buy the dip backtest

What the numbers mean

Folklore made exact enough to fail. The first thing to notice is how seldom the rule fires: both filters must agree, so the ETF has to slide a few percent across a five-session stretch while still holding above its 200-day average. Ordinary drift doesn't qualify, and a genuine bear market disqualifies itself — once price breaks that line, buying stops. Most of the tested decade is spent holding nothing, so the annualized figure is an average smeared across long flat stretches rather than something earned by staying invested.

The trade-level shape mirrors a trend follower's, inverted. Winners are capped by the profit target; losers have no stop at all — the exit field is empty, and only the ten-day clock ends a bad trade. That asymmetry produces a comfortable-looking win rate with a modest profit factor behind it: many small quick exits, plus a minority of trades that sit through whatever two weeks can deliver. Read the profit factor and the drawdown before the win rate.

Concentration compounds this. Half the account per position, two positions maximum, and two large-cap US indices that rarely disagree — when one triggers the other usually does, so being fully invested means one directional bet at full size. Over this window the result was positive but faint: not a loser, just rarely in the market long enough to compound much. The Sharpe is where the idle cash and the uncapped losing tail both show up.