Systematic Trading on ETFs - A Strategy on SPY that Outperforms the Buy & Hold

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Is it possible to do systematic trading on ETFs in an effective way, maybe getting better results than buy and hold?

According to the results produced by the strategy shown in this video, it would seem so!

This is a very simple system that trades only long on the SPY (the S&P 500 ETF) and only on certain days of the week.

Here are some things you'll learn in this video:

✅ How to identify and code the strategy's entry and exit rules (open-coded with step-by-step explanations) 

✅ A comparison between the results of the system and of the Buy and Hold (higher profits, lower drawdowns!)

✅ The SPY features you need to know to trade systematically (differences with futures, session, scalability, big point value …)

Enjoy the video! 😎


Hey everyone and welcome back to our brand new video. I'm one of the coaches of Unger Academy and today we're going to be talking about how to create a trading system on an ETF. In particular, we'll use SPY, one of the most famous ETFs in the world.

Searching for the Bias

Since many of you have asked us to research and create an automated strategy on an ETF, today we're going to evaluate a trading system on this underlying asset. The system is based on a bias logic. It enters the market once a week and we're going to discover the best day to send our entry orders.

Okay, so as I mentioned before, today we're going to be talking about ETFs. ETFs are products that can be used in place of, for example, stocks or futures, although I'd like to point out that the latter are more inclined to be used in automated strategies compared to ETFs.

Nevertheless, today we're going to try a fairly consolidated strategy on a very famous ETF, namely the SPY, which replicates the trend of the S&P 500 index, which you know is the index that tracks the 500 most-capitalized U.S. stocks. So the S&P 500 is its benchmark, let's say.

ETFs differ somewhat from futures. First of all, they don't have an expiry date, and this is certainly an advantage over futures which, as you know, depending on the type of product, have rules and predefined expiry dates throughout the year.

They have a shorter session than futures. As we know by now, almost all futures are open 23 hours a day, but in this case, these products will be open from 09:30 am (New York exchange time) until 4 pm. So, they follow the famous cash session of American stocks.

Basically, they behave and also have scaling and Big Point Values that are very similar to those of stocks, so practically one point is worth $1. Consequently, these markets are also very scalable because, for example, to buy a share of SPY, you now only need $443.

You can see here the current price, the close in this case is from yesterday, and as a result, we can scale these positions much better than futures. And this is an advantage.

At this point, let's now have a look at the rules of our strategy. To identify them more easily we're going to use the Bias Finder, a proprietary software entirely developed at the Unger Academy by Davide Tagliabue, who created this truly phenomenal instrument. David, well done!

So, what are we going to do? We're going to look at the weekly average trend of the S&P 500 and search for a recurring pattern in its behavior. In this case, we’ll use the futures data because we only need the data to run some tests. And then we'll analyze, period by period, the best days to enter the market.

So here are the results. In a slightly darker blue, we can see the results from 2008 to 2022, so practically in the time frame of the entire backtest.

And then we have different periods of 3 years that help us evaluate the consistency of possible bias and recurring behaviors over the years. So what can we see? We see that the biggest upswings seem to occur in the middle of the week, so…

Tuesdays, Wednesdays, and Thursdays are all very positive. Instead, on Fridays, there's a general leveling off, as well as on Mondays.

We'll try to set up a trading system with this data and buy at the close of the session on Monday, and then close the long trades on Thursday at the end of the session.

Strategy Script

Here are the rules for the strategy. I've added some other conditions to improve it as well.  On "Monday", the first day of the week, at 3:45 p.m. we'll send an order 15 minutes before the end of the session and then buy the number of contracts specified in the MySize input next bar market.

When we will have a long position open and the day of week will correspond to Thursday, at this time, so 1 hour before the end of the session, we'll close our trade.

There is also a stop loss which has been set at 3% of the strategy entry price.

And then, as you can see, we've also added two variables which are the Friday close and the Monday open. In this way, we're able to calculate how much the market fell the week before our entry. The reason we do so is that we've noticed that it can be useful to limit the entries only to certain weeks. So instead of trading all the 45-50 trading weeks that we have in a year, we can pick only those weeks in which the market had dropped by at least a certain percentage, in our case 0.5%.

Then we also added another condition, namely a monthly filter, which blocks trades in May. As the famous phrase says ("sell in May"), it seems that in May it's better to sell than buy. So this strategy, which only trades long, might have some difficulty in producing good results in May. And since on average, the strategy often made losses during this month, we opted for adding a monthly filter.


Now if we apply this strategy to the SPY ETF using 15-minute bars… You'll see that the strategy goes long at the last bar (let's look at another one... here it is) always and only following a bearish week of at least 0.5%.

You can see it here as well: we have a bearish week and then we send the order on Monday night.

Here too: bearish week and an order is set at the scheduled hour.

After reinvesting profits, this strategy generates this kind of equity curve. Obviously, it's an already optimized and practically finished strategy, but there are certainly some very good starting points.

I'd like to remind everyone that unlike futures, ETFs can be either distributing or accumulating. This means that they incorporate dividends and can either distribute them or accumulate them in the fund.

However, in both cases, this represents a benefit to the investors of that fund. So basically, ETFs can be a viable alternative to futures for systematic trading.

Let's move on to evaluate the average trade. In this case, it's a little hard to evaluate it because I’ve included the reinvestment of profits. In this part of the strategy, we'd buy "MySize", which would be $10,000, plus the net profit accumulated by the strategy, so basically with the reinvestment of profits.

We do this in order to be able to compare our strategy and the results it produces with, for example, a buy and hold.

Comparison with Buy&Hold

So, here we can see that this strategy allows us to make a profit of $32,000 with a drawdown of about $3,000.

While, instead, using a code that allows us to test the real buy and hold of this product... There you go, let's compile it. You can see that the strategy has opened a trade at the beginning of the backtest. Here it is, at bar number one, and then after that, it closed at the last bar.

So by only buying and holding and reinvesting the profits generated, this strategy would have yielded $20,000 with a drawdown of as much as $8,000 with this equity line.

So this bias strategy could certainly experience some bad moments, such as 2008, or even some big drawdowns. Because clearly since it trades only long, in moments of strong decline it's pretty obvious that it could suffer quite a bit. However, as we've seen, with the proper adjustments this strategy could give us a certain advantage over the market.

So, guys, give it a try too!

If there's someone among you who is interested in the world of systematic trading, I'd recommend clicking on the link in the description of this video. From there you'll be able to watch a video of Andrea Unger, get our best-selling book covering only the shipping costs, or hey, why not book a free call with a member of our team? You won't regret!

And if you liked this video, please leave us a Like. Subscribe to our channel and click on the notification bell to stay updated on the release of all our new videos.

And with, I will see you again soon! Bye-bye!

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Andrea Unger

Andrea Unger

Andrea Unger here and I help retail traders to improve their trading, scientifically. I went from being a cog in the machine in a multinational company to the only 4-Time World Trading Champion in a little more than 10 years.

I've been a professional trader since 2001 and in 2008 I became World Champion using just 4 automated trading systems. 

In 2015 I founded Unger Academy, where I teach my method of developing effecting trading strategies: a scientific, replicable and universal method, based on numbers and statistics, not hunches, which led me and my students to become Champions again and again.

Now I'm here to help you learn how to develop your own strategies, autonomously. This channel will help you improve your trading, know the markets better, and apply the scientific method to financial markets.

Becoming a trader is harder than you think, but if you have passion, will, and sufficient capital, you'll learn how to code and develop effective strategies, manage risk, and diversify a portfolio of trading systems to greatly improve your chances of becoming successful.