Behind the 39% Per Trade SSI Numbers

By beth mason

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Last week, TradeSmith shared the results of our latest testing on the Stock State Indicators (SSI) as an investment tool and the efficacy of the SSI Entry and SSI Stop signals.

The results were incredible. Our test group included about 1,300 tickers (stocks, indices, funds and commodities). Of the more than 9,700 trades that triggered SSI Entry signals, 56% of the trades were winners.

Even better, the average winner outperformed the average loser by an almost 5–1 margin. The average gain per trade going back 22 years was almost 39%. And as exciting as these results are, we think it’s important to provide a little more insight behind the findings.

We originally ran this test in 2016. The initial results were reported here. As you can see, the percentage of winners and the average gains were lower in 2016.

Stock State Indicator (SSI) Trade Results

In 2016, we actually under-reported our numbers. Back then, we excluded all trades that were still open at the time. So, this trade of UnitedHealth Group (UNH) was excluded from our SSI results, as the trade was still open in 2016.

Stock State Indicator (SSI) Trade Results

For this particular study, we assumed all of the trades were closed as of May 16, 2018. For trades still open at that time, we’ll adjust the returns and update them when we present new findings in the future.

By the way, these results also include all of the stocks that were stopped out when the DJIA dropped almost 3,000 points in February and another 2,000 points in March.

It’s important to remember that these are long-only trades. When a ticker triggers its SSI Entry signal, the “trade” is opened, and when it hits its SSI Stop signal, the “trade” is closed. We use the next day’s closing price to determine our entry and exit prices. This is done so that anyone actually making the trade could get the same price that we use in our testing results.

For an algorithmic system, 56% winning trades is incredible. And to have the winning trades outperform by a 5–1 margin is unheard of on such a large test base over more than two decades.

And there’s more good news in these numbers. Nobody is trading 1,300 tickers. And nobody is pulling tickers out of thin air and trading them blindly.

TradeSmith’s first rule in his roadmap to investing success is:Start with Great Investment Ideas

For most investors, the idea of “great investment ideas” is to find stocks fundamentally stronger than their peers. Whether you’re using advice from the newsletter world or doing your own fundamental research by finding the best stocks, it’s possible to have more than 56% winning trades.