Here is another trading system that has a good track record--The Dogs of the Dow. This system takes the biggest losers of the Dow on 12/31/XX and says go long for the next year.
The Dow is a composite index that encompasses several industries, from oil and gas to pharmaceuticals, and so on. It's made up of 30 stocks, mostly well known companies like AT&T and Exxon Mobil. Mostly fortune 50 companies.
Every year there are some losers in the bunch, and more often than not, after they have a bad year, they like to bounce back. More often than not, these are the stocks that have a high dividend yield. So, if you went long with all of the Dogs of the Dow, you might net 5% dividends at the end of the year--not bad. Add those together with capital gains, and you might have a winning strategy.
But buying into the Dogs is capital intensive. What I would do is buy a long term call on the Dogs. I may forgo any dividends that way, but it's less capital up front. So, rather than tying up everything I own, I can still benefit from the system. And, even if the system falls apart (which all systems will do) my exposure is significantly less than if I had gone long on the stock. Remember a long call has a limited downside risk; you can't loose any more than you initially put in (unlike stock).
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