Investors seeking a trading strategy to profit from volatility in the small cap arena should subscribe to ‘The 3% Signal’, said author Jason Kelly. Kelly added that the quarterly growth target tells you when to move in and out of the index and how much money to invest. He said the strategy would work on large cap indexes, but he prefers to use the S&P Small Cap 600 because it has the best historical performance and has a higher level of volatility. Kelly said he back-tested the strategy going back to 2000 and it outperformed the S&P 500. Finally, Kelly said ‘The 3% Signal’ is best used in a tax-advantaged account like an IRA or 401K.
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