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Frequently Asked Questions

Dr K Market Direction Model
I'm a new subscriber. On your Market Direction Model service, you recommended four ETFs. What is the suggested buy price?

When the market direction model switches signals, we send out reports in real-time with a list of suggested ETFs. Depending on your risk tolerance levels, you may elect to buy a 1-times, 2-times, or 3-times ETF and position size accordingly. If you bought an ETF late, assume that each percent higher you buy from where it was recommended adds that much more risk onto the trade. Thus some risk averse investors may only buy a maximum of 3% above where the buy point was issued. Others might buy more extended but keep a stop loss that contains their loss to within the maximum amount they are willing to lose, which for many investors is 7-8%.

Note, your stop loss depends on your risk tolerance levels. That said, the model has a fail-safe built into each signal, thus in practice, the loss on a false signal is often contained to within 1-2% on a 1-times ETF such as QQQQ or SPY. For a 3-times ETF, multiply by 3, or 3-6%, which is a ballpark range.

When the MDM report was emailed out on March 24, 2011, QQQ was trading at about 56.7, SPY at about 130.9. Today [as of April 15, 2011], QQQ closed at 56.75 and SPY closed at 131.56, thus if you were to buy each of these tomorrow at today's closing price, you would be paying up roughly flat on QQQ and about 0.5% higher on SPY. Thus both are still within buying range for most investors.

Published: Apr 14 2011