Last week I touched upon the subject of the Holy Grail of stock trading with the idea of developing a trading system that consistently produces good results over the long term. As noted in last week's essay, one of the first steps in developing such a system is that of finding a Strategy, i.e., a search, which consistently returns winning stocks. VectorVest has several tools to help us find the best Strategies, and I have been writing lately about our newest tools: the VectorVest RealTime Derby, the Tote Board and the Efficiency Factor.

The VectorVest RealTime Derby tracks and displays the daily performance of 185 10-stock portfolios, tick-by-tick, from the opening bell to the market's close. The data from each day's performance is stored in a Derby Tote Board which allows us to study the cumulative performance of the portfolios created from each Strategy over any selected time period. The Efficiency Factor reflects the Percent Winning Days, the Percent Winning Trades and Maximum Drawdown Percentage for each portfolio. As we have seen, the Derby provides data which allows us to identify the best performing Strategies with a minimum of effort. Basically, it measures performance day-by-day. The Tote Board accumulates the daily performance data and allows us to track the performance of all 185 Strategies for any time period since August 18, 2009.

Two weeks ago, we showed that the best performing Bullish Strategies, five days from a bottom, generally continued to perform well throughout the entire duration of a rally. (Visit the VectorVest University to see the SOTW of 07/30/10.) The efficacy of the technique demonstrated on 07/30/10 was verified in last week's SOTW, which covered several campaigns. Now I intend to examine the efficacy of using the Strategies which have been identified by the Derby to have the best performance over a long time period, i.e., 249 trading days.

The five best performing 249-Day Strategies, as of yesterday's close are as follows.

Name	Total % G/L	Efficiency Factor
Bottom Fishing in Rising Industries	104.99	24.81
El Cheapo Cheapos	97.71	13.25
Thornton's Thunder	89.39	15.44
VST Mighty Mites	85.50	24.48
Explosive EPS Stocks II	80.26	12.89

Bottom Fishing in Rising Industries had 59% Winning Days and 50% Winning Trades with a Max Drawdown of 16.41%. Coupled with a 104.99% gain, it's pretty incredible. This Strategy finds low-priced stocks ranked by VST/RT in Industry Groups with the highest one-day Price Delta. So it does what the name implies, but can we use it to make big profits?

We tried to find out. I back-tested it from August 17, 2009 to yesterday's close in Portfolio Manager using several different exit criterion and the best I could do was a gain of slightly above 40%. Glenn Tompkins worked it over with the Simulator and maxed-out with an 80% gain. But he had to make over a thousand trades to do it. That's insane. What we need is a practical, feasible trading system for capturing the profit potential of this great Strategy. The first one who sends such a system into us will get a $1,000.00 Award.

P.S. If an acceptable trading system is sent in, we will use it to test the VST Mighty Mites Strategy. If it works there too, we'll give you a $500.00 bonus.

THE WHITE FLAG.
We were thinking about presenting a Bearish "Strategy of the Week" presentation this week, but the best performing Strategy today was Bullish. Yes, the next best performer was Bearish and the next best was also Bearish. And so it goes. This market is a mixed up mess. So we're suggesting that you raise Cash. Visit the VectorVest University to see Mr. Glenn Tompkins thrilling "Strategy of the Week" presentation, "The White Flag."

The Holy Grail of stock trading is a fully developed system of trading stocks which consistently produces high returns with tolerable draw-downs. While I have never claimed to be looking for the Holy Grail, I have written about virtually every aspect of trading system development, and, in fact, we teach the subject in our Technical Analysis Course.

As I recall, the first steps in developing a successful trading system lie in knowing when to go long and when to go short and finding the best Strategy to use for finding the right stocks. Money management rules are then applied to reduce risk and optimize performance.

Traditionally, we have used our Market Timing System to know when to go long or short and the UniSearch Tool along with QuickTest to find the most promising Strategies to use. The Back-Testing features of Portfolio Manager are then used to reduce risk and optimize performance. The Simulator performs all of these tasks automatically and is the ultimate tool for trading system development.

The VectorVest RealTime Derby, however, adds a new dimension to the process. It tracks and displays the daily performance of 185 10-stock portfolios, tick-by-tick, from the opening bell to the market's close. The data from each day's performance is stored in a Derby Tote Board which allows us to study the cumulative performance of each portfolio over any selected time period.

Observation of the top five performing portfolios for the five-day periods provides a market timing system unto itself. For example, the market is bullish when all five portfolios are derived from Bullish Strategies. It is bearish when all five portfolios are derived from Bearish Strategies. It is in transition when they are mixed. These observations do not conflict with the information given by the Color Guard, but complement it.

The Tote Board performance data also complements the work done by the QuickTest tool. While the Tote Board sums the daily performance of the 10-stock portfolios created each day, QuickTest displays the performance of a single l0-stock portfolio from the day it was created to the end of the time span. Therefore, the results are different. Which data set is a better indicator of future performance?

Hopefully, you watched last week's "Strategy of the Week" presentation. It showed that going long on July 12th with a Strategy selected from the Tote Board's list of 5-day top performing portfolios produced wonderful results. What would the sequence of five QuickTests from the close of July 2nd to the close of July 12th have told me? (This sequence of QuickTests was run on the Simulator and is called "Quick Sims.") Here are the results:

Tote Board	Quick Sims
Jail Break - No Contra ETFs - 16.56%	S&P600 Small Cap/RT - 14.71%
S&P600 Small Cap/RT - 15.56%	Silber's Singles/BMB - 10.13%
Blyar's Bottom Feeders/BMB - 15.22%	Pirates Long - 10.08%
Russell 2000/RT - 14.83%	Odd Fellows Long - 9.41%
Bottoms Up - 13.49%	S&P100/RT - 9.31%
Silber's Singles/BMB - 11.82%	Bottoms Up - 9.26%
Jubilee - 10.95%	Blyar's Bottom Feeders/BMB - 8.65%
VST Mighty Mites - 10.89%	Jail Break - No Contra ETFs - 8.55%
Odd Fellows Long - 10.46%	Jubilee - 8.08%
Pirates Long - 9.63%	S&P500/RT - 7.93%

My first observation is that eight of the top 10 Tote Board Strategies also made the top 10 of the Quick Sims list. However, the S&P600 Small Cap/RT Strategy was the only one ranked in the top five performers of both lists. Since July 12th, it is the second biggest gainer in the Tote Board with 17.37% as of yesterday. Quick Test also showed a nice gain of 12.11%.

Jail Break - No Contra ETFs, the biggest 5-day winner ala the Tote Board, came in fourth place with a Tote Board gain of 15.69% since July 12th and a gain of 6.85% ala QuickTest. Finally, Silber's Singles/BMB, the second highest stock ala QuickTest, showed a gain of 6.18% since July 12th ala the Tote Board and -0.48% ala QuickTest.

So which is the better indicator of future performance? That's hard to say with so little data, but I'm leaning toward the Tote Board. However, I haven't taken efficiency into account in this comparison and it could be The Difference Maker.

EFFICIENT PERFORMERS - PART II.
Jerry D'Ambrosio dazzled us with his presentation last week, so we decided to explore it a little further. Let's see what Mr. Todd Shaffer can do with the technique Jerry described. Visit the VectorVest University to see this week's "Strategy of the Week" presentation: "Efficient Performers - Part II."

On February 13, 2009, I wrote an essay called, "Another Day at the Races." I had developed a technique of buying or shorting fast moving stocks in fast moving strategies, so I detailed how I tracked the performance of nine strategies, five bullish and four bearish, from the market's Open at 9:30 AM to its Close at 4:00 PM. In my mind, it was like going to a racetrack and watching the horses run. It was great fun and often quite profitable, so we created the VectorVest RealTime Derby.

The VectorVest RealTime Derby tracks and displays the performance of over 175 VectorVest Strategies from the time the market opens to the time it closes. With this tool, I could easily see which strategies or stocks I wanted to trade on any given day. Not only that, but I could see internal market action like never before. Take today, for example: I could easily see that the opening rally of the major indexes wasn't going to last because the Derby showed Bearish strategies out-performing Bullish strategies. Sure enough, the major indexes turned lower shortly after 10:00 AM.

With the Derby providing a tremendous amount of valuable data each day, we now needed a way of storing and analyzing it. So our developers created the Tote Board. We are very proud to announce that the Tote Board is being released today to all VectorVest RealTime Derby Users at no extra charge.

Like the Tote Board at your favorite track, the VectorVest RealTime Tote Board stores the daily Derby results and provides useful statistical information on performance. Over a time period of your choice, it shows the total gain or loss of every strategy, the percentages of the winning days and trades, and the maximum draw down. This information makes it extremely easy, of course, to see which strategies have been the best or worst performers over the time period you selected.

As I look at the Tote Board right now, 2:32 PM, the best performing strategy over the last five days is Odd Fellows Short with a gain of 8.57%. It's made money in four of the last five days, which is tops for any strategy, and it's had 68% winning trades, which is second best. It also was listed as a Top-Five Performer in Tuesday's Color Guard, and it's already up 4.1% today. Should I go short with this strategy? I just might do that. Thanks guys for The Derby and The Tote Board.

PROTECTING PROFITS.
The Price of the VectorVest Composite has gone up 61.4% from the March 9th low to yesterday's close. If you have been fortunate enough to participate in this rally, you should realize it's not going to last forever. Even if you may not wish to sell any stocks right now, you should learn how to protect profits. Mr. Steve Chappell, our Director of Educational Services, will share his knowledge and experience in how to perform this delicate task. So join Mr. Chappell at the VectorVest University to see this week's "Strategy of the Week" presentation: "Protecting Profits."