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Four Percent Model

Ned Davis created the 4-Percent Model. Moreover, Martin Zweig described it in his book, "Winning on Wall Street." With its help, it is easy to measure and analyze market-timing tool utilizing the weekly close of the Value Line Composite Index.

It reads that a sell signal occurs if the index decreases at least 4 percent. A purchase signal occurs if the index grows at least 4 percent from the latter value. During 1993 through 1998, utilizing this system to the stock market provided a return of 241% versus the buy-and-hold approach, which provided a 120% return.