It can be confusing to try to compare various combinations of timing parameters to decide which you would want to run a real-world portfolio with.

The timing signal is the SMA (simple moving average) of the S&P500 index.
I looked at two ways to compute the SMA over the same calendar period. One was to take the moving average of the daily prices, the other was to take the moving average of just the end-of-week prices.

The time period was the same, just the price granularity was different. The length of the SMA calculation was 325 market days (15 month, 65 weeks) and 252 market days (12 months, 52 weeks).

There was not a consistant significant difference in the results of computing the SMA daily or weekly.

The trading method was using the weekly SMA and trading on the first of the month according to the IN/OUT of the most recent signal. No trades are done until the next month; there is no "early sell" or "early buy" in a month.

The next thing of interest was seeing the differences in the monthly signals between 325 day and 252 day SMA, at three different percentages below the SMA for the sell signal. The buy signal is always the price at or above the SMA.

Summary:
* The lower the SMA sell lthreshold is, the fewer the OUT months are.
* The lower the SMA sell lthreshold is, the fewer the differences in IN/OUT months between the 325 day and 252 day SMA.
* The lower the SMA sell lthreshold is, the more time is spent in the market.
* There is little difference in the CAGR return, for any of the 6 combinations of SMA period and sell threshold.
The return data is for one particular cycle of the 21 overlapped cycles. There is no reason to believe that the relative CAGR rankings would be the same for other cycles.

Conclusion:
* Since every combination of parameters has approximately the same CAGR, might as well use the combination that is simplest to compute and has the fewest trades.

---- TABLES ----

Timing signals are SMA of end-of-week values. Trade on the first of the month.

Sell at 0% below SMA

          325 day   252 day      325 day   252 day       Date      325 day   252 day
SMA %     0%        0%            Not same signal        8/1/1988  out       IN
# in      8158      8025          Days      Months       10/3/1988 out       IN
% in      79%       78%           425       19           12/1/1988 out       IN
# sells   41        55                                   2/1/1990  IN        out
CAGR      26.6%     25.3%                                5/1/1990  IN        out
                                                         6/1/1994  IN        out
                                                         8/1/1994  IN        out
                                                         9/1/1998  IN        out
                                                         3/1/2000  IN        out
                                                         6/1/2000  IN        out
                                                         8/3/2009  out       IN        Since 2006
                                                         7/1/2010  IN        out       Since 2006
                                                         1/3/2012  IN        out       Since 2006
                                                         4/1/2016  out       IN        Since 2006
                                                         7/1/2016  out       IN        Since 2006
                                                         3/2/2020  IN        out       Since 2006
                                                         2/1/2023  out       IN        Since 2006
                                                         11/1/2023 IN        out       Since 2006
                                                         4/1/2025  IN        out       Since 2006

Sell -1% below SMA

          325 day   252 day      325 day   252 day       Date      325 day   252 day
SMA %     -1%       -1%           Not same signal        8/1/1988  out       IN
# in      8259      8128          Days      Months       10/3/1988 out       IN
% in      80%       79%           341       16           12/1/1988 out       IN
# sells   45        45                                   3/1/1990  IN        out
CAGR      27.4%     26.6%                                5/1/1990  IN        out
                                                         6/1/1994  IN        out
                                                         8/1/1994  IN        out
                                                         3/1/2000  IN        out
                                                         8/3/2009  out       IN        Since 2006
                                                         9/1/2010  IN        out       Since 2006
                                                         1/3/2012  IN        out       Since 2006
                                                         1/4/2016  IN        out       Since 2006
                                                         3/2/2020  IN        out       Since 2006
                                                         2/1/2023  out       IN        Since 2006
                                                         11/1/2023 IN        out       Since 2006
                                                         4/1/2025  IN        out       Since 2006

Sell -4% below SMA

          325 day   252 day      325 day   252 day       Date      325 day   252 day
SMA %     -4%       -4%           Not same signal        8/1/1988  out       IN
# in      8445      8533          Days      Months       11/1/2000 IN        out
% in      82%       83%           212       7            4/1/2002  out       IN
# sells   25        27                                   8/3/2009  out       IN        Since 2006
CAGR      26.6%     26.9%                                1/3/2012  IN        out       Since 2006
                                                                      9/1/2015  IN        out       Since 2006
                                                                      2/1/2023  out       IN        Since 2006

Mechanical Investing FAQ

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