Exposing The 2.5% Scam


You’re a good discretionary trader. But you’re also an easy mark for anyone with an investing scam like the supposed “2.5% System”. Yes, theoretically, if 2.5% were made on each trade, and if profits were reinvested, then a huge amount of money might be made. But there’s just one tiny problem, namely, market realities and human psychology say otherwise. So let’s work through an example.

It’s no secret that you love COST, both as a company and as a stock, and you’ve said on occasion that a person could retire early from trading it alone. So let’s put that claim to test. Five years ago, COST was trading at $183. Let’s give our test subject a starting balance of $1,000 and have her trade COST just on the days when a 2.5% gain (or greater) was offered. Given that she’s young and has a day job, she’ll buy at open with a MOO order and sell at close with a MOC.

What would her ending balance be? Given that there were only 38 days in the past five years when COST offered 2.5% (or more) on any given day --Close minus Open-- and given that she has to leave some money in the account for not having enough to buy full shares each time she trades, her ending balance wouldn’t be very big, and certainly not enough to retire on, and this is with the counterfactual assumption that she never guessed wrong about which days to trade and never had a losing trade.

Modeling her trades in a spreadsheet is straight-forward enough, but it’s also tedious and doesn’t need to be done, because some math suggests her ending balance --at best-- is less than $3,000, not the gazillions promised by the scam. (By my estimate, after 38 trades, she’d have around $2,556, or a very, very respectable, average annual gain of 20.6%, handily beating the G BoyZ, plus saving $199/year for not subscribing to their news letter.)

Now, let’s run the backtest again, this time letting her capture intraday profits. Her fairy godmother will --again-- tell her in advance on which days COST will have an intraday move of 2.5% (or greater) and tell her the exact moment when COST makes its intraday low. Now, how many trades can she make, each of which --it will be remembered-- she exits with a 2.5% sell-stop order. She’ll have 240 days to make her trades, and her ending balancing would be around $374,738, not the gazillions promised by the scam. But that’s still very decent money. So all she needs to do to make that kind of money is to find a fairy godmother who’ll tell her which days to make her trades, and as well as grubstake her, given that she’s likely to be part of the majority of Americans who don’t have even $400 in savings they could use to gamble in the equity casinos.

An aside: At what point in this trading campaign, --assuming it does get successfully launched-- does bet size have to be cut back to a more prudent level? It’s entirely one thing to buy 10 shares of COST and entirely another to be buying 1,000 shares, especially if the punter doesn’t have decades of market experience. And let me inject some of my own experience here. The trades I got away with I was breaking into the junk bond market --sometimes, gains of 100%-- simply don’t exist today, and even if they did, I doubt I’d have the nerve to pursue them, which calls to mind the oft-repeated bon mot of Alaskan bush pilots. “There are bold pilots, and there are old pilots. But there are no old, bold pilots.”

Also, if one’s whole account is $1,000, as it would be at the beginning of the campaign, and if on the day that first trade were made the market gaps down, by 22% as if did in '87, then how long will it be before our beginning investor has the nerve to get back into the market? Can’t happen again? Won’t happen again? Don’t bet on markets being as benign going forward as they have been for you and me the past 20 to 30 years, for this simple reason. The Fed/Treasury cartel is running out of money with which to prop up stock prices, never mind that most of the world is doing an end run around the $US dollar.

Quill, what I’d suggest is this. Your own decades of struggle to learn and master the investing/trading game offers proof that there are no easy paths to fabulous wealth and that a huge portion of whatever gains we investors/traders have achieved is partly due to the sheer dumb lucky of having stumbled into our preferred markets at a favorable time. What “Simon” and its variants can do is to help investors make buy/sell decisions when the evidence of the tape is in their favor. On that point, I’ll back you up entirely, because it’s what I can test and show is so. It’s what I have traded and have the trade slips to prove. But scams like “2.5% Systems” and their pot of gold at the end of the rainbow don’t deserve serious consideration, not compared with a close reading and application of Ben Graham’s The Intelligent Investor, which is a time-tested path to wealth. (IMHO, 'natch.)




re: COST my cash cow. :o))
re: 20 ema - 1 month

I have normally been trading COST since May of 2007 after getting laid off per Simon Sez III, however for side bar action going to add my findings to my 2.5 percent portfolio.

Now, I would like you to peruse COSTs chart below and at every bottom price label, place a bet on the Out of the Gate and after buying COST then place a limited SELL order plus 2.5 percent and tack on one more penny for good luck.

Since 5/23/23, I am seeing 8 out of 8 hits.

Of all my 155 out of 200 scanning tools. I am going to play with 3 of them.

  1. // Bullish 20ema over 200 ema - Found 12 candidates. eg…AEM, BSCP. Now when the xover occurs we would buy it and bang it for 2.5 percent plus a penny.
    Now look at any of your charts and look at EVERY 20/200 making money.

  2. // Scan 60 - 20ema - when price crosses UP and over the 20ema - found 112 candidates. eg…- ABC, ACI, AEE-

  3. // 8% moves and or 5 dollar plus moves in 5 days. Found 51 with 20ema candidates. eg. USX, ONON, GME.

Stocks that make either 8% moves and or go up 5 dollar plus moves in 5 days. A new one and going to experiment with this one.

I have the 3 lists of about 10 stocks in each group and will monitor them for a few days.

Quill -



Much thanks for responding and for filling in more details. It helps me to understand what you want to achieve.

Just now, the rains chased me indoors from raking leaves. But I’ve been on a screen most of day and need to pedal some miles on my stationary. Then I can make a proper reply.



We’re both 79, and we retired within months of each, whereupon each of us took on a new career. You became a trader for your own account in the equity markets. I did roughly the same in the bond markets, and those markets have been kind to us. Both of us haven’t forgotten our struggles to learn our respective games and —where we can-- we try to offer help and encouragement to others.

But here’s where we differ. You still want keep growing your account, whereas I realized long ago that I had ‘Enough’ and didn’t need ‘More’. That difference governs which vehicles we now choose to trade, the size of our bets, the tools we use, and the risk we’re willing to accept. As a concrete example of just how deleveraged from equity risk I am, here’s my current portfolio allocations:

5% Cash & MM Funds
45% T-Bills (chiefly, the 13wk and the 26wk)
45% Long-dated bonds (Corporates, Agencies, Munis, Foreign Sovereigns, across the yield-curve and up and down the credit-spectrum)
5% Trading Experiments (chiefly in Commodities, Commodity Producers, and Country Funds)

Right now, I’m probably putting in the same research hours as you. But when the weather warms and Spring finally arrives, then gardening, fishing, and boat-building will take precedence over this investing/trading stuff. (The daily bike rides are year 'round, weather permitting.)

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Have you actually tried to count how many times that has happened for COST since Mar 29, 2007? The quick and dirty answer is that, over any consecutive, 5- day period for COST, an 8% move has happened only 38 times in 4,025 trading days. In other words, you like COST and have done well with it. But the data doesn’t support your belief that COST is somehow special or better than hundreds of other stocks.

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re: INTC

I bought INTC for my 2.5% theory today.

This morning INTC was # 1 on the list by most volume.

Now we wait for the Bid price to hit the purple line.

So far Zero losses using Simon Sez III. All we do is follow what are peers are doin with their hard-earned money.

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$StockShopChartsNewsOption$ : fyi: Turn $20K into $80K with the 2.5% S… (advfn.com)

Been doing this since a 2007 just a few years ago.

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Quill, Wouldn’t you say that you were in that late for using Simon III? It would seem you are trading that more on momentum.


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Your are absolute correct, but the 2.5 percent theory is a separate animal. I was only using Simon III charts as a reference.

Traders have to learn how to use discipline with patience.

Let’s say we are trying to make a few bucks while INTC is in tansit.

Would you buy 10 more shares for every green bar heading north. Do not buy and red bars heading north until the finish line.

Well, my younger days as a rookie, I didn’t know better and thought it was a kewl idea. I stopped after getting yelled at by smarter traders.

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Well you know what you are doing Quill and thanks for giving me the guide lines. Right now I need to stay between the lines and try to make sure I follow my form. Later maybe I can paint outside the lines.



Lisa, Lisa.

2.5 % theory since 2007

It is to bad there are Doubting Thomas’s out there based on FEAR.

GOLD plays for the rest of your investing career.
Sidebar action with GDX, buy per Simon Sez III rules out of the gate, wait-one-day. Bang it for 2.5% compound the results and wait for the next buy signal.
Been doing this since “V” (3/19/20).

So far 25 out of 25 successful trades. Or you’re on Day 26 in at $27.29 and now at $34.99. Can continue upwards.
But back at $27.29, tack on 2.5 % plus round up to the nearest nickel or dyme. Arindam does not like it when I buy at 1000 shares at a clip or compound the profits and principle. If 9th graders can do this in Homeroom or at lunch time, you can do this; Nervous Nellies look at there I phone on average over 300 times a day to check on prices or progress.

IF you fail at the ABOVE, I want to see a Time Stamp of your purchase. As I understand it, GOLD stocks /etfs will be around for hundreds of more years.

You will notice at each out of the GATE and the FINISH line is a story to tell good, bad or uggggggly.

The following 2.5% plays = It is impossible not to make a money per Simon Sez III’s two (2) simple rules. Concentrate and ignore all the noise you’re hearing. Patience and Discipline wins all the time.


My Latest
Bought 3/31/23 EYE @ 205 shares at $19.44 = $3,923.70

Sold 4/10/23 EYE @ 205 shares at $19.70 = $4,038.50 - 2.9% - 10days

Total Amount invested.

Total Returns
$242,970.53 pending

Total profits as of today
$9,414.99 pending since 5/4/23.

4/4/23 INTC @ 86 shares at $33.75 = $29.02.50 = target $ 35.25 and we wait.

I have 6 others in the waiting

Monthly Dividends today AGNC $160.44, HYG $2.05, HYG $40.32

shopping list:

All US Exchanges Five Day Gainers - Barchart.com change to the highest volume

% CHG column more than 3.5 %
eg. EVTL click on the Plus sign, click on quote, 4 out of 5 have to be greater than 1.5 daily movements.
jamb the chart to the left and review from the smiley face.

Or if you guys have Stockcharts and access to the advanced Scan Workbench and run the following to find stocks that are at or about the starting gate.

//Bullish Scan 400 True Strength Index up and over

[type = stock] AND [country = US]
and [SCTR > 90]
AND [Daily EMA(20,Daily Volume) > 40000]
AND [Daily EMA(60,Daily Close) > 20]

AND [TSI(16,8,4) > 0]
AND [TSI(16,8,4) x TSI Signal(16,8,4)]

found only 14 candidates to review.


// Bullish 20/200 crossover

[type = stock] and [country = US]
//and [SCTR > 90]
and [Daily EMA(20,Daily Volume) > 500000]
and [today’s ema(20,close) > today’s ema(200,close) ]
and [yesterday’s ema(20,close) <= yesterday’s ema(200,close)]
and [close > 10]


// Scan 60 - 20ema - when price crosses UP and over the 20ema

[type = stock] AND [COUNTRY = US]
//and [SCTR > 90]
AND [Daily Volume > 500000]
AND [Daily Close > 10]
and [Yesterdays close <= Yesterdays EMA(20)]
and [Todays close > Todays EMA(20)]

= = = = = = = = = = = = = =
See ya around the campus.

“Opened 4/4/23 INTC @ 86 shares at $33.75 = $2902.50. Target $ 35.25, and we wait.”


That entry sucks. You were late to the trade, and now you’re under water.

Yeah, maybe, eventually, the market will bail you out of that mistake. But meanwhile, you’re in for a long, long wait. That’s not ‘trading’. That’s ‘Buying and Hoping’, exactly what you constantly scoff at.

We’ve been swapping charts and ideas for a lotta years, and I’ve got a lot of respect for what you do well, namely, crispy, gutsy entries and exactly timed exits. But with this trade --and some others lately-- you’re off your game. So take a week or two off. Otherwise, you’re going to trash your account for thinking your methods are foolproof.