TREND-12 · Trend Following

MACD Strategy

Uses MACD (Moving Average Convergence Divergence) line crossing the Signal line to identify trend changes. MACD above Signal indicates bullish momentum.

TrendMomentum

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At a glance

Best onTrending markets

Signal frequencyDaily

Typical holding periodDays

Asset classesIndex, Commodity, FX

Markets tested10

Data through2026-11-10

What the backtest shows

Beat buy-and-hold on 3 of 10 markets by annual return over 5 years.
Had a smaller maximum drawdown than buy-and-hold on 7 of 10 markets.
Best market by Sharpe ratio: SLV (Sharpe 0.56, CAGR 11.7%).
Weakest market: UNG (Sharpe -0.48, CAGR -28.8%).

Equity curve

MACD Strategy Buy & hold · SPY, 2010-01-04 → 2026-11-10, growth of 1

Score and risk profile

Arena Score: 37.8SPY, 5 years

Return quality · 30%27

Drawdown control · 25%39

Consistency · 20%22

Robustness · 15%53

Significance · 10%76

Each bar is a percentile against every strategy on the same market and window (100 = best).

Time in market48%

Ulcer index5.6%

Longest drawdown575 days

Daily VaR (95%)-0.95%

Probability Sharpe > 076%

Beta vs buy & hold0.36

Alpha (annual)-1.2%

Positive months43%

CAGR after 10 bp costs0.3%

Deflated Sharpe (luck-adjusted)22%

CAGR, 90% bootstrap range-4.1% to 10.9%

Max drawdown, 90% bootstrap range-35.0% to -10.6%

How it held up in sell-offs (SPY)

Period	Strategy	Buy & hold
Q4 2018 sell-off	-6.8%	-19.2%
COVID crash (Feb–Mar 2020)	-1.4%	-33.7%
2022 bear market	-12.0%	-24.5%
Market above its 200-day average (annualized) · 81%	+3.6%	+12.5%
Market below its 200-day average (annualized) · 19%	+16.0%	+19.8%

Sell-off dates follow the US stock market. Above/below the 200-day average uses the previous day's position, so there is no look-ahead.

Out-of-sample check (SPY)

Check	Value
Chosen parameters on their 3-year training windows (average Sharpe)	0.87
Same parameters in the following 6 months, when traded (Sharpe)	0.69
Default parameters over the same months (Sharpe)	0.81
Parameter re-selections / changes	28 / 13
Parameter settings with a positive Sharpe (full history)	9 of 9
Sharpe across settings: worst / median / best	0.61 / 0.69 / 0.73

Out-of-sample periods start on 2013-01-04. Training-window figures are flattered by picking the best of 9 settings; the out-of-sample figure is what the strategy actually earned. A large drop, or a result that depends on one setting, points to overfitting. How walk-forward testing works.

Results by market (5 years)

Market	CAGR	Buy & hold CAGR	Sharpe	Max drawdown	Buy & hold max DD	Volatility	Arena Score
SLViShares Silver Trust	11.7%	15.2%	0.56	-46.7%	-57.8%	27.8%	64
DBCInvesco DB Commodity Index	5.1%	10.8%	0.44	-30.7%	-27.3%	13.5%	58
GLDSPDR Gold Shares	4.9%	16.4%	0.44	-23.6%	-28.3%	13.7%	30
BTC-USDBitcoin	10.6%	2.6%	0.38	-48.0%	-75.9%	27.1%	73
SPYSPDR S&P 500	2.8%	11.6%	0.30	-17.1%	-24.5%	10.3%	38
ETH-USDEthereum	3.9%	-15.1%	0.25	-55.3%	-79.0%	37.8%	79
DBAInvesco DB Agriculture	1.8%	8.8%	0.24	-17.3%	-15.9%	9.3%	36
USOUnited States Oil Fund	-6.7%	20.2%	-0.12	-65.6%	-36.2%	27.4%	26
EURUSD=XEUR/USD	-1.1%	-0.7%	-0.16	-10.1%	-17.2%	5.5%	37
UNGUnited States Natural Gas	-28.8%	-30.7%	-0.48	-87.6%	-93.3%	47.1%	22

Strategy metrics use daily returns without trading costs. Buy-and-hold figures are for the same market and window. Rows are sorted by Sharpe ratio.

SPY across time windows

Window	Total return	CAGR	Sharpe	Sortino	Max DD	Win days	Trades
1 year	+5.5%	5.5%	0.83	0.93	-7.2%	19%	22
3 years	+16.0%	5.1%	0.70	0.59	-12.3%	26%	79
5 years	+14.6%	2.8%	0.30	0.28	-17.1%	25%	121
Full history	+158.7%	5.8%	0.63	0.58	-17.1%	27%	378

Rules

Entry

Buy when MACD crosses above Signal line

Exit

Sell when MACD crosses below Signal line

Indicators

MACD = EMA(12) - EMA(26)
Signal Line = EMA(MACD, 9)
Histogram = MACD - Signal

Inputs

Fast = 12
Slow = 26
Signal = 9

Position sizing

Fixed 100% allocation

Risk controls

None - pure trend following

Strategy evidence

Only available, validated bundles appear below. Missing evidence is not a passing validation result.

Evidence coverage

10 / 10 declared strategy–market pairs validated

Notes

Developed by Gerald Appel in the 1970s
Combines trend-following and momentum
Works best in trending markets, whipsaws in ranges

Related strategies

HMA-01 · SPY 5Y Sharpe 0.06HMA Crossover MOM-01 · EURUSD=X 5Y Sharpe 0.19Time-Series Momentum MOM-05 · FABER-TAA 5Y Sharpe 0.91Faber TAA MOM-10 · SPY 5Y Sharpe 0.81Accelerating Momentum TREND-05 · SPY 5Y Sharpe 0.71Dual Moving Average TREND-13 · SPY 5Y Sharpe 0.71Triple Moving Average

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Backtests are historical simulations on daily data and do not include commissions or slippage. They do not guarantee future results and are not investment advice. See the methodology for how every strategy is tested.