Methodology

These are the complete rules, and every issue follows them exactly. If a rule ever changes, the change, the date and the reason are published here first, under Rule changes at the bottom of this page.

1. Signals

• Each market's signal uses its unleveraged price: QQQ for the Nasdaq-100, GLD for gold, USO for crude oil, IEF for the 7-10 year Treasury, and the bitcoin price.
• A market is on when its close is above its 200-day simple moving average, and off when its close is below.
• A turn on or off takes one session to confirm. The close that crosses the average is flagged in that evening's issue, and the next issue sets the new target.
• When a market turns off, the whole position goes to cash. There is no partial exit and no stop other than the average.

2. Steps

• When a market turns on, the model opens step 1 of 4 at the close of the confirming session and records that close as the entry.
• Step 2 is added at a close at or above entry + 1 × ATR, step 3 at entry + 2 × ATR, and step 4 at entry + 3 × ATR, where ATR is the 21-day average true range of the signal market. A step is added in the issue for the close that reaches it, with no confirming session.
• Steps are never removed one at a time. A market is either building, full, or out.

3. Sizing

• Each market is sized so that a full position carries about 20% annual volatility, using its trailing one-year volatility. The base size is reset only when a step changes.
• Volatility overlay. Each market's size is multiplied by the smaller of 1 and the one-year volatility it was sized at divided by its 20-day volatility. It only ever reduces size. It resets at every entry, add and exit. Otherwise it updates only on a week's first session, and only when the change moves that market's target by 10 points of the account or more.
• Markets that are on share the risk budget equally.
• The whole book is scaled to target about 25% annual volatility, and positions are held in 2x daily ETFs: QLD, UGL, UCO, UST and BITX.
• Margin version: total ETF dollars are capped at 1.5x account value. Cash version: the same mix scaled to fit inside 100% of account value, with no borrowing.

4. When trades happen

• Signals are computed after the U.S. close and published that evening.
• Each issue's targets are for the next session, and readers trade during that session. The model's record prices them at the close of the day the issue is dated, one session before readers can trade. Filling a session later made no meaningful difference in testing (section 5).
• A holding changes only when its target changes or it has drifted more than 5% of account value from target. Small drifts are left alone to save costs.
• The daily is sent about 4:45 PM Eastern on every U.S. trading day. If none has arrived by 6 PM Eastern, check past issues. If no issue was posted, keep the last issue's targets until the next one arrives.

Starting mid-trend

New readers join with markets already on and positions already built. Two ways to start:

• All at once. Buy today's targets in full during the next session. Your account then matches the model from that day.
• Over two weeks. Buy half of each target now and the rest a week or two later. This costs a little tracking error in exchange for not putting everything in on one day.

Either way, from then on change a holding only when its target moves or it drifts more than 5% of your account away from target.

5. How the rules were chosen

The 200-day average and the four steps were chosen using price history from 2007 through 2016 only, then tested without changes on later years. Fill timing was tested too: filling at the next session's close instead of the signal close made no meaningful difference, which is why issues go out after the close and readers trade the next day.

6. What can go wrong

• Whipsaws. A market can cross its average several times in a few days. Each crossing is a trade.
• Leveraged-fund decay. 2x daily funds lose value in volatile, sideways markets.
• Margin. In the margin version a broker can sell positions without notice in a margin call.
• Long flat stretches. Trend systems can go a year or more without a new high.
• Thin trading. UST trades lightly; use limit orders.

Rule changes

• October 17, 2026: volatility overlay added (section 3), effective with the October 19 issue. It trims a market when its recent swings run well above the level it was sized for.
• October 17, 2026: margin-version cap lowered from 2x to 1.5x account value (section 3), effective with the October 19 issue. Brokers require you to keep your own money in at least half of a 2x fund position, and many require more, so at 2x there is no cushion before a margin call. At 1.5x, with a broker that asks for exactly half, the fund holdings can fall about a third first; a higher requirement leaves less room.
• November 5, 2026: wording clarified in sections 1, 2 and 4: a turn on or off takes one confirming session, and the model's record prices each issue at the close of its own date. No rule changed; every issue since October 19 has worked this way.