Simple Breadth
How to Build an Ultra-Efficient, Ultra-Easy-to-Use
Investment System with No Transaction Losses
22.2 years September 19, 1986--November 14, 2008
Profit 53%/year, Total Gain 7790% Compounded
--Hypothetical--
|
|
Buy/hold |
B/S %profit |
months |
|
Buy/Sell |
Date |
DJIA |
NDX |
DJIA |
NDX |
in trade |
|
Buy |
9/19/1986 |
1763 |
138 |
|
|
10 |
|
Sell |
7/24/1987 |
2485 |
328 |
41 |
137 |
5 |
|
Buy |
12/18/1987 |
1975 |
155 |
|
|
30 |
|
Sell |
6/8/1990 |
2862 |
239 |
45 |
54 |
5 |
|
Buy |
11/18/1990 |
2444 |
178 |
|
|
100 |
|
Sell |
3/12/1999 |
9904 |
2054 |
305 |
1056 |
50 |
|
Buy |
5/16/2003 |
8679 |
1154 |
|
|
53 |
|
Sell |
10/12/2007 |
13522 |
2132 |
56 |
85 |
13 |
|
open |
11/14/2008 |
8497 |
1180 |
|
|
|
|
|
|
|
|
|
|
|
tot%gain |
|
382 |
752 |
1190 |
7710 |
|
|
%/yr |
|
7.8 |
10.7 |
40.5 |
53.0 |
|
Last week, I was looking at some charts on other websites and came across one that stopped me cold.
I had kept, off and on, similar charts since 1966. That was the year I first used 'breadth' to give buy and sell signals for a subscription service I was then writing.
Breadth is a method of counting the number of stocks with prices that advance for the day less the number of stocks with prices that decline for the day, then adding each day's net total to the day before.
The next thing that happened last week, an esteemed friend sent to me one of his studies of a very simple trading system. The results were good. Even better, there were no losses. And better than that, there were only three and a half round trip trades over 14 years.
What intrigued me most was the clean simplicity of the concept and the minimal number of trades to produce the results. I love that! It has only one indicator and one rule. That was everything.
I wondered if there could be something similarly simple, profitable, loss-immune, with few trades, and easy to use lurking in market breadth. The answer appears to be 'yes'.
The results are in the table above. Four trades in 22 years. All trades profitable. No losses. Holds cash or money-market funds 28% of the time. Profits beat a buy-and-hold strategy better than five to one.
All this is astonishing. There are very few funds open to public investors anywhere in the world that produce results like these.
Then I wrote a narrative explanation on how the system works, but a strange thing has happened. I had a memorable dinner with two other esteemed friends Sunday night and told them a dilemma had arisen for me. I was having second thoughts about publishing the results as a free 'tip' and that perhaps I should instead add the system as a fee-based subscription choice to the list on the website.
One friend said instantly, "Package it and sell it." I then pointed out the great difficulty in marketing it. One long position lasts 100 months--that's eight years. Who will sit still that long? That has to be boring even though you are making better money than you would anywhere else. People like action.
Then there are 50 months, nearly six years when you are holding cash and not even in the market. Bad enough, but then the market keeps going up into the peak of the dot.com explosion in March 2000. Subscribers quit by the droves.
The other friend said, publish a monthly handholding newsletter to nurse them along. Hire the best 'spin' artists in the business to write the letters.
The first friend said, let's put $10,000 cash in the system right now. Get a documented record. My reply was, that won't wean people from boredom or from frustration when everybody else is making big money. This system will be like what Shaw said of Brahms--listening to his music was like watching paint dry. Oy!
At any rate, I confess that I am in a quandary.
What do you think?
Publish for a fee? Or
stay private?
Note. One has many good friends if one is lucky. Few are 'esteemed'. When I use that word, it means not only a better-than-good friend, but one who is also professionally qualified regarding, and familiar with, the matters under discussion. The first esteemed friend I mentioned is a former and current manager of funds and author of several well-received books on profitable trading of stocks and funds using technical analysis.
Posted
11/25/2008 10:42 a.m. EST
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