A MONEY MAKING TRADING SYSTEM.

When we began teaching our Technical Analysis Course in July 2003, trading system development was an important part of the subject matter. It still is, and now we will be taking it to a new level. We are planning to demonstrate how to develop a viable trading system on-the-spot, in class. This will be no small task. Developing a viable trading system takes a keen mind and a lot of work. The process flows along the following phases:

The Research Phase: Ideas for finding stocks are tested to see if they have a snowball's chance of working in up or down markets. Quick Test can be used to do this work, but QuickVariator, which enables one to run a multitude of Quick Tests at the click of a mouse button, makes it possible to do in class.

The Development Phase: The best searches from research are developed into trading strategies. This is where one runs scouting tests on the most promising market timing scenarios, stock purchase searches, selling criteria and money management techniques. This work requires the use of a sophisticated back-testing tool like the Portfolio Manager. AutoTester cuts down on the work when using Portfolio Manager, but we will use the Simulator in class.

The Testing Phase: The most promising trading strategies are optimized into practical, viable trading systems. This phase involves an enormous amount of testing. While it may be possible to do it manually, the Variator is the tool we will use in class.

The Evaluation Phase: The best trading systems are tested with "out-of-sample" data. If the trading system performance is acceptable, one proceeds to implementation and monitoring. The two final phases, trading and tracking performance, involve trading in the real world, so they cannot be done in class. One may practice doing them with our Portfolio Tracker; then proceed to using a small amount of real money in a brokerage account.

So how can we have some fun while doing all this stuff in class? We'll have a competition. We will ask each attendee to submit a trading system to us when they arrive at the course. (Instructions for doing this will be provided ahead of time.) We will test these submissions on-site and we'll also develop a VectorVest trading system in class. The person with the best performing trading system will win a $500.00 VectorVest Saving Certificate. Second and third place awards will also be given. If the first place trading system outperforms the VectorVest one we developed in class, the person who submitted it will receive a check for an additional $500.00. We hope these incentives inspire everyone to learn a lot at this course and go home with A Money Making Trading System.

RIMM STRADDLE/STRANGLE UPDATE.
As of last Friday, I booked a gain of $662.50 and still owned 10 RIMM March 70 Puts which closed at 70 cents per share today. I've just learned that NTP settled its suit with RIMM for $612 million which means they get about 98 cents after lawyer's fees. RIMM has about two billion dollars in cash, so they can afford to pay NTP. RIMM's stock price is up in after hours trading, so I expect my Puts to go to zero. Nevertheless, I will keep them until they expire and keep the $622.50 I booked.