Trade Like an O'Neil Disciple: How We Made 18,000% in the Stock Market

7.4. TIMING MODEL FAQ

Over time, I have found the most instructive way to teach is by the Socratic method, namely, by vigorous question and answer format. Here are the most common questions I have received over the years with respect to my Dr K Market Direction Model (Dr K MDM). Should you have additional questions, please email me directly at [e-mail] or go to www.virtueofselfishinvesting.com as the existing Q&A file will be updated regularly.

7.4.1. Should I expect returns similar to those achieved by the model?

Keep in mind the model's returns are theoretical prior to June 1, 2009 and that high returns come with drawdowns that you may find are outside your comfort zone. Thus, choose 1-times, 2-times, and 3-times ETFs, depending on your risk tolerance. The Market Direction Model(tm) is up +53.8 percent from June 1, 2009—May 31, 2010 (one year's returns) in a test fund using actual money, with exposure to the market less than half the time. In a separate account that is not using actual money, I wanted to see how my system held up against a volatile instrument such as the 3x technology ETF TYH, going 100 percent long on buy, 100 percent short on sell, and 100 percent cash on a neutral signal. Such instruments did not exist until the last year, so this gives big opportunity for profit that did not exist before. From June 1, 2009—May 14, 2010, it is up +183.9 percent, and as of May 31, 2010, it is up +215.1 percent. Of course, due to the highly aggressive nature ...