Replies to post #423 on Systematic Investing Group (SIG)

[Myst]

Senor Conrad.......

Perhaps something was lost in the translation.

The 3 day rule does not mean "3 consecutive days" immediately after the last X_DEV buy or sell.

It means "3 days total" where the price has closed either above or below the last X_DEV buy or sell after going to an all cash or fully invested status.

This means if the stock trades sideways or rangebound after the last X_DEV buy or sell, it could take 3 days to 12 days or whatever b4 the 3 day rule is initiated. The following is an example.

As you can see, WHT has gone to a fully invested position (zero cash). Price began to reverse, as is usually the case, then it dropped dramatically a few days later. Because it dropped lower than the last X_DEV buy (4 days later), that becomes day 1 of the 3 day rule.



I agree that this is not an "automatic" software written code that trips in when the conditions are met. The X_DEV user must understand and utilize the rule at their discretion. For example, on WHT above the X_DEV user can decide to sell a partial or full position here, or continue to hold.

I realize this is an objective rule and it's meant to be. I also know this rule is subject to criticism by those who desire a fully automatic "black box" system.

Those who review X_DEV know from the outset that X_DEV is not a fully automatic "black box" strictly mechanical system. It was never intended to be. I still maintain that flexible, non-mechanical, semi-automatic systems are superior for a vast majority of active experienced and semi-experienced traders then static, fully mechanical systems.

Why 3 "total" (not consecutive) days? I can only say from experience from using X_DEV that 3 days is a sufficient amount of time to determine if action is necessary.