Time the Markets: Using Technical Analysis to Interpret Economic Data
by II Charles D. Kirkpatrick
4. Systems Analysis
To time the markets using technical analysis of economic data, you must first understand how to develop a system, how to test it for reliability, and how to utilize it in the future. Systems are a set of rules with specific variables. One moving average system, for example, is a system in which the price crosses a moving average to give a buy or sell signal. It has one variable: the length of the average. In a moving average system, you could have an additional requirement. For example, you could require that the price cross the moving average by a certain percentage to get a signal. This is called a “filtered” moving average system. Your system now has two variables: the percentage filter and the moving average length.
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