Hear me out. I know that this goes against the conventional wisdom of buy & hold, but I think that the reason most timing strategies ultimately fail is because they are not completely objective and rule-based. Instead, traders inject emotion and subjectivity into their decisions and therefore make bad decisions.
I have developed several trading strategies modified from those proposed in the following links:
- Market timing via 200-day simple moving average
- Same as above from additional perspective
- Market timing via trends/momentum
- Dual momentum strategies
I am fully aware that just because something has worked in the past, does not guarantee that it will work in the future. However, these strategies are not just robust for the past 10, 20, 30 years. These have been backtested to 1875 and dramatically outperform the market at virtually all time points. On top of that, the models do well on market datasets that were withheld from the model "training" data to avoid over-fitting.
By using a strictly rule-based trading strategy, I would remove emotion and subjectivity from the trading decisions and therefore not fall victim to the main reasons why market timing doesn't work for most investors.
So... my question is given that these sorts of momentum trading strategies have been historically robust for such a long time, why shouldn't I put all of my IRA into such a strategy? What am I missing?
(Note: IRA is being used because it will shelter my investments from excessive short and long-term capital gains taxes which would result from the high trading frequency, though still not more than once per month)
Submitted October 31, 2018 at 12:06PM by I_eat_insects https://ift.tt/2ADN0cN
