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Technical Analysis: Power Tools for Active Investors by Gerald Appel

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Combining the Two Indicators

A strategy of being invested in the stock market only when both indicators—monetary and relative strength—are favorable would have had investors in the stock market between 1971 and 2003 only 31.4% of the time, during which invested periods capital would have appreciated at a rate of 30.4% per annum, with full-year gains averaging 8.7% per year (just less than the 9.2% achieved by buy-and-hold strategies).

These figures do not reflect additional income that might have come from interest while being in cash 68.6% of the time. Drawdowns and risk have been considerably reduced while this strategy has been in effect.

Point and Counterpoint

Stock market timing indicators, particularly those that produce trades on a relatively ...

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