It is important to understand that the model will generate false trading signals. No trading model is 100% accurate — in fact 75% accuracy is incredibly good and most outstanding systems with long histories of success have 65% or less accuracy.
The key is the size of the winners vs. losers. Good systems will have larger winners than losers on a dollar basis. With 1.5X winning size per losing size, a system can be highly profitable even if less than 50% of the trades are winners!
The model attempts to maximize returns by following funds with the greatest relative strength and timing trades when momentum is increasing. However, there is no way to guarantee a win/loss rate or that the model will make money.
