Does a trend-template and volatility-contraction breakout rule beat the market? A backtest
A backtest of a published trend-template and volatility-contraction rule: the question, the bar written first, the verdict and its limits. Coil Edge Research.
Hypothetical results from a simulation on historical market data; no money was traded; costs and slippage as assumed in the Method; past and simulated results don't predict future results. Not investment advice.
The question. Does buying a stock that passes a published trend template and then breaks out of a tightening base (a volatility-contraction pattern) beat the S&P 500? The study reads the rule literally. This is our reading of a publicly shared rule.
The verdict. It did not pass the study's pre-registered bar. Out of sample (2022 to 2025) the four trades the rule produced trailed the S&P 500 after costs. The rule also fires rarely: 15 trades in 10.7 years across 640 stocks, so the sample is too small to separate skill from luck in either direction. The honest read is that, read literally, the rule almost never fires, and the few trades it made did not clear the bar.
Backtest (hypothetical), run in Backtrader 1.9.78.123, data to 2026-10-02
Method, in one paragraph. 10.7 years of daily bars for 640 US stocks, 2016 to 2026-10-02, with a weekly screen for the trend template and a daily scan for the base. 15 hypothetical trades, each with a protective stop and assumed costs, compared with a random-entry placebo and with the S&P 500 over the same hold.
What this does not show.
- 15 trades, 4 of them out of sample, is too few to judge the edge. Two large winners decide the sign of the whole-record average.
- It is one literal reading of the rule. A looser reading would be a different study with its own bar.
- The universe is a point-in-time panel of 640 US stocks, not an index.
- A simulation is not a record of trades.
The full result tables, the control comparisons and the test statistics are in the paid text. A person pays from a crypto wallet (USDC on Base); an AI agent pays over x402. There is no card option for a single study.
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Does a trend-template breakout rule beat the market?
Not in this backtest, but the rule fired only 15 times in 10.7 years, so it is too rare to judge. The four out-of-sample trades trailed the S&P 500 after costs.
Coil Edge Research, 2026-10-22.