We have posted the most frequently asked questions "FAQs" from our members. If you have a question, please scan through our list. You may find other questions that you may have not thought about. If you are not clear about an answer or your question is not on the list, we invite your response and additional questions.
- What are ETFs?
- Can you tell me more about buying and and selling ETFs?
ETFs can be flexible and easy to trade. Investors buy and sell them like shares, through a broker. Using ETFs, investors can also employ traditional share trading techniques, including stop orders, limit orders and margin purchases (if available).
- Regarding the Wash Sale Rule, is this still true that selling one exchange-traded index security at a loss and buying
another within 30 days will NOT trigger the wash sale rule? And if so, do you know the rationale for this exception to the wash
sale rule requirement?
Selling one exchange-traded fund at a loss and buying another exchange-traded fund within 31 days will not trigger the wash sale rule, provided they're different exchange-traded funds. Selling 100 shares of the QQQ, which tracks the Nasdaq 100 index, at a loss and then repurchasing another 100 shares of the QQQ within 30 days will trigger the wash sale rule, meaning the loss would be disallowed. (You can adjust the basis in the new shares to reflect the loss, though, effectively letting you claim it when you sell the replacement batch.) However, you can claim a loss on the sale of Vanguard's Extended Market Vipers, which tracks the Wilshire 4500, and repurchase the same number of shares in Vanguard's Total Stock Market Vipers, which tracks the Wilshire 5000, without violating the wash sale rule.
As to your second question: It's not so much a "rationale" as it is a lack of formal opinion on the part of the Internal Revenue Service. The wash sale rule disallows the loss when "substantially identical" securities are purchased within 31 days of when the loss was incurred. (That means you can't buy new shares 30 days before you sell the stock, either.) Since the IRS has never issued a concrete definition of "substantially identical," many tax planners argue that selling a Vanguard S&P 500 index fund at a loss and purchasing a Fidelity S&P 500 index fund within 31 days will not violate the wash sale rule. And until the IRS rules otherwise, they're right. The nature of how ETFs are created precludes them from holding truly identical underlying securities, so there's even less reason to fear the wash sale rule – again, as long as you don't buy the same exact ETF.
- How does the Wash Sale Rule differ for Canadian investors?
The wash sale rule is a U.S. tax provision and applies only to persons paying U.S. taxes. In Canada, the Canadian Customs and Revenue Agency has a like rule, it is called "superficial loss", and works in a similar manner, except that it applies for 30 days, not 31 as in the U.S.
The American Stock Exchange lists Exchange Traded Funds (ETFs) on a number of broad-based indexes – each designed to provide a single value for the aggregate performance of a number of companies representing a broad group of industry and market sectors. Investors can buy or sell (i.e., trade just like stocks) any of the broad-market or benchmark indexes (ETFs). Please visit our Exchange Traded Funds page, which explains the more popular ETFs (DIA, SPY, and QQQ) in detail.
- Which online broker should I use to buy or sell a stock?
Visit google.com and type in the key phrase "online brokers". Do a little research to find which firm is best suited for you. Commissions are reasonably low for most online brokers.
- What is short selling?
Short selling means to sell shares you've borrowed in hopes the price will fall. Here's how it works: you borrow the shares from your broker and sell them. Now you're paying interest on the borrowed shares, but you're also earning interest on the proceeds from the sale. Sooner or later, you have to replace what you've borrowed, but the hope is that the stock price will fall. Then you can buy back the shares for less than you sold them for, replacing what you borrowed and pocketing the difference. When you buy back the shares, this is called "buy-to-cover".
- Should we use a market or limit order to buy or short a stock?
This is your choice. We suggest and encourage you to ask this same question to your financial professional. In general, you should always try to get the best price. But then again, you may not want to miss out on the trade. A small price differential between a limit or market order is really insignificant for the broad moves of the market. If you disagree with our timing or price, you may feel more comfortable in placing a limit order.
- Which ETF should I trade and how much to trade?
We personally believe in diversification. An investor should always attempt to minimize risk, meaning never put all of your eggs in the same basket! We can not advise anyone as to how much capital they should trade. Everyone has their own financial objectives and risk tolerances. We strongly encourage you to consult with your financial professional.
- I can not short stocks in my IRA and/or 401K account. What are some inverse ETFs to go long when you issue a short sell signal?
There are many inverse funds to go long in place of shorting the ETFs. Here are a few: SH (short for S&P 500), PSQ (short for QQQ), DOG (short for DIA), and there are many others. A good place to learn more about Inverse Exchange Traded Funds (with a very comprehensive list) can be found here: Wikipedia - Inverse ETFs.
- Would trading options in the QQQ's be a good idea?
We suggest not to trade options on any of the ETFs we cover. There are many traders who are dreamers and hope to make lots of money by leveraging as in options. Potentially one could make much more money using the system if they did trade options, but one can also lose a lot more. We do not believe in options, because it is simply gambling and carries a LOT of risk. We compare option trading to horse racing or penny stocks. In the long run if you traded options, you will lose money. It is only for those who love risk and have thousands of dollars to lay on the table, and don't mind losing it. Our system is intended to be as low risk as possible, and we do not recommend option trading for our members. We believe in slow steady gains over time.
- When did your SMT.IND System go live?
Our SMT.IND system has been live since July 2001.
- What is the purpose and objective of your timing system?
Our system is designed to consistently outperform the buy-and-hold strategy of investing on a yearly basis. Our job is to stay focused on the broad moves of the market and not on the day-to-day fluctuations. Please visit our track record – we feel it speaks for itself. We encourage you to thoroughly research any web site that claims to have produced exuberant results. A worthy phrase to remember "if it's too good to be true, then it probably isn't". We stress caution with other systems, especially on the Internet. Bottom line: Our primary goal is to help our members move their money forward.
- How are your timing signals produced?
Our proprietary methodology is a rules-based approach, which led to a brilliantly designed mechanical system. The mechanical system combines trend-following' and 'momentum' to identify tradable impulses. This method uses what we call 'reactive technical analysis'. Instead of trying to 100% forecast or predict the market's direction based on past market data as in interpretive technical analysis, reactive technical analysis is geared to reacting to the market's movements as soon as possible after they occur. Using the combination of these methods is why our performance results have been exceptional.
- What does your trading strategies offer for the investor and trader?
We feel our trading strategies:
- relieve the investor of having to depend on financial analysts' recommendations and on company information, that may or may not be truthful.
- eliminate the emotional turmoil and confusion that all day traders (and option and future traders) constantly experience.
- provide a lower risk method of investing, since you are investing in a broad market (either long or short) as opposed to a single stock that is subject to higher risk, volatility, and many uncontrollable factors that can negatively impact stock price.
- consistently beat the long-term buy-and-hold strategy, even in bearish markets. When our timing system gives a bullish signal we are buyers and profit from the rising market. When the stock market turns sour for most, we short sell the market and profit from the decline.
- When should we expect to receive your new signals?
Our signals can be produced and released before, during, or after the market closes. On a yearly basis about 20 trading signals (meaning buy long, sell short, or hold cash) are generated for each index stock (DIA, SPY, and QQQ). At the time of the new signal, members will receive an immediate e-mail alert, and members can also visit the exclusive timing signals page with the latest updates through the members login.
- In what trading environment does your system perform well, and are there any flaws?
Our system performs very well when the markets are trending – either up or down, and on all time horizons (i.e., short, intermediate, and long). We estimate that the market trends either up or down for about 75 to 80% of the time. During these times are when, for the most part, we capture those moves and produce profitable returns. Regarding flaws: the system does not perform as well on short-term horizons when the markets whipsaw back and forth within a 5% range (i.e., topping patterns), and for short-term horizontal movement, as in times of consolidation (accumulation or distribution). In fact, no system can produce profits on a consistent basis during these times. We estimate the market may trade in this manner about 20 to 25% of the time. These are the times when our system is most vunerable to small percentage losses.
- I'm confused about how the arithmetic returns are calculated. For example, let's say you make
two trades using DIA, and the first trade has a 9.2% gain and the second trade has an 8%
gain. You appear to be adding the two numbers and calling this a cumulative return of
17.2%. Lets say you start with $10,000 and you make 9.2% on the first trade. You now have
$10,920. If you make 8% on your 2nd trade you would have $11793.60. The actual compounded
return (excluding commissions) would be 17.9%, which is higher than the 17.2% reported.
If you are indeed simply adding the percentages of the gains for each trade, your actual
compounded return will either be higher or lower than the stated cumulative return.
Our gain/(loss), year-to-date, and cumulative returns are the summation of individual percentage gains and losses at the end of a closed position related to a "fixed" amount of capital (meaning they are non-compounded and we do not reinvest the amount profited). To show how we calculate our returns on a "fixed" amount of capital using your example above, is as follows: 1st trade – a 9.2% gain on $10,000 (fixed capital) is $920; 2nd trade – a 8% gain on $10,000 (fixed capital) is $800. Add them together to get $1,720. Therefore, your initial $10,000 increased by 17.2% (9.2% + 8.0%) becomes $11,720, or $10,000 x 1.172 = $11,720. For a fixed amount of capital there is no compounding, and you do not risk the amount profited. The reason for calculating our returns using this method is because many members may join in the middle of a year, and compounding our returns will present an inflated number, just as you have shown. We may add a column for compounding one day, which will show even higher returns, but we do not want to mislead or "hype" our results in any way.
- Once I have become a member, what will I received through e-mail to let me know that a signal has changed; and
secondly, will there be an explanation as to why the signal has changed?
At the moment a signal has changed, whether being before, during, or after the close of the market, our members will receive an immediate e-mail with the latest updates for each ETF. The update will include information about the previous signal, and information about the latest signal (meaning the price to go long, short, or hold) for each ETF.
In regard to the 2nd part of your question, our market timing system is not 100% mechanical. The system does have a certain degree of subjectivity since we are interpreting the charts. However, that said, our system also uses a mechanical check on the validity of our interpretation. This is why we have an exceptional long-term track record.
- How do we use your trading systems?
On a yearly basis, about 20 trading signals (meaning buy long, sell short, or hold cash) are generated for each index stock. Members will receive an immediate e-mail when there is any change in status of a signal (meaning buy long, sell short, or hold cash) for each index stock, and the exact entry or exit price. Members can visit the exclusive timing signals page with the latest updates through the Members Login to verify that a signal has changed for an index stock. These changes in signal status can be made during normal trading hours. Members select an index stock they want to trade or a combination of them for greater diversification based on the signals produced. After your trade has been placed, all you need to do is wait until the next e-mail alert with a change in signal.
- As soon as I become a member and visit the timing signals page, do I enter the
trade immediately even if the current stock price has already moved in a specific
This is entirely up to you and your professional advisor for a final decision. If you like, it is sometimes best to sit out (hold cash) and wait until the next signal, especially if the market has moved significantly since our last signal.
- Is investment news and other research data taken into consideration?
For the most part, the answer is no. We are always aware of the financial news, but this is not directly factored. However, the mathematical equations used to derive the indicators and signals, captures all data.
- Can I trade Rydex or ProFund index funds using your market timing system?
Yes, we have many members who have successfully traded Rydex or ProFund index funds using our system, especially dynamic Rydex funds. In fact, there are many Mutual Funds to choose from when trading indexes. For the most part, our signals are exceptional to use for trading any Mutual Fund that contains stocks that compliment the broad market indexes we cover.
- Who are your members?
Our members come from many countries in the world. We believe our members are professional investors, stockbrokers, money managers, financial planners and investment advisors, and individual investors. We also believe our members are those who have tried other investing strategies (i.e., day trading, buy-and-hold stocks and stock mutual funds, etc..) and have lost money through those strategies. Investors and traders alike are now looking for "and have found" an honest and lower risk method of investing through our system. For those who truly follow our methodology will notice a gradual increase in their portfolio as time progresses.
- What is the difference between a long, short or hold signal?
When the signal says "long", this means place a trade to buy the stock. A "short" signal means short sell the stock. And a "hold" means maintain a 100% cash position. If you do not wish to use margin as with short selling (i.e., borrowing stock from your broker in order to buy-to-cover at a lower price – meaning betting that the price of the security will decrease), you can simply remain in a cash position until the next buy signal is generated.
- What does a "Hold" signal mean?
When the new signal says "Hold", you are to maintain a 100% cash position. Therefore, you are to either: (1) buy-to-cover short positions and now hold 100% cash until a new signal is produced, or (2) sell stocks after a long position and now hold 100% cash until a new signal is produced.
- Could you please e-mail me a complete list of your signals for previous years so I may evaluate how effective your signals are? I do not need
current data. Older data would be fine. Thank you.
All of our tables are available to the public. Please go to the Performance page. On this page, you will find all the trading signals used through the years. The system has been back-tested using data from years 2000 and the 1st 1/2 of 2001. We went live in July 2001. The system has done quite well ever since we went live and continues to outperform the market.
- Where can I find the Trading Statistics for your yearly results?
Please go to the Performance page and go to the bottom section. On this page, you will find all information you need, such as the largest trading period gains and losses, yearly returns, etc.
- Does your company also trade the index stocks?
We rarely trade the ETFs (DIA, SPY, and QQQ). However, we do use our methodology to trade government retirement funds. We believe our system provides a lower risk method of investing, as opposed to trading any individual stock, which is subject to higher risk, volatility, and many uncontrollable factors that can negatively impact stock price.
- Can I join for a 6-month period instead of a year?
We currently do not offer a 6-month period. If we get numerous requests for this option, then we may consider this option in the future.
Our company is committed to protecting your privacy while using our site. This is explained in detail in our Private Policy page.
- Does your company offer any free trial periods?
We do not offer any free trials. However, we do offer a 48-hour grace period. Meaning, if our system is not right for you, we offer a 100% refund.
- Will your company manage my account?
At this time, we do not manage any personal accounts for our members, and probably will not in the future. However, we can direct you to a financial manager whom we respect or you can maintain your account with an online broker.
- After I become a member is there confirmation of this?
Once authorization is approved, you will receive our confirmation response e-mail. You will then be able to log into the system and will be automatically directed to our exclusive timing signals page with the latest updates!
- Who provides the signal changes and information in the newsletter?
In short, the site is owned and operated by Robert W. Dillon, Ph.D., who is a Technical Chart Analyst. His service provides one of the most credible and successful trading systems in the world today. He has been trading stocks using a rules-based approach for over 30 years. Due to his success in the financial world, he became semi-retired at the age of 41. Since then, he has been providing financial guidance to his customers. His education includes multiple degrees (B.S., M.S., and Ph.D. degrees in Geology and Geophysics). He has a vast amount of experience in interpretation of highly complex charts. His knowledge and skills with charts combined with his experience in trading stocks using technical analysis gives him the upper hand in making logical investment decisions to help members achieve financial success. He holds the highest level of ethical standards and avoids any conflicts of interest. Trading signals may be provided to Registered Investment Advisors (RIAs) who manage Assets Under Management (AUM) on a contract basis.
- How can I contact the editor/technical analyst if I have a question?
All correspondences are done through e-mail. You can contact Dr. Dillon at email@example.com.
- Once I become a member, can I change my email address in the future?
Yes, just send an e-mail to firstname.lastname@example.org and include your old and new e-mail addresses.