This single trading system can be applied in a variety of different ways. Results vary widely, but all have given far better results with considerably less risk than simply buying and holding various blue-chip value and growth stock indexes.

To diminish the possible future effects of disappointing surprises, I show past drawdowns (drops in market values along the way) both graphically and in table form. This should enable you to choose to use for yourself applications that give a balance between returns and risk with which you believe you will be comfortable.

This is what I have done for myself. I choose to use in most of my accounts the application of investing in the two top ranked stocks when overall market timing is favorable and getting out of these stocks and going to cash when it is not (Application No. 9). I may stray from this from time to time because I think (not so smartly) that I know more than the system does.

The other two applications which I may use in one of my accounts is either
No. 5 which has the lowest drawdown of any or No. 10 which shows a tremendous gain but has an uncomfortably large drawdown.

Remember though, a drawdown is not a realized loss. It is a temporary drop in value which then reverses again to upward rising prices. Realized losses in any case should be less than the maximum drawdowns unless you enter a trade on the peak week of a rising run in prices.

You can avoid this by waiting until the next buying signal from the market.

SUMMARY

The system was tested over two periods, the last 18 years and the most recent 2.5 years, with two different sets of 'stocks'. During the most recent period, the total gain was +89% compared to an average loss of -1.2% for the three most traded indexes. There were two to three cash-to-stocks transactions per year. The portfolio was in riskless cash half the time. The biggest loss was
-4.4%.

It is simple to use. If the market is up, you are continuously invested in the two strongest funds. If the market is down, you are continously in cash (or short the one weakest fund). Actions are taken Monday mornings.

Alternative applications require a few additional minutes for decision-making.

     

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