Backtest: Buy VLO at the close when the VLO/USO ratio closes at a 20-day low while VLO...
The setup is a disagreement between two trends. VLO closes at a 20-day low against USO while still holding above its own 20-day moving average. If the refiner is weak versus crude but not weak outright, the market may be pricing crack-spread compression too aggressively — and the ratio tends to mean-revert.
That thesis produced eight closed trades, a 75% win rate, and +16.75% on $100,000. The catch: SPY buy-and-hold returned +85.28% over the same window, leaving the strategy 68.53 points behind. A high hit rate that still trails the benchmark is worth unpacking.
The full bar-by-bar study, trade log, and equity curve are below.
Buy VLO at the close when the VLO/USO ratio closes at a 20-day low while VLO closes above its 20-day simple moving average; exit when the ratio closes above its 5-day simple moving average or after 5 trading days, whichever comes first. A refiner making relative lows against crude while its own price still holds trend is pricing crack-spread compression too aggressively, so the ratio tends to mean-revert.
How this was measured
This is a simulated backtest generated from the plain-English strategy below, executed bar-by-bar on historical market data using the price + news data mode with $100,000 starting capital. Strategy: Buy VLO at the close when the VLO/USO ratio closes at a 20-day low while VLO closes above its 20-day simple moving average; exit when the ratio closes above its 5-day simple moving average or after 5 trading days, whichever comes first. A refiner making relative lows against crude while its own price still holds trend is pricing crack-spread compression too aggressively, so the ratio tends to mean-revert.
The key numbers
The charts
The takeaway
The strategy returned +16.75% on $100,000 starting capital across 8 closed trades with a 75% win rate. Over the same window SPY buy-and-hold returned +85.28%, so the strategy finished trailing the benchmark by 68.53 points. Best single trade +5.15%, worst -4.54%.
The fine print
- Simulated results on historical data — fills, slippage and costs are idealized.
- Past performance does not predict future results.
- Only 8 closed trades in the window — a small sample.