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Saturday, 04/24/2004 8:01:39 AM

Saturday, April 24, 2004 8:01:39 AM

Post# of 8725
Another refresher on the 3 day rule:

The "3 day rule" is a way to provide safety against "deep diving" stocks, and it's also a way to capitalize on "strong momentum" driven stocks. The rule is unique to X_DEV users.......because the X_DEV algorithm (system) is unique.

The X_DEV system is designed to capture the highs and lows in any stocks trend, at the extreme highs or lows in the trend. Usually the stock will reverse shortly after X_DEV has bot or sold at an extreme deviation. If price continues in the same direction after X_DEV has fully sold it's entire position, or purchased the full amount allocated to the play (100% invested), then that's a clear signal that an important trend shift has likely occurred.

The way it works is as follows.

If an X_DEV play goes to a "fully invested" situation, and price continues to fall, the 3 day rule suggests exiting the play (completely or in partial increments) if price is lower than the last X_DEV buy on any 3 days following the last buy. This allows the user to exit with minimal damage, instead of holding through a substantial decline.......ala QLGC. A system like AIM would have you hold the "deep diver" regardless of the decline.

Or,

If an X_DEV play goes to a "100% cash" position, meaning it has sold all its shares at the X_DEV extreme highs, and price continues higher for 3 days after the last X_DEV buy, then the 3 day rule suggests entering back in (completely or in partial increments) immediately. This allows the trader to capitalize on a strong momentum driven rally. A system like AIM would have sold and missed out on a potential windfall.

So you can see, QLGC would have been exited for a much smaller loss than the chart is displaying, allowing the user to place their capital on a different play.



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