Does the Fair Value Gap strategy beat buy & hold on Dow Jones ETF (DIA)? (DIA · backtested honestly)
A three-candle price imbalance — a gap between the first candle's high and the third candle's low, confirmed at the third candle's close — that price may later return to before continuing higher or filling back in.
Over this period, Fair Value Gap on Dow Jones ETF (DIA) returned +29.5%, while simply buying and holding returned +65.3% — it lagged buy & hold by 35.8 points, with a worst drawdown of -14.7%. It traded 68 times and sat in cash about 69% of the time. It's a mechanism you test — not a recommendation.
It lagged buy & hold over this window. That's a result — a backtest you can kill for free just did its job, and re-tuning it until it looks better only adds another shot at looking good by luck. Walking away from an idea that didn't beat simply holding is the honest move, not a failure.
If you still want to try to break it further, the five stages show how — but the cheapest lesson is the one you already have.
Run it yourself
Change the parameters and the window, then re-run — no account needed.
Have your own idea for Dow Jones ETF (DIA)? Build and honestly test your own strategy — no code, costs on, measured against buy & hold.
Build your own on Dow Jones ETF (DIA) →Two real trades from this backtest
Shown at the modeled fills — entries at the next open, protective stops and targets at their level; costs on. A single trade is never a signal and says nothing about the next one — not the best or worst, a middling winner and a middling loser among the completed trades.
68 trades total — 42 winners, 26 losers (62% won). Below is one of each, not a scoreboard.
- Entry. A long entry fired; filled at the next open on 2023-08-09 at $352.87 — never the signal bar's own close.
- Held. 2 daily bars.
- Exit. Exited on 2023-08-11 at $351.19 (the exit rule fired (filled at the next open)).
- Result. -0.58% after costs.
The worst single trade in this whole test reached -7.08%.
- Entry. A long entry fired; filled at the next open on 2025-07-17 at $442.05 — never the signal bar's own close.
- Held. 10 daily bars.
- Exit. Exited on 2025-07-31 at $445.27 (the exit rule fired (filled at the next open)).
- Result. +0.63% after costs.
Trading costs + slippage (0.10%) are already deducted from every figure above. One trade is never the edge — it's the whole distribution (the win rate, the losers, the reality-check) that matters; this just makes the mechanics concrete. It describes the past; it is not a prediction.
A live badge that re-runs itself and links back here. Free to embed on any blog, newsletter or forum — it shows the honest result, beat or lagged.
<iframe src="https://stratsemble.com/embed/dow-jones-etf-fair-value-gap-backtest" width="360" height="340" style="border:0;border-radius:12px;max-width:100%" loading="lazy" title="Does the Fair Value Gap strategy beat buy & hold on Dow Jones ETF (DIA)?"></iframe>- • The strategy line is Fair Value Gap on Dow Jones ETF (DIA); the dashed line is simply buying and holding DIA. Beating the dashed line is the whole point — many strategies don't.
- • Max drawdown is the worst peak-to-trough fall you'd have sat through. A higher return with a much deeper drawdown is not obviously better.
- • Every fill assumes next-open execution with costs & slippage on — no acting on prices you couldn't have known.
- • A small number of trades means a small sample. Treat a great-looking result on a handful of trades with suspicion.
This is a hypothetical backtest of a well-known mechanism on past data. It is not advice, not a prediction, and not a claim that the strategy works. I hold no funds and place no orders. The value here is the ability to test an idea honestly — see where it would have helped, and where it would have hurt — before you ever risk real money on your own broker.
How this is computed → · who's behind it · where a backtest fits
See what actually beats buy & hold — most don't, here are the rare few that do →