To get accurate profit percentages for “buy and sell” versus “buy and hold” strategies requires “clean” data, or data adjusted to stock splits. The reason for this is that stock splits in a file can show a huge change in the price of the stock, where the value to the investor doesn’t change.
Let’s take Apple as an example.
On June 9, 2014, Apple Corp declared a stock split at 7:1. In other words, each investor got 7 shares for each existing share that they owned while the price of the stock dropped from $645.57 to $93.70 (7 times less value). So, the value of the assets each investor owned remained exactly the same, but the true data would show a single day drop of $551.87 (approx. 85%).
In the above diagram, the column on the far right shows the adjusted data, while the two columns to the left, you’ll see the true pricing (where you’ll see the change from $645.57 to $93.70 in a single day).
TechSignal 9, in doing its calculations, doesn’t have any way of knowing that this huge drop in price was due to a stock split. That’s why it’s important to know what data you’re downloading and importing. You need to ensure that you’re using “adjusted data.”
You’ll find that most data services will provide the adjusted data that allows for stock splits by adjusting the data accordingly.
Not having this adjusted data won’t change the cycles analysis and results. The cycles will still form exactly the same way in both instances. But it will affect the percentage profit calculation. So, if you’re making a decision as to whether to buy and sell, as opposed to buying and holding, for example, non adjusted data will throw off the calculation (it will make buying and selling cycle bottoms and tops look more attractive than it actually is).
Otherwise, everything else remains the same.
To check as to whether the asset you’re considering trading has stock splits in its recent history, go to stocksplithistory.com and look up it’s history by the symbol.