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Frequently Asked Questions

Dr K Market Direction Model
I am confused about your references to stop losses of 7-8% with your direction model.

Q: I am confused about your references to stop losses of 7-8% with your direction model. If an investor makes a purchase when your model indicates a buy, how could the stop loss be triggered prior to your fail safe kicking in? I thought your fail safe kicks in at about 1-2%?

 

A: The model typically engages its fail safe within 2% on a 1-times ETF. This means within 6% for a 3-times ETF. These are rough guides since some ETFs are more volatile than others. In addition, during unusual periods of high volatility, this fail safe may be higher than 2%, say, 3.5%, which would be over 10% for a 3-times ETF. Thus members are advised to position size accordingly and always adhere to their own personal sell stops. Some members opt to just follow the model's change in signals, knowing that some losses, should they choose to invest in a 3-times ETF, could exceed 10%.


Published: Aug 21 2011