In the late 1980′s I began working on a stock index trading methodology with several goals in mind:
1. Signals must be 100% mechanically based.
2. Returns must be reasonably consistent.
3. Volatility should be limited within current market conditions.
4. Returns must, over time, outperform whatever stock index to which the system is applied.
5. While adhering to basic “buy low, sell high” principles it must also be able to recognize trends.
6. Trading activity should be kept to a minimum to avoid excessive fees and slippage.
It took more than 20 years, thousands of hours and hundreds of thousands of calculations but I finally developed a program which met each of these criteria. I use a variety of technical indicators which provide me the necessary information upon which “long”, “short” and “cash” signals are generated.