The goal of this model is to outperform the market indices by diversifying risk across 4 robust quantitative "components" which have proven their profitability in a consistent and stable manner over a period of decades.
Investment position entries and exits via signals are indicated in black, blue and green text. Each colored "signal" ( as generated by one or more of the 4 quantitative "components" ) represents a 33% "long" portfolio allocation. Thus the portfolio equity allocation increments taken are as follows: 1) cash 2) 33% 3) 66% 4) and 100%.
The "end result" * trading vehicle used in taking portfolio positions in part 1 is the QQQQ exchange traded fund; an ETF that "mimics" the movement of the Nasdaq 100 index.
* Signal testing in the model over multiple decades involved a "rolling" composite of market indices: starting with the SP 500 index, moving through the Nasdaq composite, the Nasdaq 100 index, and finally the QQQQ **.
** As Nasdaq index data is scant prior to 1974, the data set starts with the SP 500 and evolves system investment return calculation through the Nasdaq index, the Nasdaq 100, and finally the QQQQ: a popular Exchange traded fund that mimics the movement of the Nasdaq 100 index .
View model's signals below :
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