Considering the timing for stock buying

Considering the Timing for Stock Buying and Selling - Backtesting My Model

Creating a model for stock buying and selling guidance requires considerable effort. However, once a model is established, it's essential to adjust the variables within it to find the optimal model.

For instance, while one might primarily use the 50-day and 200-day moving averages and RSI for analysis, it's possible to incorporate shorter durations.

20 days moving average

As the chart becomes more complex, the timing for buying and selling varies depending on the weights. Ultimately, which model you choose and when you decide to buy or sell is up to your analysis and selection. There are commonly used analyses, and one reason for this is the frequent use of the 50-day and 200-day moving averages.

Stock analysis

Now, you need to decide on a model. Which model will guide your buying and selling decisions? This is where backtesting comes into play.

What is backtesting?

Backtesting in stocks refers to analyzing the effectiveness of an investment strategy using past data. Through backtesting, investors can verify how their investment strategy performed in past markets and measure the strategy's returns, risks, and risk metrics. Additionally, backtesting can assist investors in optimizing their investment strategy and making decisions for future investments. While backtesting is a useful tool for analyzing the effectiveness of an investment strategy, it does not guarantee future market performance. Investors should consider backtesting results to optimize their investment strategy and make decisions for future investments, but they should also be prepared for market volatility.

Which model should you choose during backtesting? It's probably rational to select the model that had the best returns or showed a similar market trend. However, one must be wary of #overfitting. If a model fits too perfectly, consider the following:

Increase the size of the data or the analysis period.

Diversify the indicators.

Validate the investment strategy.

Buying and selling are divine territories, and I firmly believe that long-term value investing is beneficial. Nevertheless, I think it's crucial to continuously refer to technical analysis.

I hope everyone has successful investments.