7Mon·

Improving my buy-the-loser strategy with more performance and less risk...✅📈

I often see the most punished stocks at the top after a short time, because the market sometimes overreacts even to small news... And that's how my idea came about:

Buy the 5 worst stocks in an index every month
Sell again after one month

Under my original post I got the suggestion to test some other aspects and refine the idea to reduce the risk (thanks @Epi old version: https://getqu.in/2OA9NM/)...

Only buy when the stock is above the 200-day moving average (SMA200) is
→ How to avoid "falling knives" and increase the probability of success
Consider risk and maximum drawdown
Longer investment horizon (not 10 but 25 years)
Expanded equity universe

Results from 2000 to 2025 (backtest with historical data):

1. DAX

Buy & Hold DAX: +5.99 % p.a.Max. Drawdown: -39 %
Losers without filter: +10.7 % p.a., Drawdown: -15 %Sharpe: 0,70
Loser with SMA200:
+11.6 % p.a., Drawdown: -9 %, Sharpe: 0,80 ✅

2nd MDAX loser strategy

Buy & Hold MDAX: +7.4 % p.a.Max. Drawdown: -34 %
Losers without filter: +11.6 % p.a., Drawdown: -17 %Sharpe: 0,67
Loser with SMA200:
+12.4 % p.a., Drawdown: -11 %, Sharpe: 0,76✅

3. nasdaq 100 loser strategy

Buy & Hold Nasdaq-100: +8.8% p.a.Max. Drawdown: -52 %
Losers without filter: +12.5 % p.a., Drawdown: -20 %Sharpe: 0,75
Loser with SMA200:
+13.2 % p.a., Drawdown: -12 %, Sharpe: 0,84✅

4th S&P 500 loser strategy

Buy & Hold S&P 500: +6.5% p.a.Max. Drawdown: -48 %
Losers without filter: +10.2 % p.a., Drawdown: -18 %Sharpe: 0,65
Loser with SMA200:
+11.0 % p.a., Drawdown: -10 %, Sharpe: 0,73✅

5 MSCI World as comparative benchmark

Buy & Hold: +9.3 % p.a.Max. Drawdown: -32 %Sharpe: 0,50

So: The 200-day line helps me to improve performance and significantly reduce risk! ✅

Since I do not include fees and taxes, the actual performance may differ 😏

Expansion to include global equity universe (USA + Europe)

Universe:

Another idea was to add the entire European and American stock market so as not to be so dependent on individual regions. Since the SMA200 filter has held its own, I apply it directly...

approx. 500-600 stocks from S&P 500, Stoxx Europe 600, MDAX, TecDAX, Nasdaq-100
Every month: 5 biggest losers with SMA200 filter

Results 2000-2025:

Return: approx. +13.6 % p.a.
Max. Drawdown: approx. -9,5 %
Sharpe ratio:
0,88
MAR (yield/drawdown):
1,43✅

Conclusion:

This setup beats all individual markets - not only in terms of returns, but also in terms of risk.

The global selection offers a higher chance of finding real turnarounds - even if individual regions are currently weak.

I will soon be testing another idea of applying the strategy to the weekly losers...

The overall results make me want to take a closer look at the loser list of the month in the future in order to improve my performance...

⚠️keine Anlageberatung⚠️

53 Comments

Patrick Schäfer@Hotte1909

7Mon

I find that very interesting. Also with the improvement. I already wrote to you in the first post. Have you ever done a backtest with the winners of the indices? Above the gd50 and below the gd 200 line? They should actually perform even better in the uptrend as long as there is still enough space to the gd200.

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Klein-Anleger1@Klein-Anleger1

7Mon

@Hotte1909 Hi, thanks for your feedback... No, I haven't done that yet... But it's a good idea when I have a bit more time 😁

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Patrick Schäfer@Hotte1909

7Mon

@Klein-Anleger1 keep us up to date. 😀

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Epi@Epi

7Mon

That already looks very good! 👌

There may be another way to boost performance further:
Pick the 10 weakest stocks above SMA200 and of these the 5 stocks with the highest 12-month momentum. This way you always have the strongest stocks in your portfolio.

Or:
Choose the 5 weakest stocks above SMA200 from the index with the highest 12-month momentum. This way you are always in the strongest index and automatically diversified worldwide.

I like the 2nd option more, but perhaps my intuition is deceiving me. 🤷

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David@Redfox77

7Mon

@Epi What exactly do you mean by highest monthly momentum? Strongest increase in value?

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Epi@Epi

7Mon

@Redfox77 Exactly. Very simple: difference between current price and price 12 months ago.

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Chris@Multibagger

7Mon

@Epi But isn't it the case that the weakest stocks each month also have weaker momentum? And does it make sense to compare the weakest stocks each month with the 12-month momentum?

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Klein-Anleger1@Klein-Anleger1

7Mon

@Multibagger Hi, the goal is to avoid falling knives and only invest in stocks that have a high rebound potential... - and therefore the 200-day line as a hedge

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Chris@Multibagger

7Mon

@Klein-Anleger1 I am aware of the 200-day line. That ? applied to the 12-month momentum. Isn't the selection then only determined 😕 by technical factors and fundamentals play no role?
Example: a share reports poor figures and lowers its outlook because a product did not deliver the expected results in studies and then falls by 15%, but before that it had risen by 60% in 12 months in anticipation of positive results. So it has top momentum, but poor prospects.

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Epi@Epi

7Mon

@Multibagger SMA200 tries to catch rising stocks. 12M Momentum tries to catch the strongest rising stocks.
If they fall for a month (no matter why), then the probability of a strong reversal is also the highest (no matter why fundamentally). And that's exactly what you want.

And yes, this strategy is completely driven by technical factors. It is based on the assumption that fundamental factors are secondary to technical factors in the short to medium term. This assumption is well documented by behavioral finance research. This is why this reversal strategy should also perform relatively well.

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Cekay@CMustermann

7Mon

My inner Monk needs to come out: that means loser, not looser 😁
Sorry

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Klein-Anleger1@Klein-Anleger1

7Mon

@CMustermann Thanks for your correction... 😁

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Ralf@Matterhorn3260

7Mon

@Klein-Anleger1 That sounds like a very good strategy. I just have to ask, how do you filter out the stocks? Is it a simple way with getquin or do you have another tool?

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Klein-Anleger1@Klein-Anleger1

7Mon

@Matterhorn3260 Hi, thanks for your feedback, I'm currently still looking for a more practical tool because my current one is unfortunately very unwieldy and time-consuming 😬

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Stefan@Serviceuser

7Mon

That sounds very interesting.
How did you calculate it? I would be interested in the results after adjusting other parameters (number of shares to buy, weighting, holding period, etc.).

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Klein-Anleger1@Klein-Anleger1

7Mon

@Serviceuser Hi, unfortunately I haven't found a really handy and usable tool yet (quite cumbersome), but if I find one I'll let you know...

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yieldhunter@randomdude

7Mon

It's going to be good 🤩
You don't need to be afraid of the practical implementation. If you use a cheap broker, the trading costs are negligible. That's my experience with GTAA, where it was always said: "Yes, it might work in the backtest, but it's not practical ...!" But it is - the results correspond exactly to those of the backtest setup that I ran for a while.
Taxes can be an issue, but with the tax-free allowance and loss offset pot, you can get pretty far without paying anything. If you get into the high five figures, you could consider a wikifolio mantle.

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Klein-Anleger1@Klein-Anleger1

7Mon

@randomdude Hi, thanks for your feedback 😁

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Dominik@Dominik_76

7Mon

Thank you for your contribution. I would be interested, also because of the completeness of the comparisons: How was the losing strategy with the MSCI World compared to B&H?

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Klein-Anleger1@Klein-Anleger1

7Mon

@Dominik_76 Hi, I haven't actually calculated that, but I'll do it one of these days...
Thanks for your feedback 😁

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Thilo M.@ThiloM

7Mon

Thank you. Bookmark it right away. 👍

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Klein-Anleger1@Klein-Anleger1

7Mon

@ThiloM 👍🤝

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Chris@Multibagger

7Mon

Thank you very much for your work and your input. I can well imagine that for many here it is very interesting to achieve a continuous return of 10-12% p.a. and to beat the market by 2-3%. So keep up the good work. I will follow it, even if the approach is out of the question for me, because the return is too low for my approach. But I'm also rather exotic here 😉😂

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SemiGrowth@SemiGrowth

6Mon

Strong. The drawdown looks extremely low. How exactly does that work?
As I understand it:
1. select 5 weakest stocks of the last month
2. filter out all those that are not quoted above 200 SMA
3. buy the remaining stocks equally weighted with the entire capital?

Somehow that sounds infinitely risky. Especially if you only go all-in on one share because the others have been thrown out by the filter.
Or do you simply buy the 5 weakest stocks that survive the filter?

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Klein-Anleger1@Klein-Anleger1

6Mon

@SemiGrowth Yes, you described that correctly, but I wouldn't go through with the strategy with my full capital, but rather as an admixture to achieve an excess return... 😁

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Dave W.@CrossieFX

7Mon

Which stocks would that be this month? According to my search, they would be: Aurubis, DWS Group, Lufthansa, Lanxess, Carl Zeiss Meditec.
Okay ?

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David@Redfox77

7Mon

@CrossieFX Wieso MDAX?

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Dave W.@CrossieFX

7Mon

Why not ?

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David@Redfox77

7Mon

@CrossieFX Of course! But there could have been a specific reason. For example, the fact that the DAX is the strongest index over a 12-month period speaks in its favor.

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Dave W.@CrossieFX

7Mon

I was looking for the weakest stocks in the MDAX in April. Then for those above the 200-day average.

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Klein-Anleger1@Klein-Anleger1

7Mon

@CrossieFX Unfortunately, I am currently doing the same thing... (I would rather have a filter where I can directly display the stocks according to monthly performance, and only those that are above the 200-day line... 🙃 But I haven't found anything effective yet...

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Dave W.@CrossieFX

7Mon

@Klein-Anleger1 The whole thing is done relatively quickly. I'd just like to know if I'm right with my list. I would buy these 5 titles in small quantities tomorrow.

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Klein-Anleger1@Klein-Anleger1

7Mon

@CrossieFX Hi, I did a quick check and everything was fine so far...👍 Unfortunately I don't have any free cash to invest and have to wait another week 🫠🤑

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Patrick@Philps8

7Mon

@CrossieFX I had chatgpt create a list for me and today it was HugoBoss, Bechtle, Jenoptik, Lanxess, Fuchs Petrolhub. So you don't have to search for long - the result must of course be checked against.

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Klein-Anleger1@Klein-Anleger1

7Mon

@Philps8 Unfortunately, ChatGPT doesn't always have the latest data... I also had ChatGPT create a list of the above criteria the other day, but when I checked against it, the stocks were generally below the 200-day line...

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yieldhunter@randomdude

7Mon

@Klein-Anleger1 In my experience, easily accessible and absolutely reliable data is absolutely essential for such strategies. I track my values with Excel - with an MS365 subscription you have access to stock market prices and can calculate with them straight away. Google Sheets probably works too.
You don't even need to start with AI data.

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Stefan@Serviceuser

7Mon

Can someone explain to me how/where I can calculate this with historical data and adjust parameters as described above?

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Tim@Tacticus

7Mon

Why SMA 200 and not, for example, 275? What is the reason?

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View all 2 further answers

Alex@AlexBloch

7Mon

In the backtest, I would leave out the period 2010-2025 because the entire global market was unnaturally high, especially in 2024, pushed up by the internet giants, which also pulled the loser stocks back up strongly. Only now, in May 2025, is there an expected correction - for which Trump's tariff policy was just the small drop that broke the whole camel's back...

It's best to do a backtest from 2000 (or even earlier) to 2010.

Even more meaningful would be the average (median!) of many backtests, each with a different time period:
Only this would tell you whether your Loosr strategy is not just successful by chance "on the side", i.e. only depending on a long-term bull market !

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Dave W.@CrossieFX

7Mon

I have now done the math for the S&P500. Among the worst 16 companies, not a single one is above the SMA200

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Alex@AlexBloch

7Mon

Your comparative values with Buy&Hold are not very meaningful if you did the backtest right now in the middle of a stock market crash that will only recover for weeks or months from now!
It's clear that when the recovery begins, the loser stocks that were wrongly (because of panic) dragged down will be the first to rally the most... That's why your strategy wins in a current(!) backtest.

Let your backtest end at various earlier points in time and look at the normal distribution (peak of the bell curve across all test periods!) in the result: Then you will find out the true systematic return of your strategy !

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View all 8 further answers

Kai Nehr@Webda

7Mon

Interesting approach! The SDAX ($SDAXI) losers could also be included. There is often a lot of movement in them.

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wealth_maximizer_ebllj@wealth_maximizer_ebllj

6Mon

Danke

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