Replies to post #270 on The "Stock Trading Riches" Investment Sy

[PraveenP]

Hi Neko,

I checked out the 3% signal at the author's website:

http://jasonkelly.com/books/3sig/

It looks like the essence of the system is that, each quarter, you check the stock. If it went up 3%, you leave it alone. If it goes up more than 3%, you take out the excess. If it grows less than 3% or goes down, you increase it to the 3%.

With the basic stock trading riches system, we are looking to buy or sell back to the constant value at the end of the year if it goes up or down 10%.

To make it simulate the 3% solution, we would recalculate the constant value by raising it 10% (or 12% if you want to keep the 1% per month / 3% per quarter).

So, let's look at 12%. If the constant value is $2000 at the start of the year then, after 1 year, the new constant value would be 2000 x 1.12 = $2,240. So we would rebalance the stock or fund to $2,240.

This would be more aggressive than rebalancing back to a constant value, so you would want to try this either with a fund or with stocks if you are diversified (have at least 10-12 stocks).