Crisis-proof ETF strategy - Surviving a Crash

The ETF-SP500 Strategy

This strategy is easy to implement and has achieved a double-digit return per year since 1998, with only a few trades per year in one of the safest and largest indices in the world. Perfect for those with limited time who want to improve their annual performance.

In the past, the ETF-SP500 Strategy has successfully navigated all crises. The 2008 financial crisis, the 2001 dot-com bubble, and even the recent 2020 coronavirus crisis.

Figure 1: 2020 Coronavirus Crisis

Figure 2: Financial crisis 2008

Where do the entry and exit signals come from?

The strategy is based on the Market Alert Index from W5invest.com. This indicator measures the state of the market using breadth indicators, volatilities, and cross-industry comparisons. It essentially measures the internal strength of the SP500, indicating whether an uptrend is healthy or if a correction can be expected soon.

Being warned of a possible upcoming crash is a great advantage of this strategy, but it can do more. It offers promising entry signals to participate in the next upward movement after a bear market in a timely manner.

The strategy trades only ETFs on the SP500 (SPY or equivalent tradeable counterparts for the European market). This eliminates individual stock risk or the difficult choice of the right stock. There are not many trading signals per year, between 3 and 10. Occasionally, the position size is adjusted.

An email containing the trading instructions is sent a few hours before each trading signal.

An example of a trading instruction:

March 25, 2020

We open a position (ETF on the SP500: SPY, in Europe IE00B5BMR087) at the opening of the market (USA) today.

The investment ratio is 70% (70% of the available capital is invested)

The strategy is comfortable to implement with very few trades per year. Another big advantage is the very high liquidity of ETFs on the SP500. The SP500 itself is the most famous stock index in the world and includes the largest companies in the USA. This eliminates the risk of individual stocks.

The performance of the SP500 ETF strategy speaks for itself:

Fig. 3: S&P500 ETF Strategy Metrics

Figure 4: Equity Matrix

Figure 5: Drawdown of the strategy

Fig. 6: Equity Curve

With a Cumulative Annual Return of 13% and a maximum drawdown around 10% (only 13% in 2008), this passive strategy yields strong performance numbers. With a leverage of 1.5, we would have an average return of 20% since 1998!

Combination with COT Strategy

This strategy can be perfectly combined with the COT Strategy from InsiderWeek. As seen in the image, despite the improvement in annual performance, the drawdown does not increase!

The correlation of the equity of the two strategies is very low. The image marks exemplary phases, showing that the drawdown phases of both systems do not fall together in time. Ideal for achieving higher returns with less risk.

Figure 7: Combination of ETF and COT strategies

Given that the COT strategy leaves 70% of unused capital on the account, the SP500 strategy provides an excellent opportunity for diversification and effectively utilizing the unused capital.

About the author

Max Schulz is a professional futures and commodities trader. He is the founder and head of InsiderWeek. For many years he has been helping people achieve their financial goals by training them in futures trading.

You might also get interested by these articles

Trading results
Our Futures Trading Results. Week 11 2023

-$13.305. That is the trading result from our commodity and futures trading according to COT data...

Read more >>
Trading basics
Trading futures? 10 answers that explain futures trading simply

Are you looking for a definition of futures and an explanation...

Read more >>
Trading results
Our Futures Trading Results. Week 10 2023

+$11.285 profits. That is the trading result from our commodity and futures trading according to COT data...

Read more >>
Trading basics
Trading Pros and Cons - Do you have what it takes to be a successful trader?

To provide an objective evaluation of whether...

Read more >>
Bulletin
Commodities Markets Report. Week 10 2023

It is highly important to monitor transition from La Nina to El Nino...

Read more >>
Trading results
Our Futures Trading Results. Week 9 2023

+$2.422 profits. That is the trading result from our commodity and futures trading according to COT data...

Read more >>
Bulletin
Commodities Markets Report. Week 9 2023

La Niña continues in the tropical Pacific Ocean. While oceanic indicators...

Read more >>
Trading results
Our Futures Trading Results. Week 8 2023

-$976. That is the trading result from our commodity and futures trading according to COT data...

Read more >>
Bulletin
Commodities Markets Report. Week 8 2023

La Nina implies hot and dry summer for Argentina, USA and wet for Brazil...

Read more >>
Bulletin
Commodities Markets Report. Week 7 2023

La Niña continues in the tropical Pacific, but oceanic indicators (sea surface temperatures, SSTs)...

Read more >>
Trading strategy
Small account, big trading with futures - how long does it take?

Hello Insider, today we calculate ourselves as millionaires! We make...

Read more >>
Currencies
COT Data for your FOREX Trading - How does it work?

Are you an experienced FOREX trader looking for additional information...

Read more >>
Success stories
Who is Larry
Williams?

Larry Richard Williams was born on October 6, 1942, in the 8,000-person small town of Miles City, Montana, USA...

Read more >>
Success stories
Living and trading in Thailand - how good is it?

Experience the ultimate tropical paradise in Thailand with sun, beach...

Read more >>
Trading strategy
Crisis-proof ETF strategy - Surviving a Crash

This strategy is easy to implement and has achieved a double-digit return...

Read more >>
Trading psychology
3 Factors that determine your Professional Trading Mindset

Many traders who are new to the subject experience...

Read more >>
Trading Strategy
What are trading strategies? An overview of the 4 most common trading styles

Have you ever questioned what lies behind...

Read more >>
COMMODITIES
How the Indian monsoon can affect resources

With commodities such as sugarcane and cotton, there are often...

Read more >>
Trading Strategy
Gold Rush Friday – A simple yet effective strategy

One of the relatively stable patterns in the gold market is the so-called...

Read more >>
Trading Basics
US stock market trading hours: the 4 most important US futures exchanges

At InsiderWeek, we only trade US futures. You can find...

Read more >>
Trading Basics
Sentiment analysis — the 4th dimension of trading

Many traders only focus on the price when looking at the market...

Read more >>
Trading Strategy
What is Open Interest? With examples from futures trading

Are you wondering what open interest is and whether...

Read more >>
COT Report Trading Strategy

This is one of our major strategies that allowed us to increase our trading capital from $ 14.000 to over $ 550.000 within just 6 years...

Learn more >>

Sign up for our newsletter

We will notify you of upcoming webinars. We promise to only send the most useful information and not to spam.