Doc wrote: "Momentum and reversals are often seen as new higher highs and higher lows are created. Actually I tried to design a system which would avoid buying into a sell off continuation pattern."
Yes, this is true of your GLAD rules but once you are in, you employ the buy if down 3% rule which can have you continuing to buy in a heavy slide down. It also requires that you keep cash/margin available for these slides and is what is mostly likely to cause someone to abort the "system" should one of the stocks experience a deep slide.
Thus, a possible solution would be to test and implement a 3% combo with GLAD. So, if a position you're in drops by 3% or more, you buy more once GLAD is met following the 3% drop (say as long as the price has not moved back above your original purchase).
This still has the additional buy feature but waits at least until it makes a higher high and higher low -- which will eliminate continued buys into a slide and also makes it "easier" to pull the trigger on the buy. I think you will also find that it requires less capital in reserve, meaning that you can employ more capital on the first buys (making you more money in the long run).
I, too, have/had reservations about the 3% purchases for similar reasons. I recently studied CLM back 15 months. Using Doc's enter and exit dates and GLAD and 3% additional purchases, it was revealing that the overall gains, for the period of $6.40ish include $2.10 from those extra purchases. A significant addition, I would say.
Also, at least with this stock, the dips that triggered the additional purchases were very fast, and would not have allow any additional purchases if one waited for subsequent day signals.
I did look at exactly what you describe on all of the SS. By the time GLAD was met after the draw downs the stock was back to pre- draw down levels in almost every case. The bummer is that often the 3% limit buy was hit, just to see the close on the same day way down below your day's buy price.
I played with buying on all closes which were less than your original buy by different percentages as an alternative to the 3% rule, only to miss the lows of many mid day sell offs. I did not want to combine both rules because of the loss of participation by having so many buys throughout a cycle.
Those mid-day sell offs were more in number than the deep multi day sell offs, so I stayed with the 3% Rule to capture the majority, rather than the minority of events.
Does that make sense? I appreciate your input especially with your accounting background...;-)
Btw, I am always 'all ears' on improvements on GLAD/3%. My goal is not to have a great model...it is to make consistent monthly income at at least a 30% ROI level.
I am a fish out of water relative to your collective expertise, but wanted to ask the collective advice on AGNC covered calls; for example, June 33 strike that expires 6/21 that would appear to close shortly after ex-div....any thoughts as to whether this represents reasonable opportunity to collect some addition income on AGNC?....thx
My guess is that you are wrong on EX date and that it will occur post June OPEX. As a result, your shares will be called and you will not get the dividend. So the question is will you be happy making 33.43(strike + credit) on your investment? If yes, then go for it, if not, then don't....pretty easy choice.