a final direction is picked, but this is normal. System signals are generated overnight and the system trades are entered at market open. There is a 4% stop loss on each trade and when a stop is triggered, the position is exited immediately. Once a stop has triggered, the portfolio stays in cash until the next signal trade occurs.

Simulation tests with compounding have been performed on the system from to Nov 1, 2008 to Jul 15, 2019 and the results are shown below. These results have not been audited by C2.

Commission per Trade 5.00
Initial Capital 25,000.00
Ending Capital 193,831.08
Net Profit 168,831.08
Net Profit % 675.32%
Exposure % 97.83%
Net Risk Adjusted Return % 690.28%
Annual Return % 21.09%
Risk Adjusted Return % 21.56%
Transaction costs 880.00

Number of Trades 88
Avg. Profit/Loss 1918.53
Avg. Profit/Loss % 2.68%
Avg. Bars Held 30.95

Winners
Number of Winners 57 (64.77%)
Total Profit 202,115.95
Avg. Profit 3,545.89
Avg. Profit % 4.86%
Avg. Days Held 44.44
Max Consecutive Winners 7
Largest Win 26,283.92
# Days in Largest Win 428

Losers
Number of Losers 31 (35.23%)
Total Loss -33,284.88
Avg. Loss -1,073.71
Avg. Loss % -1.34%
Avg. Days Held 6.16
Max Consecutive Losers 4
Largest Loss 4,945.01
# Days in Largest Loss 14

Max Trade Drawdown -17,058.23
Max Trade % Drawdown -10.10
Max System Drawdown 17,058.23
Max System % Drawdown 11.37%
Recovery Factor 9.90
CAR/Max DD 1.86
RAR/Max DD 1.90
Profit Factor 6.07
Payoff Ratio 3.30
Standard Error 5,081.92
Risk-Reward Ratio 2.71
Ulcer Index 3.37
Ulcer Performance Index 4.66
Sharpe Ratio of Trades 0.64
K-Ratio 0.16

Profit Table
Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Yr%
2008 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A 9.6% 12.6% 23.5%
2009 -8.5% 0.0% 15.2% 9.9% 5.8% -0.1% 7.5% 3.7% 3.5% -1.9% 6.2% 1.9% 49.9%
2010 -3.6% 3.1% 6.1% 1.5% -0.7% 2.3% 1.4% 4.3% -4.6% 2.8% 0.0% 6.6% 20.4%
2011 2.3% 3.4% 0.0% 2.9% -1.1% 0.3% 0.4% 9.7% -1.0% 9.0% -1.2% 0.0% 26.9%
2012 4.6% 4.3% 3.2% -0.7% -3.3% -1.9% -4.4% 2.5% 2.5% -1.8% 0.6% 0.9% 6.3%
2013 5.1% 1.3% 3.8% 1.9% 2.4% -1.3% 5.2% -3.0% 3.2% 4.6% 3.0% 2.6% 32.3%
2014 -3.5% 4.6% 0.8% -1.2% 2.2% 2.1% -1.3% 3.9% -1.4% 2.2% 2.7% -0.3% 11.0%
2015 -2.1% 5.6% -1.6% 1.0% 1.3% -2.0% 2.2% -5.0% 0.4% 8.6% 0.4% -1.7% 5.7%
2016 4.0% 3.1% 1.1% -1.3% 2.7% -4.4% 2.3% 0.1% 0.0% -1.7% 3.7% 2.0% 11.7%
2017 1.8% 3.9% 0.1% 1.0% 1.4% 0.6% 2.1% 0.3% 1.5% 2.3% 3.0% 1.2% 21.1%
2018 5.6% -3.6% -2.7% 0.5% 2.4% 0.6% 3.7% 3.2% 0.6% -6.9% 3.3% -0.9% 5.2%
2019 1.8% 3.2% 2.3% 4.1% 0.7% 0.9% 2.6% N/A N/A N/A N/A N/A 16.8%