This model is designed to support medium term traders who hold onto positions for days, weeks or even months. It is not intended for day traders or scalp traders.
It uses a mix of 7 among the most popular technical indicators, each generating specific trading signals when prices reach predetermined levels.
A final BUY or SELL signal is generated when at least 3 out of 7 indicators get activated. They are: RSI, SMA, BB, PP, ATR, MACD (a synthetic explanation of each indicator can be found in the Glossary).
Due to the extended time horizon, the aim is not to follow the trend but SELL when the price breaks above resistance and BUY when the price breaks below support. For the same reason, there is no need to rely on sophisticated charts to time market entry or exit.
The model uses historical daily prices imported by the user (going back upto 15 years) plus specified technical indicators’ levels, to produce a simulation of historical trading returns based on the assumption that BUY and SELL occur on the first such signal. Stop losses are factored-in based on the original buying/selling price assumed by the model. Positions are opened both ends, short or long.
Returns are shown in both, trailing and calendar year fashion. Average holding time of position as well as idle time between positions is also provided for completeness of information.
Once all technical indicators have been tuned-up to generate the best possible historical result for the desired lookback period, the idea is to keep on updating prices daily, executing trades upon the first BUY or SELL signal.
Even though price updates can be done at any time during the day, best would be to operate at closing time or at the opening of the next trading session, since technical indicators in the model look at historical closing prices.
Instructions for TUNING-UP technical indicators as well as importing HISTORICAL DATA are illustrated in the 'INSTRUCTIONS' spreadsheet of the workbook.