Lets say you have stock A, stock A doesn't generate any buy or sell signals but you are eyeing at another stock B which seems to be close to breaking out. Will you sell stock A and buy stock B? Just wondering if any one will "break" their trading rule or if they strictly follow buy/sell signals and what has been the experience or results.
I am not currently trading this system, but I used to have a strategy that would fully invest my account capital in the strongest ETF out of a group of ETFs and it would re-balance periodically. I had some other strategies that did not occur very frequently but when they did portions of my main position would be sold to free up capital for the less frequent, high probability trades.
As a basic strategy, you should always be looking to be positioned for... 1. Reversion to a mean (oversold/overbought, correcting), or 2. Giving the benefit of the doubt to relative strength/momentum 3. You believe you've got a "line on a story" about the issue, and you're giving it time to play out. If what you own isn't poised for at least one of the above, should consider alternatives.
Why was I in Stock A in the first place? As a general rule, capital mobility demands that capital seek its greatest return. If stock A has no promise, then I have the risk of A's going down, while having no promise of return. Second, "generate any buy or sell signals" suggests a problematic equivalency between such signals and even the lack of such signals. A Buy_To_Enter signal is not the same as either a Buy_To_Exit, nor is it the opposite of a Sell_To_Exit signal. Buy and Sell, to Enter or to Exit, must be considered separately.
With me it all depends on a specific situation. It is not rule that I will exit position just to enter another one that has some potential. I need to evaluate potential earnings in option A and feasibility of option B. If profits from A are better from B then I will stick with A, and vice-versa
%% I still like the idea; as long as commissions don't forbid that. A good principle-cant break that; any rule could be slowly changed, if market changes. Dividends may help.