MLR - Important Reminder on the Market Direction Model

Published : October 7 2011 at 8:50 ET
Thank you for your comments and praises regarding the Market Direction Model. After four successful signals in a row, and possibly a fifth successful signal, I wanted to remind everyone that it is unusual for the model to have a four or more true signals in a row. As we have said in prior reports, the model tends to have more false (unprofitable) signals than true (profitable) signals, but the model, over time, has always managed to substantially outperform the major indices because of its failsafe which limits losses when signals are false, while capturing more sizeable gains when signals are true. Such gains more than make up for the small losses during false signals.

Earlier this year, the model had five false signals in a row due to a choppy, go-nowhere, trendless market. At that time, we reminded everyone that such challenging environments usually lead to a string of false signals. Fortunately, most everybody stayed on, understanding the situation, and we continued to attract new members, or as we like to say, students, as we consider ourselves and will always consider ourselves students of the market.

That said, the point of this discussion is to remind everyone that strings of true signals are unusual and do come to an end, so stay vigilant in terms of your money management, position sizing, and risk tolerance levels.

And as a reminder:


Best Wishes for Successful Investing,

Dr. Chris Kacher and Gil Morales

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