RESULTS FROM BACKTESTING
The No Rainy-Day Model has been calibrated to every major asset class and meticulously backtested over the last 20+ years, periods involving both bull and bear markets.
The model is designed to capture the most meat of the big moves in a prudent manner. It usually goes long after the uptrend is established and by that time the asset is usually up 15-20% from the lows.
The results of the backtest are clear. The model is not perfect but overall its returns show a robust overperformance over the buy-and-hold strategy by minimizing drawdowns. Risk-adjusted returns are stellar as it makes sense mathematically to be prudent when market conditions turn risky.
The No Rainy-Day Model works great on highly volatile investment vehicles and trendy markets like technology or crypto.
Below you can find the details of the backtest performed on Bitcoin and the Nasdaq 100.
BACKTEST ON BITCOIN Jan 1st 2014 to Jan 1st 2023:
SUMMARY OF BUY & SELL SIGNALS
The No Rainy-Day Model generates 4 trades (buy and sell signals) and would have been invested 30% of the time since 2014 and the average trade lasts around 8 months.
All 4 trades are highly profitable, especially in the early days.
PERFORMANCE SUMMARY VS. BUY & HOLD STRATEGY
If someone had invested $100 in 2014 following a Buy & Hold strategy, they would now have almost 20 times more ($1,896 per every $100 invested in 2014). If those dollars had been invested alongside the model, the total return would be around 1,000x of the initial capital ($110,573 per every $100 invested in 2014)
Note: The No Rainy-Day Model strategy assumes the capital does not yield any return whenever it´s not invested in the market.
The No Rainy-Day Model overperforms the 'Buy & Hold' strategy 6 out of the 9 years analyzed and ends up reaching an average return over 3 times higher.
Note. Some of the indicators that have worked extremely well in detecting past crypto cycle picks in the past might not perform as well in the future.
BACKTEST ON The Nasdaq 100 Jan 1st 2000 to Jan 1st 2023
SUMMARY OF BUY & SELL SIGNALS
The No Rainy Day Model generates 22 trades (buy and sell signals), keeping capital invested 43% of the time. The average position lasts around 6 months.
- 40%+ of the suggested trades generate less than a 5% return.
- 18% are unprofitable with average returns of -2%
- just 1 out of every 4 trades gets us exited, with returns over 20%
PERFORMANCE SUMMARY VS. BUY & HOLD STRATEGY
If someone had invested $100 alongside the Model at the beginning of 2000, today they would have $1,259 (12x the initial capital). If they had followed a Buy & Hold strategy, the amount would have been just over $300 (3x the initial capital); still great but 4 times lower.
When compared to the 'Buy & Hold' strategy, the No Rainy-Day Model only overperforms 30% of the years. Despite that fact, the model ends up reaching an average return over 2 times higher and with a risk-adjusted return 30 times higher.
