DeployQuantXLK trading strategies, backtested
Technology Select Sector SPDR Fund: S&P 500 technology stocks, the sector behind most recent bull runs. Every DeployQuant template run on XLK over 5.7 years of minute data, same engine, same window, sorted by return.
XLK is the technology sector fund of the S&P 500, and in this window it was one of the strongest funds in the 59-fund test. Buy-and-hold returned 22.1% a year from 2021-01-04 to 2026-10-02, turned $10,000 into $31,425, and had a maximum drawdown of 33.0% and a Sharpe ratio of 0.95. Calendar-year returns of the fund were 37.0% in 2021, negative 27.7% in 2022, 56.0% in 2023, 21.6% in 2024, 24.6% in 2025, and 39.3% in 2026 to date.
None of the 12 templates beat holding on CAGR, and all 12 had a shallower maximum drawdown. The top two finished close: the monthly cycle at 20.9% and the weekly 7% target at 20.4%. Below them the field drops to 16.8% for the 200-day filter and 15.3% for golden cross, and the weakest template, 3-month momentum, returned 6.1%.
This is a test of rules that spend time in cash against a fund that rose most of the time. The fund closed above its 200-day average on 76.5% of sessions. Each template had to be right about the exits to justify the entries it skipped, and over this window the exits that mattered were few: the 2022 decline, the drop from 2025-02-18 to 2025-04-08, and the sharp fall in mid 2024.
The numbers are one window of 5.74 years with no fees in the headline run, so they describe what happened and say nothing about what comes next.
| Strategy | CAGR | max DD | Sharpe | trades | win rate | final value |
|---|---|---|---|---|---|---|
| First-to-Last Day of Month | 20.9% | −32.0% | 0.93 | 69 | 64% (+1 open) | $29,671 |
| Weekly Entry + 7% Target | 20.4% | −20.7% | 0.98 | 125 | 34% (+1 open) | $29,024 |
| 200-Day SMA Regime Filter | 16.8% | −19.7% | 0.98 | 11 | 36% (+1 open) | $24,405 |
| Golden Cross (SMA 50/200) | 15.3% | −19.6% | 0.87 | 2 | 50% (+1 open) | $22,684 |
| SMA-200 Trend + 15% Trailing Stop | 12.5% | −32.5% | 0.70 | 7 | 57% (+1 open) | $19,653 |
| RSI(2) Dip Snapback | 12.1% | −18.1% | 0.78 | 158 | 65% | $19,277 |
| 20-Day Momentum + Trailing Stop | 11.6% | −26.1% | 0.80 | 9 | 56% | $18,797 |
| EMA 12/26 Trend | 9.8% | −25.6% | 0.64 | 23 | 35% (+1 open) | $17,136 |
| SMA 10/50 Trend | 9.5% | −25.6% | 0.63 | 18 | 44% (+1 open) | $16,815 |
| RSI(14) Mean Reversion | 8.7% | −26.0% | 0.58 | 16 | 69% | $16,176 |
| Drawdown Dip Buyer + 8% Target | 7.8% | −27.9% | 0.50 | 5 | 100% (+1 open) | $15,435 |
| 3-Month Momentum Switch | 6.1% | −30.9% | 0.45 | 18 | 33% (+1 open) | $14,022 |
| Buy & hold XLK | 22.1% | −33.0% | 0.95 | – | – | $31,425 |
Why the calendar rule led and the signal rules lagged
The monthly cycle buys at the first open of the month and sells at the last. It was invested 95.2% of the time, so it behaves like holding with a few days of cash at each month end. It made 69 round trips, won 64% of them, and averaged a gain of 5.47% on winners against a loss of 4.68% on losers. Its maximum drawdown was 32.0% against 33.0% for the fund. The shallow gap shows that it gave up very little protection and very little return. Its CAGR was 1.2 points under holding.
Its calendar-year path was close to the fund's. It returned 30.7% in 2021, negative 28.9% in 2022, 49.3% in 2023, 26.5% in 2024, 26.9% in 2025, and 35.7% in 2026. It beat holding in 2024 by 5.2 points and in 2025 by 2.6 points, and trailed in the other four years. Its worst single trade was 10.3% lost in March 2025, and its best was 18.8% gained in April 2026.
The weekly 7% target took a different path to a similar CAGR. It made 125 round trips with a win rate of 34%, an average win of 7.14%, and an average loss of 2.28%. Its longest losing streak was 9 trades. That is the signature of a rule that cuts losers by the clock on Thursday and waits for a 7% move on the rest. It beat holding in 2022, by 15.6 points, and in 2024 and 2025. Its maximum drawdown was 20.7%, and the deepest one began on 2026-06-02 and had not recovered by the end of the data. The weekly rule's 2026 return of 17.9% trailed the fund's 38.9% by 21.0 points in the gap table, the largest single-year gap it had.
The 200-day filter returned 16.8% with 11 round trips, a drawdown of 19.7%, and a Sharpe ratio of 0.98, which matches the weekly template and is above holding. It won 4 of 11, with an average win of 20.31% and an average loss of 1.74%. The best trade ran from 2023-01-24 to 2024-08-06 for 52.1% over 560 days, and the position opened on 2026-04-09 was up 41.37% at the end of the data. All 6 of its 2022 round trips lost money, but the largest loss was 2.89%. The filter behaved well in 2022, returning negative 18.5% against negative 27.2%, which was a gain of 8.7 points over holding, and it gave a lot of that back in 2021, when it trailed by 25.7 points. See the 200-day filter page for XLK for the trades.
Golden cross made 2 round trips and returned 15.3%. The first lost 4.61% over 149 days. The second held 770 days from 2023-02-21 to 2025-04-01 for a gain of 51.24%. A third position opened on 2025-06-27 was up 59.78% at the end. Its profit factor of 10.54 is the highest in the table and reflects two trades. In 2025 the rule sold on 2025-04-01 and did not buy again until 2025-06-27, so it returned only 1.4% against 24.3% for holding. The 50-day average had to turn back above the 200-day before it re-entered.
The trailing-stop version of the trend rule returned 12.5% with a 32.5% drawdown, which is close to holding on risk and well below it on return. Its 2022 trades lost 14.42%, 8.27%, and 4.28%. A 15% stop gave the fund room to fall a long way before the exit, and the position was out only after a drop that had already happened. Compare the trend with trailing stop page.
RSI(2) snapback returned 12.1% with the shallowest drawdown at 18.1%. It made 158 round trips, won 65%, and held for about 5 days. It was invested 35.5% of the time, and its year-by-year results ran from 42.5% in 2021 to 3.3% in 2024, so its return came early in the window. In the gap table it was ahead of holding in 2021 and 2022 and behind in each of the four years that followed.
The slower signal rules (EMA 12/26 at 9.8%, SMA 10/50 at 9.5%, and 3-month momentum at 6.1%) each had a win rate between 33% and 44% and winners that averaged 13% to 16%. That is enough to give each a profit factor above 1.6, but the fund's long uptrends were interrupted by shorter dips that triggered exits, and the re-entries came after part of the move. 3-month momentum lost 16.8% in 2024 against a gain of 21.3% for holding, the worst single-year gap in the table at 38.1 points. The EMA 12/26 and 200-day filter comparison shows how those two differ across all funds.
How each strategy traded XLK
| Strategy | Time in market | Avg hold (days) | Best trade | Worst trade | Profit factor | With 10 bps slippage |
|---|---|---|---|---|---|---|
| monthly cycle | 95.2% | 28 | 18.8% | −10.3% | 2.14 | 18.1% |
| weekly 7% target | 79.8% | 12 | 9.2% | −7.0% | 1.61 | 16.5% |
| 200-day regime filter | 65.9% | 110 | 52.1% | −2.9% | 6.87 | 16.3% |
| golden cross | 65.9% | 460 | 51.2% | −4.6% | 10.54 | 15.2% |
| trend + trailing stop | 71.4% | 204 | 53.5% | −14.4% | 3.82 | 12.3% |
| RSI(2) snapback | 35.5% | 5 | 4.5% | −10.1% | 1.64 | 6.3% |
| momentum breakout | 57.7% | 134 | 28.3% | −9.8% | 4.91 | 11.3% |
| EMA 12/26 trend | 65.7% | 57 | 30.0% | −7.2% | 1.95 | 9.0% |
| SMA 10/50 trend | 62.8% | 71 | 29.4% | −9.8% | 2.10 | 8.8% |
| RSI mean reversion | 30.1% | 39 | 15.0% | −13.1% | 3.44 | 8.2% |
| dip buyer | 36.6% | 133 | 8.0% | 8.0% | – | 7.4% |
| 3-month momentum | 59.2% | 69 | 32.9% | −11.5% | 1.67 | 5.4% |
Hold lengths, profit factors and what 10 basis points does
The trading table shows that XLK's best trades came from holding through trends, and its worst from rules that traded often.
The four longest-holding templates are golden cross at 460 days, trend with trailing stop at 204 days, the momentum breakout at 134 days, and the dip buyer at 133 days. Their best trades ran 51.2%, 53.5%, 28.3%, and 8.0%. The dip buyer is capped at its 8% target by design, and on XLK it made 5 round trips, all wins, and one of them, the entry on 2022-01-21, took 494 days to reach the target. It finished at 7.8%, with a 27.9% drawdown that came from sitting in that position through 2022.
The shortest-holding template is RSI(2) snapback at 5 days. Its best trade was 4.5% and its worst was a loss of 10.1%, the position entered on 2025-02-21 and closed on 2025-03-06. A rule that buys weakness can lose more on one trade than any single winner can earn. Its profit factor of 1.64 is the lowest of the templates with a high win rate, since the average win of 1.62% and average loss of 1.74% are nearly equal.
RSI mean reversion held for 39 days, won 69% of 16 round trips, and returned 8.7%. Its 2022 round trips were 3 and none won: the worst lost 13.06% over 82 days from 2022-04-20 to 2022-07-11. A strategy with a high win rate that buys oversold readings in a falling market takes the loss when the market keeps falling.
The cost columns split the templates cleanly.
For the low-turnover templates the effect is small. Golden cross went from 15.3% to 15.2% at 10 basis points, the dip buyer from 7.8% to 7.4%, the 200-day filter from 16.8% to 16.3%, and the momentum breakout from 11.6% to 11.3%.
For the weekly 7% target, the move was from 20.4% to 16.5%, with 251 fills. That drops it from second place to a position just above the 200-day filter. The monthly cycle fell from 20.9% to 18.1%, which keeps it first but narrows its lead.
For RSI(2) snapback the fall was the largest: 12.1% at no cost, 9.1% at 5 basis points, 6.3% at 10 basis points. With 316 fills the strategy pays the spread 316 times, and its median trade gained 0.85%, so a fixed cost on each of those fills takes a visible share of it. XLK trades 1,324,049,811 dollars a day on average, with a median minute volume of 20,984 shares, so the fund itself is liquid. The cost runs are fixed offsets and say nothing about spreads in a fast market.
The long-hold rules are close to cost-immune but each rests on a handful of decisions. Their results can change by double digits on a single date. Read the golden cross results across all funds before treating 15.3% as a typical figure.
How XLK behaved
| Measure | XLK |
|---|---|
| Data in this test | 2021-01-04 to 2026-10-02 (1444 sessions) |
| Total return, buy and hold | 226.1% |
| Annualized volatility | 25.1% |
| Deepest drawdown | −33.6% (2021-12-27 to 2022-10-12) |
| Up days | 55.2% |
| Average daily range | 1.77% |
| Average overnight gap | 0.69% |
| Correlation to SPY | 0.91 |
| Correlation to QQQ | 0.97 |
| Correlation to TLT | 0.07 |
| Sessions above the 200-day average | 76.5% |
| Crossings of the 200-day average | 22 |
| Falls of 10% or more from a 20-day high | 30 |
Calendar years
| Year | Return |
|---|---|
| 2021 | 37.0% |
| 2022 | −27.7% |
| 2023 | 56.0% |
| 2024 | 21.6% |
| 2025 | 24.6% |
| 2026 (part) | 39.3% |
Biggest single days
| Best day | Move |
|---|---|
| 2025-04-09 | 13.4% |
| 2022-11-10 | 8.2% |
| 2026-07-30 | 5.5% |
| 2022-11-30 | 5.0% |
| 2026-08-04 | 5.0% |
| Worst day | Move |
|---|---|
| 2025-04-03 | −6.8% |
| 2026-06-05 | −6.7% |
| 2025-04-04 | −6.6% |
| 2022-09-13 | −5.3% |
| 2025-01-27 | −4.9% |
Average return by calendar month
| Jan | Feb | Mar | Apr | May | Jun | Jul | Aug | Sep | Oct | Nov | Dec |
|---|---|---|---|---|---|---|---|---|---|---|---|
| 0.9% | −0.7% | 0.7% | 1.6% | 7.4% | 3.5% | 2.0% | 0.5% | −1.5% | 4.2% | 4.8% | −0.1% |
Most and least correlated funds
| Most correlated | Least correlated | ||
|---|---|---|---|
| TECL | 1.00 | TECS | -1.00 |
| ROM | 0.99 | REW | -0.98 |
| TQQQ | 0.97 | QID | -0.97 |
| QQQ | 0.97 | SQQQ | -0.97 |
| QLD | 0.97 | PSQ | -0.97 |
What XLK's own statistics say about the results
XLK's annualized volatility was 25.1% and its maximum drawdown was 33.6%, from 2021-12-27 to 2022-10-12, with recovery on 2023-06-15. The fund spent 368 sessions in the longest drawdown. The peak date is the same as QQQM's, and XLK's trough and recovery both came earlier, so the slower rules on XLK show drawdowns that end in June 2023.
The fund beta to SPY was 1.39 and its correlation to SPY was 0.91. Its correlation to QQQ was 0.97 and its beta to QQQ was 1.08. The most correlated funds were TECL at 1.00, ROM at 0.99, and TQQQ, QQQ, and QLD at 0.97. The least correlated were the inverse funds TECS at negative 1.00 and REW at negative 0.98. The correlation to TLT was 0.07, close to zero, so a bond fund moved independently of XLK in this window.
Up days were 55.2% of sessions, with an average up day of 1.15% and an average down day of negative 1.21%. The average intraday range was 1.77% and the average overnight gap was 0.69%. The lag-1 autocorrelation of daily returns was negative 0.03. The overnight share of the log return was 55.3% and the intraday share was 44.7%. That split differs from QQQM, where the overnight session produced the larger share by a wide margin, and it matters for rules that fill at the open: XLK paid out more during the trading day than the Nasdaq-100 funds did.
On oversold readings, XLK had 15 sessions with RSI(14) below 30. The median forward return was 4.01% over 5 days and 4.40% over 20 days, against baselines of 0.5% and 1.9%. Both beat the baseline by a wide margin, which is consistent with RSI mean reversion earning 8.7% with a 69% win rate and a profit factor of 3.44. The sample is 15 observations, and the template still lost 13.06% on one 82-day trade in 2022, since a median hides the cases where the fund kept falling. For RSI(2) below 10 there were 137 sessions with a median 5-day forward return of 0.6% and a median 20-day return of 2.59%, against baselines of 0.5% and 1.9%. The 5-day edge over baseline is slim, which fits the 0.85% median trade of RSI(2) snapback and its sensitivity to costs.
The fund crossed its 200-day average 22 times and closed above it on 76.5% of sessions. It had 30 falls of 10% or more from a 20-day high, spread over 96 days. The filter's 6 round trips in 2022 all lost money, each by a small amount, and the largest was 2.89%.
By calendar month, May averaged 7.38%, November 4.79%, and October 4.19%. February averaged negative 0.7% and September negative 1.48%. Each month has 5 or 6 observations, so these are descriptions of this window. The best single days were 2025-04-09 at 13.37% and 2022-11-10 at 8.23%. The worst were 2025-04-03 at negative 6.76%, 2026-06-05 at negative 6.67%, and 2025-04-04 at negative 6.57%. April 2025 holds the best day and two of the three worst, and several templates' 2025 drawdowns bottom on 2025-04-08.
Among the other sector funds, SOXX returned 31.11% on buy-and-hold with its best template at 30.54%, XLF returned 12.58%, XLY 6.27%, and XLP 5.8%. On XLP and XLY the best template beat holding, and on XLK, SOXX, and XLF none did. A sector that rose steadily gave the rules the least room to add value, and a sector that did less gave them more.
The results here cover one fund over one window. They measure what these 12 rule sets did, with daily decisions, and do not predict how the fund or the rules will behave next.
Seasonality, extreme days and sector peers
The month-of-year averages for XLK are large and uneven. May averaged 7.38%, November 4.79% and October 4.19%, while September averaged negative 1.48% and February negative 0.7%. Each calendar month appears only five or six times in a 5.74-year window, so one strong May, or one weak September, moves the average a long way. These figures describe this sample. They do not show a repeating pattern, and no template here was built around them. The monthly cycle buys and sells on fixed calendar dates, not on a month list, so its lead in the ranking does not come from picking May.
The day-of-week averages are close to flat. Monday averaged 0.21%, Wednesday 0.16%, Thursday 0.05%, Friday 0.04% and Tuesday 0.02%. A weekday filter would have had nothing to work with on this fund over this window. The lag-1 autocorrelation of daily returns was negative 0.03, which is also close to zero: a down day did not predict the next day in either direction.
The extreme days cluster. The best day was 2025-04-09 at 13.37%, one session after the low of the 2025-02-18 to 2025-04-08 drop. Two of the five worst days, 2025-04-03 at negative 6.76% and 2025-04-04 at negative 6.57%, came in the days just before it. A rule that sold on the first weak close and re-entered on a signal a few days later took the losses on the way down and missed the 13.37% rebound day. A rule that stayed invested took both. The worst day of 2026, 2026-06-05 at negative 6.67%, shows the same fund still produces single-session moves of that size well after the 2022 bear market.
Five other sector and communication funds in the test give context for the XLK result. SOXX held at 31.11% a year, and its best template, the weekly 7% target, reached 30.54%, so the best rule finished below holding there as well. On XLF, holding made 12.58% and RSI mean reversion made 11.82%. The funds where a template did beat holding were slower ones. XLP held at 5.8% and the RSI(2) snapback made 8.22%. XLY held at 6.27% and the weekly 7% target made 10.19%. On VOX, golden cross made 11.2% against 9.08% for holding. XLK sits with the strong funds, where the templates trail holding. The difference in each case is how much the fund rose while the rules were in cash.
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Frequently asked questions
What was the best strategy for XLK?
Of the 12 templates tested on XLK over 2021-01-04 to 2026-10-02, the strongest by CAGR was monthly cycle at 20.9% (max drawdown 32.0%), versus 22.1% for buy-and-hold. The best result in hindsight is not a forecast. Check drawdowns and trade counts before drawing conclusions.
Did any strategy beat buying and holding XLK?
0 of 12 templates beat XLK buy-and-hold (22.1% CAGR) on this window; 12 of 12 had a shallower maximum drawdown than holding (33.0%).
What is the best trading strategy for XLK?
By CAGR, the monthly cycle at 20.9% from 2021-01-04 to 2026-10-02, against 22.1% for buy-and-hold. The weekly 7% target was close at 20.4% with a shallower drawdown of 20.7%. None of the 12 templates beat holding on return.
Did any strategy beat buy-and-hold on XLK?
No. Holding returned 22.1% a year with a 33.0% maximum drawdown. All 12 templates had a shallower drawdown, with the RSI(2) snapback template the shallowest at 18.1%, and golden cross and the 200-day filter at 19.6% and 19.7%.
How did the 200-day moving average work on XLK?
It returned 16.8% a year with a 19.7% drawdown and 11 round trips. Its best trade held 560 days for a 52.1% gain. In 2022 it returned negative 18.5% against negative 27.2% for holding, and in 2021 it trailed by 25.7 points.
Does golden cross work on XLK?
It returned 15.3% a year, with only 2 round trips. One lost 4.61% and one gained 51.24% over 770 days, and a third position was still open at the end. Two trades are too few to call it a pattern.
How much do trading costs matter for XLK strategies?
They matter for frequent traders. RSI(2) snapback fell from 12.1% to 6.3% at 10 basis points, and the weekly 7% target fell from 20.4% to 16.5%. Golden cross barely moved, from 15.3% to 15.2%.
How did XLK behave in 2022?
It fell 27.7% over the calendar year, with a peak-to-trough drawdown of 33.6% from 2021-12-27 to 2022-10-12. It recovered by 2023-06-15. The weekly 7% target did best among the templates that year at negative 11.6%.
Other sector etfs
Backtests are hypothetical, computed by DeployQuant's engine on minute-resolution consolidated US market data (2021-01-04 to 2026-10-02, $10,000 starting capital, no margin, no fees or slippage in the headline run; buy-and-hold puts 98% of the account in at the first open, as the templates do) and do not guarantee future results. Nothing on this page is investment advice. Live trading involves risk of loss.