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Author: mungofitch Big gold star, 5000 posts Top Favorite Fools Top Recommended Fools Feste Award Winner! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 254187  
Subject: Re: Does this stuff work ? Date: 1/30/2013 11:02 AM
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Well, yes and no. My main objection to the MI scheme is that it
involves fixed holding periods. There is absolutely no way to tell how
long you should hold a stock when you buy it.


For whatever it's worth, I consider this by far the best strength of MI.
Why?
Nobody has found another method of deciding when to sell that works well
on average, or in backtest, or in real live, or even with decent anecdotes.
A fixed hold period rules out all the other reasons to sell a stock at
a given time, virtually all of which either fail on average when done
repeatedly because they're based on emotion or poor pseudo-theories,
or can't even be tested as a thought experiment because they are arbitrary.
It also ensures that the selling date criteria are quantifiable and testable.
If you're going to do something, do something that works on average in backtest.
It might not work in real life, but it makes NO sense to do something
that didn't work on average in the past, or something that can't even
be tested hypothetically on how it might have done in the past.
I take fairly broad definitions of those tests, but hold to them rigorously.

Whenever you buy something, you should write down why you bought it,
what will trigger you to sell it, and what good evidence makes you think
that that pair of rules will make money on average through time.
If you can't answer those three questions, don't buy a stock.

Jim
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