The End Of The Year Rally In Stocks (Santa Claus Rally/Effect Strategy — Rules, Backtest)
The End Of The Year Rally In Stocks (Santa Claus Rally/Effect Strategy — Rules, Backtest)
Our backtests reveal that the stock market shows significantly better performance in the last days of the year and the first days of the new year. Both the end-of-year rally and the Santa Claus rally are no myths.
The strategy is pretty simple:
The last four days of December and the first three days of January are often referred to as the end-of-year rally (effect). Let’s test if the hypothesis is true.
Below is the equity chart (Shown in the image) of the S&P 500 from 1960 until January 2020 (100 000 invested in 1960 and compounded/reinvested)
The strategy has produced 1.12% per trade, the win ratio is 68%, the average winner is 2.47%, the average loser is -1.88%, the profit factor is 2.66, and max drawdown is 9.2%.
You can find more info about this trading strategy here:
https://www.quantifiedstrategies.com/end-of-the-year-santa-claus-rally-strategy/
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