This is a long-only breakout book on Borsa İstanbul. It buys stocks making one-year highs, holds a handful at a time, and sells each one when it closes below a short moving average. Over 6.7 years it returned 139.9% a year against BIST 100's 48.8%, with a worst drawdown of 43.4%.
Before any of that means anything, two warnings that the rest of the article keeps coming back to.
The rules
Every trading day, in order:
- Screen the universe. 678 of the 747 Borsa İstanbul tickers that existed at some point in this window, namely the ones with usable price history, reconstructed as of the decision date, with delisted names present until the day they stop trading. Drop anything under a minimum price, anything without a minimum length of listing history, and anything where the intended order would take too large a share of the bar's volume. All three thresholds are Withheld: this is the firm's own calibration. The mechanism is described in full, and every result on this page was produced with the real value..
- Find the breakouts. A name qualifies when its close clears the highest close of a trailing window several months long, whose length is Withheld: this is the firm's own calibration. The mechanism is described in full, and every result on this page was produced with the real value.. Not a high on an intraday basis, a closing high, which is a slower and less noisy trigger.
- Rank the candidates by Withheld: this is the firm's own calibration. The mechanism is described in full, and every result on this page was produced with the real value.. This is the part people find strange, and it is doing a lot of work. Two names that broke out on the same day are not equally interesting, and the ordering here decides which one the book actually buys. Ranking the survivors at random instead costs most of the edge.
- Hold a fixed number of positions, equally weighted by remaining equity. The count is Withheld: this is the firm's own calibration. The mechanism is described in full, and every result on this page was produced with the real value..
- Exit on a close below a moving average, whose type and length are Withheld: this is the firm's own calibration. The mechanism is described in full, and every result on this page was produced with the real value.. There is no profit target and no stop loss. A position is held until the trend line breaks, which is what allows a handful of positions to run several hundred percent.
Two exchange-specific guards matter more than they look:
- Skip anything that opens 9.9% or more above the previous close. Borsa İstanbul has a 10% daily limit. A stock locked at the limit cannot be bought, so an order that assumes a fill there is fiction. Without this guard, a backtest quietly buys the most explosive days at prices nobody could get.
- Defer exits when the open is 9.9% or more below. The same limit applies downward. If the stock is locked down, you cannot sell, and pretending otherwise understates the drawdowns.
Costs are 0.5% per fill, charged on every entry and every exit.
What it did
- CAGR
- 139.9%
- Max DD
- -43.4%
- Sharpe
- 2.57
- MAR
- 3.22
| Train | Holdout | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| CAGR | Max DD | Sharpe | Sortino | Volatility | MAR | CAGR | Max DD | Sharpe | Sortino | Volatility | MAR | |
| BookUnusual Gain breakout | 139.9% | -43.4% | 2.57 | 3.91 | 36.2% | 3.22 | 48.8% | -36.1% | 1.59 | 1.90 | 27.6% | 1.35 |
The left block is the strategy, the right block is a BIST 100 basket built the way the next section describes. The book returns close to three times the index while taking a drawdown about five points deeper, which is where the return-to-drawdown ratio of 3.22 against 1.35 comes from.
What it is measured against
The exchange publishes index membership at quarterly reviews. The comparison line above holds exactly the names that were in BIST 100 during each review period, equally weighted, rebalanced only on review dates, and paying the same 0.5% per fill the book pays. No name enters the basket before the review that admitted it, so the benchmark cannot borrow hindsight the strategy is denied.
| CAGR | Max DD | Sharpe | MAR | |
|---|---|---|---|---|
| BIST 100 basket, equal weight | 48.8% | -36.1% | 1.59 | 1.35 |
| BIST 100 basket, traded-value weight | 47.1% | -38.3% | 1.46 | 1.23 |
| BIST 30 basket, equal weight | 48.2% | -35.3% | 1.49 | 1.37 |
| BIST 30 basket, traded-value weight | 48.4% | -38.2% | 1.45 | 1.26 |
| Whole universe, equal weight | 73.3% | -40.2% | 2.27 | 1.82 |
Two rows in that table matter more than the headline.
The first is that the weighting scheme barely moves the answer. The published indices are float-capitalisation weighted and those weights are not in this data, so any basket built here is an approximation. Equal weight and traded-value weight land within about two points of each other on every measure, which is the useful result: the comparison does not hinge on a judgement call I had to make.
The second is the last row. An equal-weight basket of all 678 names in the universe returned 73.3% a year, far ahead of either index. Turkish small caps beat Turkish large caps badly over this window. That cuts against the strategy rather than for it, because the book picks from the whole universe, so the small-cap tailwind is one it was standing in too. Read the index rows as the return available from an ordinary index fund, and the last row as the return available from buying the entire opportunity set blindly and never trading again.
The shape of the returns
| Year | J | F | M | A | M | J | J | A | S | O | N | D | Year |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2020 | -24 | -18 | 66 | -4 | -2 | 33 | -17 | 74 | -0 | 26 | 43 | 286% | |
| 2021 | -2 | 8 | 18 | -19 | -10 | -4 | -5 | 2 | -5 | 7 | 54 | -13 | 15% |
| 2022 | 7 | -11 | 21 | 6 | 16 | 17 | 12 | 30 | 14 | 12 | 37 | 15 | 386% |
| 2023 | -16 | -6 | 5 | -3 | 6 | 63 | 20 | 5 | 33 | 13 | 7 | -18 | 125% |
| 2024 | 31 | -1 | 1 | 3 | -5 | 3 | 6 | 15 | 1 | -2 | 3 | -7 | 54% |
| 2025 | -9 | 26 | 19 | 42 | -23 | 14 | 16 | 24 | -13 | -1 | -11 | 11 | 110% |
| 2026 | 6 | 9 | 17 | 14 | 2 | 17 | 9 | 15 | -2 | 117% |
Monthly return in percent. Colour saturates at 40%.
The year column is the part to read carefully. 2022 returned 385.99%, and BIST 100 returned 221.47%. A book that quadruples in a year where the index itself more than triples has not demonstrated much. The years that carry the argument are 2023 and 2025, where the strategy made 125.27% and 109.8% against a market doing 25.74% and 13.43%.
And 2024 is the year to sit with: the book made 54.24% while the index made 17%. That is about 37 points of excess return for a full year of holding a concentrated book of small Turkish names whose worst drawdown is 43.4%. Nothing went wrong that year. The strategy simply did not earn much for the risk it was carrying, and that is the year that should set expectations rather than 2023 or 2025.
How the money is actually made
This is the part that decides whether someone can hold the thing.
Realised return per closed position, by percentile
Percentiles of realised return per closed position, after costs.
Over 687 closed positions the strategy was right 39.9% of the time. The median position lost 4.9%. Most of what this book does is lose small amounts of money.
The average winner made 48.5% and the average loser lost 12.86%, a ratio of roughly four to one, which is what turns a 39.9% hit rate into a profit factor of 2.09. The top percentile of positions returned 299.9%, the best single one made 658.4%, and 5.2% of all positions at least doubled.
Ten positions out of 687 produced 52.3% of the gross gains.
That concentration is the strategy, not a flaw in it. The exit rule exists to let those positions run, and the cost of that rule is a long tail of small losses from breakouts that failed immediately. Median holding period is 22 days. The longest losing streak was 22 positions in a row.
Anyone running this needs to be able to watch twenty-two consecutive losers without concluding it is broken, because the arithmetic depends on still being in the market when the next one that doubles arrives.
Exposure
This is not a strategy that sits in cash and waits. It holds its full book on the large majority of days and is essentially never flat, so it is close to permanently exposed to a concentrated basket of small Turkish stocks.
That matters for reading the drawdown. The 43.4% figure is not what happens when a cautious strategy is caught out. It is the honest cost of being in that position all the time.
The currency problem
Now the part the opening warning promised.
Everything above is lira. Over this period the lira went from about 5.95 to the dollar to about 48.49, losing 87.7% of its value, and depreciation flatters a return without touching a drawdown: the numerator is inflated, the denominator is not.
The same trades, repriced daily into dollars, look like this:
| CAGR | Max DD | Sharpe | MAR | |
|---|---|---|---|---|
| In lira | 139.9% | -43.4% | 2.57 | 3.22 |
| In dollars | 75.3% | -60.6% | 1.59 | 1.24 |
Both rows describe one set of trades. Roughly half the annual return was the currency: 139.9% becomes 75.3%.
The more interesting half of that table is the drawdown, which moves the wrong way. It is 43.4% in lira and 60.6% in dollars, because the lira's sharpest devaluations landed while the book was already down. A Turkish investor and a dollar-based one lived through the same positions and had materially different experiences of them. Return over drawdown falls from 3.22 to 1.24: from a spectacular number to a good one.
Neither column is wrong. Which one is right depends on what you eat and what you pay rent in. If that is not lira, read the second row and ignore the first.
What I do not know
- One market, one regime. The window starts in 2020 and Borsa İstanbul has been extraordinary throughout. There is no bear market in this sample worth the name.
- The size ranking is unexplained. Preferring the smallest qualifying company works here. I do not have a mechanism for it beyond the usual story that small illiquid names move further, and an effect without a mechanism is a candidate for being a feature of this particular period.
- Capacity is unaddressed. The book buys small Turkish companies at their highs. The volume cap keeps an order under a fixed share of a bar, which is a crude answer, and any meaningful share of the volume of a small name breaking out is not a fill anyone should assume.
- The exit was chosen, not derived. The moving average I settled on is a reasonable default and it is also one of several that were tried.
The companion piece on a cross-sectional momentum book covers a different way of holding Turkish equities, and a third piece covers what happens when the two run together, which is the version I actually care about.