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."