VXX inception was in January 2009. What about 2008 big bear market and its tremendous backwardation?
How did The Summit system performed during the 2008 world stock markets turmoil?
We have no real data to perform such a backtest. We can only rely on synthetic data for all VIX etps.
VIX futures do go back to 2004, so we can replicate VXX back to 2004.
The big issue is that synthetic data is only available for close prices while The Summit system is an intraday trading system. The only way is to compare the obviously worse daily performances of the period from January 2009 to present to the daily performances of the 2004-2008 period to understand if The Summit system holds.
I run two close-to-close backtests of the two different time periods to see wether the drawdowns are similar or not and to see if we can trust The Summit system in 2008 big bear market regime.
I had to remove some intraday filters like my “down gap filter” and my “extended close filter” because of the close-to-close backtest logic. That’s why this 2009 to present drawdown is higher than The Summit drawdown posted on the site.
To sum up, the 2009 to present backtest shows a maximum compounded drawdown of -65%.
And YES! The Summit system held the 2008 big bear market regime!
It shows a maximum compounded drawdown of -56% during 2004 to December 2008 period even lower than the 2009 to present drawdown.
Below is the 2004 to December 2008 cumulative % returns equity curve:
Maximum high is at 250% of cumulative return.
And here is the January 2009 to present equity curve:
The second equity curve apparently looks more solid but this is due to the longer time frame which is nearly double the 2004-2008 timeframe.
Oviously The Summit system cannot be traded in a close-to-close logic as the compounded drawdowns are too high. This two backtests purpose was to validate The Summit system through 2008.