I was wondering if anyone knows of a way to best allocate my investment funds when using a Market Timing approach. For example, I have a market timing system I developed and tested since 2005. Every year it has shown excellent results from a return percentage perspective; however, from a dollar perspective it has not generated as much income as I would have hoped for.
After doing some research most of it points to the fact that my investment amount, say 100K is not fully invested at all times, just a portion of it is (10%) on each trade I am signaled to enter. What I am trying to figure out is a formula on how I can be almost fully invested at all times, but still be able to enter into new trades as the system signals them.
My system tracks 30 ETFs, and at any time I can be in from 1 to many trades, so how can I stay almost fully invested, and yet have money when new signals are generated. I hope this is clear, but perhaps an example will help. If on Jan 1st 2014 I am signaled to buy 5 ETFs, and I invest 20K into each of them, and then on Jan 10th, I get a signal to buy 5 more different ETFs, I won't have any investment money to buy this second set. The first set of 5 may generate a 5% return or a loss, but the second set may generate a 25% return, I can never be sure which set will be the biggest winners so I'm trying to be fully invested at all times to have the greatest chance of getting the best dollar amount return.