Most of the indicators that I have back tested work well long and short, but you have to know whether the trend is up or down. Otherwise it reduces the percentage of success, but maximizes profits if you are correct about the trend. So the first work of our index will be to define trend.
1) The index will have only 65 stocks, in honor of the DJ65, as well as keeping the index to bearable levels for me. 30 Industrials, 20 Transports, and 15 Utilities. Also, need to decide mix of big,mid, and small cap stocks.
2) We need to define what an uptrend is as well as a downtrend. And maybe we should start by renaming the uptrend for what it really is: an increase in liquidity, .ie inflation (more buyers than sellers). So we are going to measure what counts as an inflating market. As well as a deflating one.
3) The second question is: are we setting this index for short, intermediate, or long term trades? Or possibly a mix of the three.
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