Strategies

In order to implement the IndexPilot market timing system it's important to understand a few basic concepts, then to determine whether you're a conservative or aggressive investor. Our system involves 3 types of signals:  Long; Short; and on rare occasions, Cash.  We'll explain each:

• Long:  In it's most simplistic terms, being long means you'll make money when the market goes up and lose money when it goes down.  This is the strategy which you've more than likely followed most of your investment life.                                                                             


• Long Only Strategy: In this case, you'll be invested in the market via an index fund or your favorite diversified mutual fund.   If you're not trading one of the funds we've listed below, it's important to note whether the fund you're trading restricts the number of in and out movements in any particular time frame.  This is because IndexPilot signals have lasted anywhere from a day to 18 months.  In following the long only strategy, you'll be invested in your mutual fund when IndexPilot has issued a Long signal.  By contrast, you'll be in the money market fund when IndexPilot issues a Short signal.


• Short:  In it's most simplistic terms, being short means you'll make money when the market goes down and lose money when it goes up.  It more than likely is a strategy which you haven't been able to take advantage of without the use of a system like IndexPilot.  There are several mutual funds listed below which enable you to "short" the market.  Of course, you can also short the QQQQ's or SPY's which trade like stocks and are described below.                                                                            


• Long and Short Strategy: The long and short strategy is an extension of the long only strategy; rather than going into a money market fund when IndexPilot issues a Short signal, you'll either go into one of the specialized short funds we've listed below or short the QQQQ's or SPY's.  These funds are specially constructed to go up in value when the market goes down, thereby allowing you to duplicate the returns our Long and Short strategy accomplishes.  Again, if you're not trading one of the funds we've listed below, it's important to note whether the fund you're trading restricts in and out movements in any time frame.  All of the funds we list below welcome trading in and out as often as you like with no fees involved.


• Cash:  As the name implies, you're not invested in the market.  Normally you'll have your money in the money market fund during times of a cash positon.  The only time you'll be in a cash position is during times of short signals if you're following our Long Only Strategy, or on the rare occassion we issue a cash signal. 

Conservative vs Aggressive Investor: 

• We consider the Long Only Strategy to be for the conservative investor since it's only in the market 75% of the time.  The remainder of the time you're in the safety of a Money Market Fund.  The returns are slightly less as you can see by this graph , however, since you spend 25% of the time in cash, you're exposed to much less risk.  This is also the strategy you'll most likely follow if in a 401K or IRA investment.  Most 401K's have a limited selection of mutual funds you can trade, however most plans offer either an index fund or a good diversified mutual fund which are ideal for following IndexPilot's long signals.  Just be sure to note if they restrict in-and-out movements in any way.


• We consider the Long and Short Strategy to be for the aggressive investor since you'll be invested 100% of the time.   In addition to following the long signals, when a short signal is issued you'll go "short" the market by trading one of the Rydex or ProFunds listed below.  As you can see by the same graph, the returns are higher, however you're also exposed to more risk since you're in the market 100% of the time.

Description of Funds suitable for implementing the above strategies:

• Rydex: There are 2 funds available at Rydex suitable for implementing the Long Only  strategies:
  
• Nova Fund (symbol RYNVX):Buy this fund during long signals.  The Nova Fund correlates to the movement of the S&P 500 index.  It has a beta of 1.5 which means the fund will move 1.5 times the S&P index. 
  
• OTC Fund (symbol RYOCX): Buy this fund during long signals.  The OTC Fund correlates to the movment of the NDX 100 index.  
  
• Rydex: There are 2 funds available at Rydex suitable for implementing the short side of the Long and Short strategy:
  
• Inverse S&P 500 Fund (symbol RYURX): Buy this fund during short signals.  The Inverse S&P 500 Fund has an inverse relationship to the S&P 500 index meaning it will go up in value when the S&P index goes down. 
  
• Inverse OTC Fund (symbol RYAIX): Buy this fund during short signals.  The Inverse OTC Fund has an inverse relationship to the NDX 100 index meaning it will go up in value when the NDX index goes down. 
  
• ProFunds: There are 2 funds available at ProFunds suitable for implementing the Long Only strategy:
  
• Bull ProFund (symbol BLPIX): Buy this fund during long signals.  The Bull Fund correlates to the movement of the S&P 500 index. 
  
• OTC ProFund (symbol OTPIX): Buy this fund during long signals.  The OTC Fund correlates to the movement of the NDX 100 index. 
  
• ProFunds: There are 2 funds available at ProFunds  for implementing the short side of the Long and Short strategy:
  
• Bear ProFund (symbol BRPIX): Buy this fund during short signals.   The Bear Fund has an inverse relationship to the S&P 500 index meaning it will go up in value when the S&P index goes down. 
  
• ShortOTC ProFund (symbol SOPIX): Buy this fund during short signals.  The Short OTC Fund has an inverse realtionship to the NDX 100 index meaning it will go up in value when the NDX index goes down. 

Stocks suitable for implementing the 2 strategies:

• Cubes: (symbol QQQQ):  You will buy the QQQQ's during long signals and short the QQQQ's during short signals.   The QQQQ's are an Exchange Traded Fund or ETF.  They trade like a stock on the American Stock Exchange.   The QQQQ's correlate to both the up and down movement of the NDX 100 index.  The advantage to trading an ETF is the ability to enter or exit at anytime during the trading day.  Note: If trading in a 401k or IRA you won't be able to short this issue, therefore you follow the Long Only strategy if trading QQQQ's in your retirement account. 


• Spyders: (symbol SPY): You will buy the SPY's during long signals and short the SPY's during short signals.   The SPY's are an Exchange Traded Fund or ETF.  They trade like a stock on the American Stock Exchange .  The SPY's correlate to both the up and down movement of the S&P 500 index.  The advantage to trading an ETF is the ability to enter or exit at anytime during the trading day.   Note: If trading in a 401k or IRA you won't be able to short this issue, therefore you follow the Long Only strategy if trading SPY's in your retirement account.