Frequently Asked Questions
For 3-times ETFs, since they move 3-times or possibly slightly more than the NASDAQ Composite if they are volatile, you should give them 7-8% from the buy or sell signal issued by the model. The model tends to lose 2% or less on the NASDAQ Composite if the signal proves false, thus for a 3-times ETF, this would be roughly 6%. For a more volatile 3-times ETF such as TNA, this may be as much as 7-8%. Note, on rare occasions, should the false signal have a higher loss than 2%, say 2.5-3%, due to volatile markets, the loss on TNA could be 9-10%. If 9-10% is greater than your risk tolerance level, you could put in a smaller than normal position.
Knowing ahead of time the markets are volatile is possible since volatility often begets volatility, as it did after August 2008 and May 2010. We would make a note in the report we send out if such is the case.