Quote Originally Posted by TraderD View Post
Billy,

I wonder why simple averaging of signals from all sectors makes sense for the formation of the 20DMF signal. As sectors' aggregate market caps (and consequently, trading volumes) can be very different, wouldn't simple averaging introduce a skew into the 20DMF signal by over-representing the smaller sectors (and vice versa wrt the large sectors)? I'd be naturally inclined to weigh the sectors' signals in proportion to their market caps, but then, how's that different from just combining 1000 stocks' signals with their respective market caps weights?

Trader D
From back-testing, it worked better that way: same weight for each sector.


Pascal