Hi Mysty One,
The "3-day rule" you speak about appears, at first, to be a sensible "extension" to the basis system signals, but does it work effectively, on the average?
In Vortex the cash also runs out at the bottom of the trading range, and the shares are sold at the top of the range. When this happens there are various options by which one can get back in, if the market or fund conditions justify it. This requires setting up a set of criteria for determining if an override option is justified.
The "3-day rule" appears to be very arbitrary and could well backfire on the casual investor. In 3-days a stock could creep almost imperceptibly higher or lower and then one would jump in or out on a practical zero stock price movement. I would strongly advise to add a minimum price move that would have to occur in these 3 days also. But why is "3 days" The magic Limit?. It could have taken a month, or much more, to reach the last X-DEV Trade and then a 3 day period for a slow price-move continuance means nothing. Why not make it a 12-day rule" instead?
Also, after jumping in or our after 3 days the stock price could immediately reverse, sharply, and then you are caught with your pants down (or up, whatever may be the least pleasant). If the stock happens to sit in a 4-day up/down price cycle then you are continually jumping in and out, buying at a higher price then you sold it and selling at a lower price than you bought it.
As a protection against this type of "blind reaction" I would advice an approach that is based on understanding the fund itself, or the market in general, so that the "Override" is based on some measure of predictability rather than a blind rule.
I would be interested in finding out if your "3day rule" would be effective, statistically analysed, if the rule were applied completely rigorously and without any regard for the market trend or fund operational knowledge.
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