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Choosing Stocks and Timing Buy and Sell Decisions: Trend-Based, Evidence-Driven Strategies That Work
There’s only one way to successfully compete with Wall Street’s “big boys”: use algorithmic systems, just like they do. Fortunately, you can. Thanks to the wide availability of derivatives, cheap computing, and low-cost, high-speed trading platforms, you can run algorithmic systems that are proven statistically and can operate almost automatically.
In this book, world-renowned technical analysis expert Charles D. Kirkpatrick II presents these systems and the evidence that supports them. Building on exhaustive research, Kirkpatrick shows why relative strength systems deliver consistent profits. Next, he drills down to identify the optimal elements of such systems, including lookback periods, ranks/ratios for portfolio changes, minimum trading volumes, and techniques for limiting the impact of market declines.
Kirkpatrick’s final results are practical and robust. Based on easy-to-interpret ADX, forward line, and 3-bar reversal charts, they are easy enough for virtually any investor to use, with any size portfolio.
At its foundation, technical analysis involves recognizing and analyzing trends and identifying the best investment strategy to take advantage of them. Most traders and investors who look for trends do so by analyzing a long list of charts on a continuing basis. In Kirkpatrick's Investment and Trading Strategies, world-renowned technical analysis researcher Charles D. Kirkpatrick II presents tested, pinpoint approaches to stock investing that are far more effective and efficient.
Drawing on statistical testing of markets from 1990 to the present, Kirkpatrick identifies combinations of technical tests that have consistently delivered the best performance. Using them, he shows how to identify stocks that are now demonstrating the strongest relative and absolute strength. Next, he identifies specific trend following indicators most likely to identify the first signs of trend reversals--and, thus, the right time to sell.
Throughout, Kirkpatrick offers detailed, practical, and example-rich guidance for using these indicators, providing all the detail you need to implement an investment strategy that is both profitable and risk-averse.
Chapter 1: Introduction 1
Chapter 2: Investment Strategies: Backtesting 21
Chapter 3: Initial Standard Optimizations 37
Chapter 4: Market Timing and Walk-Forward Optimizing 51
Chapter 5: Stock Selection Using Relative Strength 69
Chapter 6: Trading Strategies 83
Chapter 7: Directional Movement Index (DMI) and the ADX 91
Chapter 8: Cycles and the Forward Line 109
Chapter 9: Trading Models and Tests 127