Kirkpatrick’s Investment and Trading Strategies: Tools and Techniques for Profitable Trend Following

4. Market Timing and Walk-Forward Optimizing

This chapter looks at how to use walk-forward optimizing to find the parameters for any strategy system. Because the initial standard optimizations in Chapter 3, “Initial Standard Optimizations,” show that large market declines have a significant adverse effect on relative strength stock selection, I reduce the effects of that observation by finding a suitable market-timing model that tells when the investor should be utilizing relative price strength and when he should be completely out of the market.

Market Timing

Control Indexes

Before devising a market-timing system, I must decide exactly what index to use in the timing. A buy-and-hold comparison to some index is one way to judge the results ...