Quant vs trader5 min read
Same 10 years, three approaches: SPY
Buy and hold, a 200-day trend rule and an RSI rule on SPY from October 2016 to September 2026, run through our engine with costs included.
We ran three simple approaches on SPY from 3 October 2016 to 30 September 2026 with our backtest engine: 0.1% commission and 0.05% slippage per side, orders filled at the next bar's open.
| Approach | Total return | CAGR | Sharpe | Max drawdown | Trades / win rate |
|---|---|---|---|---|---|
| Buy and hold | +313.85% | 15.28% | 0.88 | -33.72% | — |
| SMA200 trend | +103.76% | 7.38% | 0.70 | -21.24% | 25 / 29% |
| RSI 30/70 | +72.05% | 5.58% | 0.45 | -28.90% | 25 / 80% |
- Buy and hold: buy on the first day, never sell.
- SMA200 trend: in the market while the close is above its 200-day average.
- RSI 30/70: buy when RSI(14) drops below 30, sell when it rises above 70.
The trend rule cut the drawdown, and paid for it
Stepping aside below the 200-day average kept the worst fall to -21% instead of -34% in March 2020. It also missed the sharp rebounds that follow sell-offs and won only 29% of its trades. The result was roughly a third of buy and hold's return.
The win-rate trap
The RSI rule won 80% of its trades, which feels like success. But it was in the market only 29% of the time, and its average loss (-6.2%) was bigger than its average win (+4.5%). Win rate says nothing about how much you make.
The human side
These rules didn't panic or chase. Real traders do: Barber and Odean found the most active US households trailed the market by about 6.5 points a year in the 1990s. Buy and hold only works if you actually hold through a -34% fall.
What this doesn't show
One asset, one decade, mostly a bull market. A trend rule would likely have looked better over a period that included 2008. Test the same rules on other assets and periods before drawing conclusions.
Educational content, not investment advice. Past results don't predict future returns.
Try this strategy
Buy SPY when the close crosses above the 200-day SMA, sell when it crosses below.