You know you're in a tough business when you have a portfolio that was up 85% for the year and you still receive complaints about its performance. Specifically, I've received a number of emails asking why the "Riding-the-Wave," (RTW) 2009 Model Portfolio performed so poorly over the last six months of the year. It peaked at 115.47% on 06/22/09 and ended the year with an 85.02% gain.

I agree, the portfolio's performance wasn't very good in the second half of the year. But one email went so far as to ask if it's even possible to make money in a Bull market with VectorVest. I had to hold myself back on answering that one, but anyone who could parse the 2009 portfolio to kingdom come, as the writer did, could have easily seen that every Riding-the-Wave portfolio since 2005 was up nicely, and the average annual gain over the five year period was 76.3%. So it is possible and even probable that you could and would make money with VectorVest in any kind of market.

In regard to the first issue, i.e., the poor performance of the 2009 RTW portfolio in the last six months, there's a long explanation and a short explanation. The short answer is that we were victimized by our own success. What I mean is that so many of our subscribers were buying the stocks that I was expected to buy, thereby driving up prices before I bought them, that I was buying at artificially high prices. Then, the next day, many subscribers saw what I bought and charged into those stocks, driving them even higher. So in two days, one could easily have had a 10 to 20% gain, causing them to take profits and killing the stocks I had purchased. The net result is that I would make very little or no money or lose money on the round trip over and over again. Check it out for yourself, every trade is documented in the Trade History Report of the 2009 RTW portfolio.

Over the years, we have taken a number of steps to avoid moving the market. When we first created the Model Portfolio, we would say "we're going to go long (or short) tomorrow with such and such a Strategy," and we would do this regardless of what the market did. This worked pretty well when we were still small, but as we grew in size, we began to notice that the stocks in the Strategy we had selected had popped at the Open. Ultimately, it got to the point that they would be up sharply, as much as 60%, at the Open. But we bought them anyway, since we had said we were going to go long. This often led to substantial losses because the stocks, which had gapped higher at the Open, usually pulled back during the day as traders took their profits.

To solve this problem, we began to say we would go long (or short) with any one of five designated Strategies. This tactic worked quite well, but it led to an endless flood of questions, such as, how did we select the one Strategy that we went long (or short) with. Once we explained that we picked the Strategy that was performing the best, we saw some signs that we were still moving the market, but it wasn't too bad.

While this was going on, we learned that it was silly to commit to going long (or short) the next day when the market didn't always do what we thought it was going to do. So we began to say "we would go long (or short) if the market moved sharply higher (or lower) the next day." This technique ultimately led to the rule of defining a sharp move as one in which the Major Indexes, i.e., the DJI, SPX and IXIC, were all up (or down) by at least 1%.

There's more to this story, such as watching the direction of the futures, not trading before 10:00 AM and so on. The net result of all this was that I became bound by a set of rules that severely restricted what and when I could trade and the portfolio's performance suffered. I didn't like it and seriously thought about scrapping the whole idea of having a model portfolio.

But I decided against that. Managing the Model Portfolio had actually helped make me a better trader and I know it has helped thousands of our subscribers learn some good techniques and also become better traders. So I decided to go with the idea of taking a more flexible, natural course, which I'll describe further next week, to managing The Model Portfolios.

DEALER'S CHOICE.
While preparing the training material for our new course, "Trade Like a Pro," we noticed that there are some very good professional traders who like to buy on strength and sell on weakness, and others who do the opposite, i.e., buy on weakness and sell on strength. While VectorVest belongs in the former camp, we thought it would be worth conducting some head-to-head tests to see which technique gave better results. Mr. Glenn Tompkins, Manager of Internal Training, ran the tests and came up with some very interesting results. Please join Mr. Tompkins at the VectorVest University to see this week's revealing "Strategy of the Week" presentation: "Dealer's Choice."

TRADE LIKE A PRO.
If you are in or around the Vancouver area in late January, you've got to attend our new course, "Trade Like a Pro." We're very excited about it and believe it will be well worth your while to attend. I can assure you that you will learn things that would cost you thousands of dollars to learn elsewhere. Although we'll be using VectorVest RealTime as the platform, the strategies and trading techniques we describe can also be used by end-of-day traders. Don't delay, read all about it above and sign up now.

TRADERS EXPO OPTIONS COURSE.
VectorVest has been invited to offer its Options Course at the upcoming Traders Expo in New York City on Sunday, February 14, 2010. This will be the same course described in my essay of July 2, 2009, so you'll be able to get the same great offer to attend that we made then, but even better. In addition to the Early Bird registration fee of only $445.00 per person, you will receive a $50.00 Saving Certificate from VectorVest, which is good on any VectorVest product or service. You must register before January 28, 2010 to get the Early Bird rate. Details are shown above and I hope to see you there.