Ray -

"Critique:
What he calls "SAFE" is what I'd call "threshold to take action" or "guiderail". It is a percentage of the current STOCK value. He uses 10%. That seems to be a very large percentage."

I called it buffer - same thing. This is what I have as alpha. Ideally a parameter you would optimize on 1950-2000 and then validate 2000+.

Then it computes the excess (above that threshold) and calls for a buy/sell of the amount of excess but ONLY if the order is for more than 5% of the current cash. That seems...odd. It works to moderate the change of cash.

AND THIS - is where when you write it down formulaically - and on a series execution - or even looking at the column in the spreadsheet you will see it just tries to maintain the 50/50 parity while the stocks going up - and then starts to allocate $ from cash on the Excess DROP on the downside. Since its a fixed 5% - your executions will dwindle in size too in line with the drops - ie you buy LESS and LESS.

And hence - its conceptually flawed - you dont even need to test it against B&H

Best

Mechanical Investing FAQ

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