Does anything beat buy & hold on SmallCap 600?
Every setup we tested on SmallCap 600 — ranked out-of-sample, corrected for multiple testing, and forward-tracked in public from the day this page published. The honest answer is the headline.
No setup beat simply holding once tested honestly. We say so plainly.
Its best setup only beat buy-and-hold in one window — a regime artifact, not a strategy. Buy-and-hold benchmark: +10.2% CAGR over 26.2 years (+8.0% CAGR in the out-of-sample window).
Educational research from historical backtests — not investment advice. Past performance does not predict future results.
SmallCap 600: Nothing Beat Buy-and-Hold, and That Is the Honest Answer
Broad, diversified instruments like SmallCap 600 are where indicator strategies go to disappoint. We ran 746 setups against IJR, and none cleared the bar once scored honestly — on data the strategy never saw. The best of the batch, Volatility Stop (ATR) on the weekly timeframe, posted an out-of-sample Sharpe of 0.67, short of the 1.29 hurdle we require before calling anything real. For an index fund this is the expected result: whatever inefficiency exists in single names tends to average away in the basket, leaving buy-and-hold's +10.2% annualized return as the number nothing here managed to beat.
Read these figures with the selection problem in mind. Test 746 indicators, keep the best, and the winner looks impressive by construction — which is exactly why the hurdle exists instead of applause for a lucky draw. Here, only 1.4% of setups outperformed buy-and-hold even in-sample, and the top candidate produced +2.6% annual alpha over 7.9 unseen years, across 38 trades with a 55.3% win rate and a -36.2% drawdown. That pattern reads as noise, not signal. Markets also change, so even a genuine past edge can fade. This page documents what failed — useful to know before assuming something works.
Every figure above is computed from our own backtests — nothing is estimated or invented. Hypothetical results; not investment advice.
The least-bad setups — shown with their failure numbers
Nothing here earned a verdict — these are the best of a losing field, published so you can see exactly how "best" still failed.
Volatility Stop (ATR)
Mechanical rule (exactly as backtested): Wilder's ATR trailing stop that flips with trend - long while price holds above the stop (20, 2x ATR). Signals are evaluated at weekly-bar close, the position changes on the NEXT bar, 0.08% cost per side, long/flat only — no leverage, no shorting.
Out-of-sample (last ~30% of the window, never used to pick this setup): Sharpe 0.67 · alpha +2.6% · 11 trades over 7.9 yrs.
Hull MA 10/40 Cross
Mechanical rule (exactly as backtested): VARIANT — Hull MA 10/40 cross; long while fast leads slow. Signals are evaluated at daily-bar close, the position changes on the NEXT bar, 0.08% cost per side, long/flat only — no leverage, no shorting.
Out-of-sample (last ~30% of the window, never used to pick this setup): Sharpe 0.63 · alpha +0.9% · 85 trades over 7.8 yrs.
Lorentzian Classification
Mechanical rule (exactly as backtested): k-nearest-neighbor classifier over oscillator features (Lorentzian distance) — long when the most-similar past bars led higher. Signals are evaluated at weekly-bar close, the position changes on the NEXT bar, 0.08% cost per side, long/flat only — no leverage, no shorting.
Out-of-sample (last ~30% of the window, never used to pick this setup): Sharpe 0.62 · alpha +2.1% · 83 trades over 7.9 yrs.
Since publication — including if it loses
The forward record is just getting started — the gap between the two is the honest score. Marked to market nightly from real prices, rules frozen at publication, as of 2026-06-29. Currently LONG.
We tested 746 setups (indicator × parameters × timeframe) on SmallCap 600. Only setups with ≥30 trades qualify (656 did). Setups are ranked by out-of-sample Sharpe — the last ~30% of history, which standard-parameter rules never saw during selection. Because picking the best of 746 tries mines even the holdout, the VALIDATED verdict additionally requires the top setup’s OOS Sharpe to clear a selection hurdle of 1.29 (√(2 ln N)/√T) AND positive alpha in both windows. Of the eligible setups, 1.4% had positive out-of-sample alpha (median OOS Sharpe 0.18) — the table below is truncated, but this summary covers all of them. Full recipe: methodology · the engine’s contract lives in the repo as STRATEGY_METHODOLOGY.md.
Top 20 of 656 eligible setups
Ranked by out-of-sample Sharpe. Full + out-of-sample columns, costs included. Hypothetical.
| # | Setup | TF | Total ret | Sharpe | Max DD | Win | Trades | α vs B&H | OOS Sharpe | OOS α | OOS trades |
|---|---|---|---|---|---|---|---|---|---|---|---|
| 1 | Volatility Stop (ATR) | Weekly | +307.3% | 0.43 | -36.2% | 55.3% | 38 | -4.7% | 0.67 | +2.6% | 11 |
| 2 | Hull MA 10/40 Cross | Daily | +137.2% | 0.3 | -51.4% | 44.3% | 305 | -6.9% | 0.63 | +0.9% | 85 |
| 3 | Lorentzian Classification | Weekly | +189.2% | 0.32 | -56.9% | 53.4% | 236 | -6.0% | 0.62 | +2.1% | 83 |
| 4 | TEMA 10/30 Cross | Daily | +217.1% | 0.37 | -45.4% | 44.0% | 275 | -5.7% | 0.62 | +0.9% | 78 |
| 5 | Accumulation/Distribution | Weekly | +396.0% | 0.46 | -38.9% | 55.6% | 81 | -3.9% | 0.57 | +0.7% | 24 |
| 6 | Parabolic SAR (fast) | Daily | +13.4% | 0.11 | -58.8% | 45.1% | 508 | -9.8% | 0.57 | +0.3% | 141 |
| 7 | Price Momentum Oscillator | Daily | +259.5% | 0.41 | -35.5% | 42.6% | 190 | -5.2% | 0.56 | -0.2% | 55 |
| 8 | KAMA 10/30 Cross | Daily | +329.9% | 0.45 | -33.8% | 44.9% | 78 | -4.5% | 0.52 | -0.4% | 26 |
| 9 | Coppock (fast) | Daily | +134.1% | 0.29 | -36.1% | 42.5% | 233 | -6.9% | 0.52 | -0.6% | 65 |
| 10 | TEMA 20/50 Cross | Daily | +274.7% | 0.42 | -42.0% | 49.7% | 147 | -5.0% | 0.51 | -1.0% | 46 |
| 11 | True Strength Index | Daily | +157.8% | 0.32 | -48.3% | 41.5% | 284 | -6.5% | 0.5 | -0.9% | 79 |
| 12 | LSMA 10/30 Cross | Daily | +40.3% | 0.16 | -54.2% | 46.8% | 293 | -8.9% | 0.5 | -1.3% | 84 |
| 13 | Least Squares MA | Weekly | +141.2% | 0.32 | -42.8% | 49.6% | 129 | -6.8% | 0.5 | -1.5% | 36 |
| 14 | Chande-Kroll Stop (fast) | Weekly | +579.4% | 0.51 | -46.3% | 57.0% | 79 | -2.6% | 0.49 | -0.0% | 27 |
| 15 | Twiggs Money Flow | Weekly | +373.1% | 0.44 | -35.1% | 56.3% | 71 | -4.1% | 0.49 | -0.6% | 18 |
| 16 | QQE | Weekly | +708.3% | 0.5 | -58.0% | 60.0% | 75 | -1.9% | 0.48 | +1.0% | 26 |
| 17 | Delta Volume (CVD proxy) | Weekly | +342.7% | 0.44 | -35.8% | 52.6% | 78 | -4.3% | 0.48 | -1.0% | 25 |
| 18 | Premier Stochastic | Daily | +31.4% | 0.15 | -44.2% | 41.8% | 244 | -9.2% | 0.48 | -1.1% | 71 |
| 19 | McGinley 10/30 Cross | Daily | +525.1% | 0.52 | -33.9% | 44.0% | 50 | -3.0% | 0.48 | -1.1% | 19 |
| 20 | Zero-Lag MACD | Weekly | +163.5% | 0.33 | -50.4% | 56.3% | 119 | -6.4% | 0.48 | -1.3% | 36 |
Hypothetical backtests with 0.08%/side costs. Not investment advice — see the full disclaimer.
These are historical backtests of mechanical rules. They are educational research, not investment advice, not a recommendation, and not tailored to you. Educational information only — not investment advice. Hypothetical backtested results; past performance does not guarantee future results. Trading involves risk of loss.