Subject: Re: Timing period examined, 200 vs 325 days
The sell signal is clear but for the buy signal it appears that there are 3 possibilities:


Nope. I was as clear as I could be.

Buy when the index closes above the moving average. Period.

Not much to be said about that. When the market is going up, you want to be in the market. Because, duh, it is going up.

Plenty of people have said that to win at investing just simply avoid losing. The big losses hurt you more than the big wins help you.

"not losing money ends up being far more powerful than making extra money in the long term."

"not losing money in bad times is more important than making it in good times."

"The moving average timing strategy makes the majority of its money by avoiding large, sustained market downturns. To be able to avoid those downturns, it has to accept a large number of small losses associated with switches that prove to be unnecessary. Numerically, more than 75% of all of MMA’s trades turn out to be losing trades." - http://www.philosophicaleconom...




The logic behind the "G" of GTT is perhaps a bit hazy. It took me quite a while before I got a real understanding of it.

The times when it makes sense to be out of the market when it is NOT going up, is when the economy is not doing well. There are plenty of possible indicators to look at to decide if the economy is not doing well.
GTT as published uses two. Industrial Production and Retail Sales. If both are up year-over-year then the economy is doing ok. If either is down, then MAYBE the economy isn't doing so well. Importantly, these are not subject to possible political pressure, unlike employment/unemployment statistics.

What happens is that GTT keeps you in the market much more than simple SMA. as I posted, in 84% of the time vs. 72% for SMA. What GTT is going here is staying in the market and not "accept[ing] a large number of small losses associated with switches that prove to be unnecessary".

Using the same SMA parameters, since 1950 for the S&P500, for the periods that it was out of the market:
SMA had 23 successes and 60 fails
GTT had 15 successes and 18 fails
"Fail" is a switch that proved to be unnecessary.