by Dr. Bart DiLiddo
Friday, 08/21/2009
Two weeks ago I wrote an essay called, "One Day at a Time." The point was that you don't have to predict the stock market to make good money in it. In fact, having a preconceived notion of what stock prices are going to do could be very harmful to your wealth.
Then I began to wonder what would happen if I bought the top stock, ranked by VST, every time a Green light appeared in the Price column of the Color Guard. VectorVest preaches that we should buy rising stocks in rising markets. So I should make money. I ran some tests.
The first test I ran started on March 17, 2009, when a Green light first appeared in the Price column of the Color Guard from the March 9th bottom. I bought $1,000 worth of Buckle Inc., BKE, the top VST stock as shown in Stock Viewer, at the Open on the 18th. I decided that I would sell it on an 'S' Rec or if it went up 100%. Another Green light appeared in the Price column of the Color Guard on the 18th, so I bought $1,000 worth of Aeropostale, ARO, at the Open, on the 19th. I repeated this process of looking for a Green light in the Price column of the Color Guard and buying the top VST stock, until yesterday.
During this time, I made 44 purchases of $1,000 each and closed 19 positions with four winners and 15 losers. The average winning trade made $706 and the average losing trade lost $195. The current portfolio holds 25 positions with 17 winners and 8 losers. The portfolio is worth $31,165 from an investment of $28,013, for a net gain of $3,071, or 11.25%.
While this performance is not overwhelming, one must remember that the money was invested over a period of time, not all at once. This means that there was far less risk during the early stages of building the portfolio. In another test in which I bought 10 stocks on the March 17, 2009 Green light, I used a 50% gain or 20% loss to exit positions and replenished positions only upon receiving a Green light produced a gain of 49.74%. Other tests going back to March 21, 2003 also showed that buying top VST stocks when a Green light appears in the Price column of the Color Guard is a viable strategy.
The thing I like the most about this technique is that it's so easy to do. Simply look at the Color Guard. See a Green light in the Price column and buy a top VST stock you don't already own. Try it. You may wish to Become A Green Light Buyer.