Does anything beat buy & hold on Energy (XLE)?
Every setup we tested on Energy (XLE) — 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 trailed buy-and-hold out-of-sample. Buy-and-hold benchmark: +8.8% CAGR over 27.4 years (+11.3% CAGR in the out-of-sample window).
Educational research from historical backtests — not investment advice. Past performance does not predict future results.
Energy: Nothing Beat Buy-and-Hold, and That Is the Honest Answer
Broad, diversified instruments like Energy are where indicator strategies go to disappoint. We ran 749 setups against XLE, and none cleared the bar once scored honestly — on data the strategy never saw. The best of the batch, Standard Error Bands on the daily timeframe, posted an out-of-sample Sharpe of 0.87, short of the 1.27 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 +8.8% annualized return as the number nothing here managed to beat.
Read these figures with the selection problem in mind. Test 749 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 5.0% of setups outperformed buy-and-hold even in-sample, and the top candidate produced -5.2% annual alpha over 8.2 unseen years, across 47 trades with a 59.6% win rate and a -15.7% 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.
Standard Error Bands
Mechanical rule (exactly as backtested): Buy a breakout above the upper Standard Error Band around the LSMA. 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 0.87 · alpha -5.2% · 16 trades over 8.2 yrs.
KDJ
Mechanical rule (exactly as backtested): Stochastic KDJ with the J line — long when K leads D and J turns up. 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 0.77 · alpha +3.5% · 190 trades over 8.2 yrs.
Fisher Transform
Mechanical rule (exactly as backtested): Long while the Fisher Transform turns up above its trigger. 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 0.72 · alpha +2.5% · 200 trades over 8.2 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 2026-07-02. Currently FLAT.
We tested 749 setups (indicator × parameters × timeframe) on Energy (XLE). Only setups with ≥30 trades qualify (665 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 749 tries mines even the holdout, the VALIDATED verdict additionally requires the top setup’s OOS Sharpe to clear a selection hurdle of 1.27 (√(2 ln N)/√T) AND positive alpha in both windows. Of the eligible setups, 5.0% had positive out-of-sample alpha (median OOS Sharpe 0.29) — 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 665 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 | Standard Error Bands | Daily | +84.7% | 0.44 | -15.7% | 59.6% | 47 | -6.5% | 0.87 | -5.2% | 16 |
| 2 | KDJ | Daily | +21.5% | 0.13 | -74.5% | 41.4% | 681 | -8.1% | 0.77 | +3.5% | 190 |
| 3 | Fisher Transform | Daily | +18.0% | 0.13 | -74.7% | 42.3% | 692 | -8.2% | 0.72 | +2.5% | 200 |
| 4 | Zero-Lag MACD | Weekly | +42.5% | 0.16 | -58.6% | 50.0% | 124 | -7.4% | 0.72 | +2.0% | 36 |
| 5 | Zero-Lag MACD | Weekly | +42.5% | 0.16 | -58.6% | 50.0% | 124 | -7.4% | 0.72 | +2.0% | 36 |
| 6 | Coppock Curve | Daily | +189.0% | 0.3 | -53.8% | 43.5% | 170 | -4.8% | 0.71 | +2.2% | 47 |
| 7 | McGinley 200 Trend | Daily | +740.8% | 0.44 | -57.4% | 28.9% | 45 | -0.7% | 0.69 | +3.1% | 16 |
| 8 | Chaikin Oscillator | Weekly | +650.7% | 0.48 | -32.0% | 55.0% | 80 | -1.1% | 0.69 | +3.0% | 22 |
| 9 | A/D Oscillator | Weekly | +650.7% | 0.48 | -32.0% | 55.0% | 80 | -1.1% | 0.69 | +3.0% | 22 |
| 10 | Zero-Lag EMA Cross | Daily | +54.7% | 0.18 | -66.5% | 44.3% | 332 | -7.2% | 0.68 | +1.8% | 96 |
| 11 | ZLEMA 10/30 Cross | Daily | +54.7% | 0.18 | -66.5% | 44.3% | 332 | -7.2% | 0.68 | +1.8% | 96 |
| 12 | Chande Kroll Stop | Daily | +92.4% | 0.22 | -74.4% | 40.0% | 437 | -6.4% | 0.67 | +3.8% | 114 |
| 13 | Williams Fractals | Daily | +84.1% | 0.21 | -53.4% | 41.0% | 173 | -6.5% | 0.66 | +1.0% | 46 |
| 14 | Intraday Momentum Index | Daily | +673.0% | 0.45 | -64.4% | 77.1% | 70 | -1.0% | 0.65 | +3.2% | 25 |
| 15 | TEMA 10/30 Cross | Daily | +49.5% | 0.17 | -69.5% | 41.8% | 294 | -7.3% | 0.65 | +0.8% | 85 |
| 16 | SMC: Fair Value Gap | Daily | -28.6% | 0.03 | -77.7% | 39.0% | 408 | -10.0% | 0.65 | +0.7% | 116 |
| 17 | True Strength Index | Daily | +166.1% | 0.28 | -56.7% | 42.2% | 289 | -5.2% | 0.64 | +0.8% | 83 |
| 18 | QQE | Daily | +766.4% | 0.42 | -66.8% | 40.4% | 418 | -0.6% | 0.63 | +4.2% | 121 |
| 19 | Twiggs Money Flow | Weekly | +429.4% | 0.4 | -37.4% | 51.9% | 81 | -2.4% | 0.63 | +1.9% | 23 |
| 20 | TEMA 20/50 Cross | Daily | +121.1% | 0.25 | -56.4% | 43.7% | 158 | -5.9% | 0.63 | +0.3% | 45 |
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.