When you first start out, you should run the model twice before entering any trades. Run it the first week, then run it again the following week to see if you get any new Buy signals.
Most of the signals you get the first time you run the model are existing signals. If you enter them, you run the risk of getting in too late in a move. You’re looking for new Buy signals to reduce the risk of entering late in a trend.
This situation differs from continuously buying shares in a fund that has a Buy signal week after week, for example when you allocate 401(k) contributions deducted from your periodic paychecks.
One recommended technique is to execute new Out signals immediately, but wait for 2-3 weeks before executing new Buy signals. Executing the Out signals immediately gets out of potentially losing situations quickly. But waiting to execute new Buy signals allows you to see if a fund is actually moving into a new trend by studying charts and comparing it to other fund choices.
If you have two funds where one switches to Out and the other moves up and generates a Buy signal, it often helps to watch the two funds for a couple weeks before making a decision.
If the two funds are similar (e.g. two technology funds), one fund’s relative strength might get stronger by a percentage point or two but offer no different opportunity than the original fund. In this case, it pays to wait and see if the two funds’ relative strengths spread more than 2-3% before committing capital to a new position.
On the other hand, if the two funds are in completely different sectors (e.g. gold and biotechnology) where the sectors are not correlated, then entering without delay may be a better decision as there is more likelihood that the change in relative strength is real.
