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Chapter 3. Moving Averages and Rates of ... > The Triple Momentum Nasdaq Index Tra...

The Triple Momentum Nasdaq Index Trading Model

You will now learn about a simple-to-maintain timing model that is designed for use with investment vehicles that track closely with the Nasdaq Composite. This is a short-term, hit-and-run timing model that was invested only 45.9% of the time from 1972 to May 2004, yet it outperformed buy-and-hold strategies during 20 of the 32 years included in the study. Gains per winning trade were more than five times the size of losses taken during losing trades. More performance data is shown afterward, but first you should look at the logic and rules of the model.

Chart 3.7. The Triple Momentum Timing Model (1999–2000)

This chart shows the Nasdaq Composite from late October 1999 through early October 2000. Below the price chart are three rate of change charts: the 5-, 15-, and 25-day rates of change of the Nasdaq Composite, expressed in percentage (not in point) changes in that index. At the top of those three charts is a chart that is created by summing the daily readings of the separate rate of change measurements. B signifies a buy date, and S signifies a sell date. You might notice that the shorter-term 5-day rate of change indicator leads the longer-term 15-day and 25-day rate of change indicators in changing direction before changes in price direction. (This chart is based upon hypothetical study. There can be no assurance of future performance.)



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