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Frequently Asked Questions

Dr K Market Direction Model
I am wondering if the MDM can be used effectively in an IRA or 401k by just taking the long signals only?

Q: I am wondering if the MDM can be used effectively in an IRA or 401k by just taking the long signals only (in an account where you can't short or are subject to three day clearing before making your next trade).

A: Yes, absolutely. Some of our members opt to only take the long signals. While both long and short signals have done well over many market cycles, if one were to isolate the long signals from the short signals, returns from only the long signals outpace the returns from only the short signals. And even if you make the trade the next day (for those who cant act on the signal during the trading day), returns should be roughly the same as in some cases, you will enter in at a slightly better price should the market trade lower at the open, and in some cases, you will enter in at a slightly worse price should the market trade higher at the open.

Alternatively, you could buy an inverse ETF instead of shorting a normal ETF. If you have to wait three days before you are permitted to switch ETFs, this will have a small impact on the performance numbers, though since the model has well outperformed the general market averages over many cycles, you should still come out well ahead, as the general markets do not move up in straight lines within 3 days after a signal is issued.


Published: Mar 15 2011