Rocket Scientist wrote:
It's actually quite easy. After all, it's not rocket science.
Trend Following.
It really is rocket science, or at least data science, with statistical analysis and backtesting if you want an optimal result. The problem with just setting stops, like 20% and you're out, is that some of the Russell Indices and maybe also the NYSE have hit lows of 24% declines in the last 6 months, and you don't want to get stopped at the bottom and see the market go back up against you.
What you want to do is follow the trend, and detect when the trend reverses. There are a number of trend following systems like 5day/10/day/20day moving average crosses that you can read about on the web. The version I use is 19 week/39 week EMA cross which has been backtested. You go short or long when the moving averages cross, and in my system, there have been 7 signals in the last 20+ years.
Generally, trend following systems make twice as much money as buy-hold by avoiding most of bear markets. You get a copy of Metastock and build/optimize a system until you have something that stands up to backtesting.