Background: Our strategy of employing multiple systems per market requires that our systems be carefully integrated. The role of the new Phoenix Bond System is clearly defined: It is intended to detect and trade bottom formations and it is the only one of our systems that performs this highly specialized function. Like the legendary Phoenix rising from the ashes, this system is specifically designed to capture a new uptrend rising from a "V" bottom.

Strengths of the system: This system differs from many trend-following systems in that it does not wait for a trend to be confirmed before entering. It typically enters a long trade after a significant decline well before traditional trend-following indicators would signal an uptrend. We were careful to investigate the possibility that this system might duplicate trading initiated by our other bond systems. We wanted to make sure that we were adding a system that would complement and not replace any of our existing systems. For example our previously offered Big Dipper system is a long only trend following designed to enter an existing uptrend after a decline. One might assume that the two systems would tend to duplicate one another. This is not the case. The purpose and mechanics of the two systems are entirely different and the system rules are close to being mutually exclusive as far as entries are concerned. The setup conditions for the Phoenix system allow it to enter only when the Big Dipper system would be very unlikely to enter.  The most important difference in logic relates to the fact that the Big Dipper system is designed to trade only within a previously established uptrend. The Phoenix system however, is designed to trade at the end of a downtrend and to establish a long position well before any uptrend is defined by conventional trend following methods. In almost all cases the Phoenix system will begin trading an uptrend weeks before the Big Dipper is allowed to begin looking for dips within that trend.

Weaknesses of the system: The Phoenix System is a long only system with a long term exit that holds winning trades for an average of about nine weeks. The system trades only 31 times during our ten year test period. Although the Phoenix system is a more than adequate stand alone system it was designed to be integrated into a multiple system strategy for trading bonds. Because the system was specifically designed to catch V-shaped bottom patterns it may not catch bottoms that emerge from a basing pattern.

Summary: We feel that the Phoenix Bond System is an excellent system in its own right and a very valuable addition to our multiple systems approach to bond trading. It fills a void by identifying V-bottoms and initiating long positions early in the trend well before the other long only bond systems are allowed to begin trading. The Phoenix system combines well with the other systems and increases returns substantially with very little increase in risk. For example when combined with the Big Dipper system the combined systems produce twice the profits with only a slight increase in drawdown. We were pleased to find that the combined drawdown when trading both the Big Dipper and Phoenix systems is less than $6,000 while combined profits were approaching $200,000.