Really easy. Means you can give your broker discretion to follow the system while you take a year-long trip around the world and check results when you get back on December 31st. Your expected average return will be 40% vs 12% (or some other multiple of 3 to 1) for the S&P500. You have one chance out of 200 of earning less than a positive +3% at the same time the S&P is losing -9%.

      Results. There are three kinds of results. Real, real-time, and hypothetical. Hypothetical will interest us most, because it applies to every record of performance you will ever see in print or electronic form anywhere. The one exception is your own record of securities that you actually own or have owned. That's the 'real' record of results, and it pertains only to you during the time you actually had ownership.
      'Real-time' resuts are a species of hypothetical. The only thing real about them is that they actually occurred in the sense that they were published on the date attributed to them.
      Other results that occurred before date of publication, as in the case of historical backtesting, are purely hypothetical. The limitations and shortcomings of reliance on hypothetical results are well known and treated elsewhere publicly and on this site (here, here, and elsewhere).

      Results table. Historic results comparison with benchmark indexes here.

      Risk. There is only one real risk: a realized loss. Risk is buying a security and then actually selling it voluntarity or involuntarily for less money than you paid for it.
      But the term these days more widely means 'volatility'. If you have looked at some of the earlier pages and charts, you have seen a lot of volatility, the wild jumps up and down in price behavior. None of that means 'realized loss'. Therefore it should only enter into our considerations as a reminder that these swings will occur and do not directly affect our final outcome.
      Other than taking actual realized losses all (?) other risk is air--measuring fictitious sets of different 'what-if' scenarios, none of which may ever come to completion. 'Volatility' is the leading meaning of the word 'risk'. Volatility is a measure of past ranges of price fluctuations of a security, air, but frightening air. Other risks include inflation: the probability that an investment will buy less in the future than it can today due to cost-of-living increases. Well, maybe. But most of that meaning is air, too--subject matter for another day. Bankruptcy: the usually drastic decline in the value of a security, possibly to zero. Bad corporate management: the inability to direct businesses to make satisfactory profits. Increased government regulations, changes in Generally Accepted Accounting Principles, onset of new, damaging competition, obsolescence of an industry, and so on.
      All in all, a risk isn't real till its realized even though the list above of 'risk' factors may affect your decision-making. The range of past volatility may suggest the mental pain or emotional distress you might expect to incur in the future.

      Rules. There are only two basic rules. Invest in the two top-ranked funds when the trend is up. Sell short the two bottom-ranked funds when the trend is down. Cash is the alternative option to short-selling, but results will be lower. Use equal dollar amounts in each when two funds are used.
      Special case. When the long-term trend is under 5, the market is especially bearish, and the long-term trend takes precedent over the short-term trend. The two bottom-ranked funds may be sold short. See the middle table in Rankings and chart. If Ursa (the bear mutual fund) enters the top two ranks while the long-term trend is under 5, the rule is to continue to hold short (or sell short) the two bottom-ranked funds or hold cash.
      Note. Rules may be viewed as guidelines. Using your own discretion within the general framework of the system can produce superior results. For accounting and reporting purposes on the site, the rules are inflexible and rigidly adhered to with the sole, possible exception of an unprecedented government intervention in a specific sector of of the securities markets.
     To reduce the market risks of this and continuing interventions, rules are now modified to limiting short selling solely to a broad-market lindex, the Standard & Poor's 500 Composite Stock Index (SPY) in lieu of the two bottom-ranked funds. This rules provision will continue until there is clear reversal and withdrawal of government intervention from the capital and exchange markets to the status that prevailed before the financial panic that commenced in 2007.
     To repeat, the application of rules is optional. They may be varied personally to accept more risk (i.e. volality) than they are currently designed to restrain.
     SPECIAL NOTE. Germany late this month banned certain short sales and theatens to ban short sales in all German stocks. This is part of the seismic shock waves continuing to roll though the worldwide economy, the markets, and national policy-making legislatures and agencies. Such bans are mistakes. Regulators' sole purpose should be to abate fraud and to enforce orderly processes, not to restructure free markets. When you impose structure, they are no longer free. Accordingly, the 'rules' here are amended to suggest a simple short sale of the S&P 500 or its equivalents whenever short sales of any other stock or funds is indicated. The two-bottom ranked ETFs, however, will continue to be reported in Real-time returns. (Adopted and amended, May 29 and June 5, 2010)

      Short selling. Although not necessary nor advocated (see rules), some (myself included) may want to use the system rankings and timing for shorting. The rule is: when the trend turns down, sell short the bottom two ranked ETFs if they are not Ursa or Treasury bills. If either is Ursa or Treasury bills, sell short the next lowest ranked ETF.

      Short selling in Retirement Plans. Not allowed by regulations. You may, nevertheless, legally accomplish effective short positions by the use of so called 'inverse' funds or by buying put options. These move exactly opposite to the funds you may wish to sell short.

      Stop-loss orders. The system uses none. That's because they are already built into the system and are multiple. When a fund drops in ranking out of the top two, you sell it. That is a form of stop-loss. If you use the system short-term timing indicator, and it drops, you sell any funds owned. That's a stop loss. If a bear market emerges, one or more of three of the funds in the portfolio, Treasury Bills, Gold, or Rydex Ursa (Inverse S&P500 fund), will automatically climb into the top ranks and may become the fund(s) of choice to buy and hold subject to the Rules of buying and selling. If a serious bear market emerges, the long-term trend indicator kicks in and overrides all else. Please See Rules.
      I have always had a problem with 'stop-loss' orders. The fixed percent or dollar amount or initial or trailing price levels that you set are completely arbitrary even if you use a volality factor to adjust the decision. The market knows nothing of your personal cleverness, predilections, and caution.
      It seems better to me to let the market itself by its own internal actions automatically set loss-control operations with respect to itself and its components rather than to impose random, personal, psychological criteria from the outside.
      I did not always believe this, but after years of experiment surrendered to market behavior itself with me as a participant rather than as the dubious director of arbitrary orders.

      Timing. Click here.

      Tips for Getting Started. Wait for a drawdown. Then watch the two weekly timing indicators, short-term trend and long-term trend. When the short term trend turns up, commit funds. This trend information appears in the weekly chart or in the portfolio Summary in the middle of each weekly Rankings & Prices table. Special case: the long-term trend under 10 is very bearish and trumps the short-term trend: stay short. Commit funds when the long-term trend turns up provided it is above 10.
      A further safeguard to prevent buying at the peak of a price move just before a drawdown is to divide the size of your intended position into two or three or four parts and space each entry several weeks apart, separately, one portion at a time.

      Trends. 'Trends' mentioned on the site refer to the Portfolio Trend, the trend of all the funds in the portfolio taken together--not the general overall market, nor the widely followed indexes like the Dow Jones or the S&P500. Treasury Bills, Ursa, and Gold are excluded because they behave, or tend to behave, inversely to the general market.

      Upgrade. All systems degrade, or they (rarely) self enhance. Periodic adaptive testing discloses when the system needs upgrading if required.