The Eighth Rule: Under the Hood
A bug fix, a short-selling option, and why I'm not using it.
Quick update & some thoughts but first off I hope everyone has had an excellent weekend.
Since the eighth rule signal went full cash/bearish last week on Thursday close, Bitcoin is down an additional -8.1% that we thankfully have avoided because we all follow the system ruthlessly and without emotion.
After coming home from a short break I spent the weekend tearing apart The Eighth Rule line by line. Not because it was broken.. it was performing beautifully, but because one trade in October didn’t sit right with me.
The system entered at 25% when the VATS dots on my chart looked green. If VATS was confirmed, why didn’t it size up?
That question led me down a rabbit hole, and what I found was a subtle but real bug in the position-sizing logic that every member running this script needs to know about.
Here’s what happened.
When the system flips from one state to another on the same bar.. say, exiting a flat period and entering a long, there’s a safety check that syncs the internal allocation tracker with the actual position.
The problem?
On transition bars, the strategy engine still reports the old position size while the new order is queued. The safety check would see the mismatch, panic, and reset the allocation level to zero.
In practice, this meant the system was occasionally blocking legitimate size-ups. It happened twice across the entire backtest:
once in August 2017 (minor)
once in October 2025 (not minor)
The October trade should have sized up from 25% to 100% when VATS confirmed on Oct 2. Instead, the bug silently ate the signal.
I’ve added a transitionThisBar guard that skips the safety check on bars where a state change just occurred. Simple fix. Two lines of logic.
But it changes the backtest: net profit drops from ~$5.04M to ~$4.58M because that October size-up (now correctly firing) happened to precede a losing trade. The old number was inflated by a bug that got lucky. The new number is the truth.
A 4.58 profit factor with 67% win rate and 24.8% max drawdown is still an exceptional system. I’d rather trade real numbers than lucky ones.
The second update: optional short positions.
I’ve added the ability to open small 25% short positions when GVTS is bearish and VATS confirms negative momentum. It’s toggled off by default. You can flip it on in the settings to A/B test against long-only.
I ran the full backtest with shorts enabled and here’s the honest truth: the shorts themselves are net losers.
Profit factor of 0.84, win rate of 41%, net P&L of -$123k. They lose money.
The system still shows higher total profit with shorts on because winning shorts occasionally pump the equity base right before a big long entry.. compounding does the heavy lifting.
But the short alpha is fragile, concentrated in a handful of trades, and it tanks your profit factor from 4.58 down to 3.40. I will not be running shorts. I don’t recommend you run shorts.
Let me say that again for the folks in the back.
I will NOT be running shorts and I DO NOT recommend you run shorts. SHORTING an extremely volatile asset such as Bitcoin is the FASTEST WAY TO FINANCIAL RUIN.
Cool; with that ridiculous public service announcement out of the way…
If you’re not shorting then why add the feature?
The option is there for members who want to experiment. Turn it on, compare the equity curves, draw your own conclusions. The toggle exists so you can stress-test the idea yourself instead of taking my word for it. You can also adjust the short-entry allocation as well.
What you need to do: Update your script to the latest version. Both chart types (Line and Candles) now produce consistent results. Reminder that access to this script is for premium members only.
The three-tier VATS dots.. green for confirmed, yellow for warming, red for bearish are easier to read at a glance.
And most importantly, every signal the system gives you is now mechanically accurate. No silent bugs. No phantom blocks. If it says size up, it means it.
If it stays at 25%, there’s a real reason. The system you’re looking at is the system you’re trading. That’s all I ever wanted from it.
Until next time, we follow the rules.
— Durden out. ✊🧼
great stuff