That’s what I was getting at; nothing specifically about you, but since the comments from Koch were here, I addressed them here. Sorry for any confusion that may have caused.

And many timeframes from intraday to weekly bars.

http://dayvejohnson.blogspot.com/2005/10/hope-you-didnt-get-sucked-in.html

http://thetradingdigest.com/blog/2007/03/27/are-you-diversified-no-really-really-diversified/

Maybe those will give you a bit more insight to how I approach the market.

Thanks again.

Software like http://www.tradingblox.com/ (I’m not a user, but I like their forum) includes adjustments for divvies and splits on stocks, accounting for margin interest and risk-free rate, etc. It’s probably the best route for testing more complicated trend-following systems on a basket of leveraged issues, which is where probably most of the trend-followers make their money.

Another note: many of the classical indicators DO work, just not in their default parameters. 14-day RSI is whack, but 2-day RSI shows “fear” on the timeframes Koch mentioned. Using a percentage-based MACD on a longer parameter than default, one could assemble a relative strength portfolio on a basket of index constituents and outperform the index pretty handily, with relatively low turnover. Just because you haven’t made it work YOURSELF, doesn’t mean it WON’T work …

Very few timing systems on the major stock indices outperform buy+hold over long period on a “cash to the mattress” basis, when CAGR is the only metric. A proper comparison for any in/out system should include the returns of the competing investment, in this case, cash in a money market account, 30- or 90-day T’s, etc.

It should also measure the volatility-adjusted results, since that’s the primary purpose of timing for many participants, avoiding volatility. Kelly Criterion is optimal position sizing from a CAGR standpoint, but I doubt many people would view its drawdown characteristics as “optimal” with their own money at risk.

That may be why Dr. Koch hasn’t found trend-following systems to work; he hasn’t tested them properly (accounting for alternate returns), and hasn’t applied proper metrics for comparing results. Very few people are interested in CAGR only, and many that say they are, won’t be anymore, after a big account drawdown.

There’s a certain arrogance in saying “I haven’t been able to see this work, ergo, it doesn’t” - especially when many other people HAVE seen it work. I used to be guilty of that sin, and have been trying to root it out for the past few years.

Aside from that, 50/200 simple moving average isn’t optimal in my testing. I found the general area of 80-120 and 160-200, with exponential moving averages, to be a bit better. The main benefit is avoiding prolonged bear markets.

FWIW, I agree that the fear concept is very useful, although it’s far from the only useful one.

Did you evaluate the crossover results from a risk-adjusted perspective, perhaps that of an investor who needs to withdraw funds to live?

One remark: You should display long term charts with an log scale always. This scale makes Percentage changes the same size no matter where prices are.