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Charting the markets or charting the portfolio?


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Sometimes a trader just hits a lull in the market or his or her trading. A life event may occur for any trader to simply throw them off their game or disrupt their trading plan. Years ago, there were floor traders that would wear the same socks or tie each day that they may deem lucky tokens. The largest CTAs (Commodity Trading Advisors) have had their biggest drawdowns upon the breakup of a personal relationship. Health and wealth go hand in hand for ones well-being. The balance is necessary for optimum performance in all that we do. Upon the loss of a loved one, it is easy to fall into a depression and find it simply hard to get out of bed or even to breathe. A trader may have constructed a trading model that just seems out of sync with the current market. There may be a situation where you took another job to survive in this economy. There are many factors that could manage to affect our mindset for trading. Your charts are your tools, always giving you the signals, whether you interpret them correctly or not. Charting can guide an investor on whether to participate in a market or an investment product. Investors may analyze and chart their entire portfolio performance as traders may chart the markets. There are other vehicles to participate and make decisions in the marketplace without trading the markets themselves.


Systems trading actually began back in 1949 by a Richard Donchian of Futures, Inc. He launched a commodity fund with exact rules to execute the buy/sell orders. Since, the systems trading has grown thru mathematical models and the success of CTAs, banking institutions and brokerages. With the advent of futures trading came the system developers attempting to garnish an edge in trading thru programmable algorithms and testing. These computer programs usually have filters to signal buy and sell orders automatically executed with a trading platform. The mathematical formulas may typically be technically based. There are then traders that trade the commodities contracts and then there are traders that simply trade a system developed with specific parameters where they may participate in or stop trading as they are furnished with the controls. Investors can trade in and out of their desired systems.


While the systems may appeal for their impressive trading results, the models are hypothetical. They are based on simulations with back data. The buy and sell orders are virtually simulated trading.
The realty of systems trading is that past performance does not guarantee future results. Real time trading involves margin calls and possible trading results that may impede a trading program from continuing. When running back data, those factors do not exist.


  • The simulated fills may show a performance better or worse than real trading results. The profit/loss may be skewed by many factors.

  • When entering a system, you can enter during a severe drawdown or when the system may show that it is performing well. The results may change upon entering.

  • The developers are typically unrelated to the brokerages that may offer the service. They may not be able to screen all of the vendors or developers to be sure that the system has quantifiable data and testing.

  • There may be actual mechanical failures in that an order may be held exchange server or system server. If a server goes down, the order may be canceled.

  • The systems must still be monitored by the client. There are typically layers of monitoring from the developer thru to the platform to the brokerage at least. The client must essentially follow the system to be sure that the results are within the parameters of risk/reward.

  • Some systems may be over optimized where they are created to show positive hypotheticals but cannot be achieved in live trading.


Wealth management entities may incorporate the systems to diversify and create an equity curve. With that in mind, they may monitor a series of systems to spread the risk. Varied commodities are correlated or may trade inversely with higher probability such as the US Dollar and Gold. The systems may be practically charted for performance such as the markets themselves. Each individual must first decide if the investment is right for them. Excess venture capital should only be used and one should view the high risk investment in terms of worst case scenario.


  • Todays system trading does allow the individual investor to select their portfolio and make changes as they please. The investor may diversify while engaging in a variety of investment vehicles and simply trade in and out of the selection without the stress of trading the markets themselves. Portfolio management is now the clients strength in monitoring and selecting the portfolio that works with his/her risk parameters and financial goals. The emotional trading mistakes are taken out of the equation.

  • Potential risk of loss should be viewed first and then cost of the system. Leases can be easier to work with. Many investors in the past may have purchased a system that may be out of sync with the market thus becoming worthless. Plus, you must consider cost for your breakeven. Breakeven, is what you have paid in before you can make anything back. It includes systems lease or purchase. There is a commission cost associated with each trade made.. There may also be data fees from the commodity exchanges. They own the data and no longer provide it free in real time.

  • The electronic automated systems allow the client the hands free ability to set the selected systems and trade without any broker intervention. The entries, stops and limits are all routed to the exchanges automatically without human emotion. The discipline necessary to trade no longer becomes necessary as the system follows its set parameters. The consistency in following the set parameters no longer is an issue as a manual trader would have to follow the rules or trading plan.

  • The fills are practically instantaneous as they are filled by match once found. The trading itself is on a level playing field. The systems selected may differ in the algorithms, the risk, the sophistication of the developer and the correlations to other markets. This allows the traders to run a variety of systems at one time while it may be impossible to do so manually. The fills on trading manually often do not catch a market move as precisely as a system.

  • The beauty of systems trading is that the Client may begin or stop a trading systems at their discretion allowing them the ability to select the perfect trading portfolio to suit their goals and risk parameters.
    In the past, trading systems were for sale, but no lease arrangements were available. Often a client may spend a great deal on a methodology or mathematical system that could go out of sync with the current market conditions. This would never allow them to make their break-even with the horrendous cost. Now, the leased systems do not require that chunk of money up front. Clients may pay by the month with the ability to simply change as desired. The Easy Language Programming and building Wizards allow the developer to mix the indicators and filters.


While we may look at systems trading with scrutiny, the volume of trades derived from systems may create some curiosity about this method of trading. The Chicago Mercantile Exchange studies reveal that approximately half of the volume in the commodity contracts may be derived from some sort of algorithmic trading. The liquidity derived from systems trading contributes to the efficiency of the electronic futures trading. While systems trading may not be for everyman, it does add appeal thru the significance of the fund managers and commodity trading advisors. After all, trading is a zero sum all game!


https://www.danielstrading.com/brokerage-services/invest/automated-strategies


IMPORTANT RISK DISCLOSURE

Futures trading is complex and carries the risk of substantial losses. It is not suitable for all investors. The ability to withstand losses and to adhere to a particular trading program in spite of trading losses are material points which can adversely affect investor returns.

The returns for trading systems listed throughout this website are hypothetical in that they represent returns in a model account. The model account rises or falls by the average single contract profit and loss achieved by clients trading actual money pursuant to the listed systems trading signals on the appropriate dates (client fills), or if no actual client profit or loss available by the hypothetical single contract profit and loss of trades generated by the systems trading signals on that day in real time (real-time) less slippage, or if no real time profit or loss available by
.the hypothetical single contract profit and loss of trades generated by running the system logic backwards on back adjusted data (back adjusted).

Note that the Client Fill Trades are reported across all clients utilizing the platform, across multiple brokers, and are not based solely on the performance of accounts at this brokerage.

The hypothetical model account begins with the initial capital level listed, and is reset to that amount each month. The percentage returns reflect inclusion of commissions, fees, slippage, and the cost of the system. The monthly cost of the system is subtracted from the net profit/loss prior to calculating the percentage return.

If and when a trading system has an open trade, the returns are marked to market on a daily basis, using the back adjusted data available on the day the computer back test was performed for back tested trades, and the closing price of the then front month contract for real time and client fill trades. For a trade which spans months, therefore, the gain or loss for the month ending with an open trade is the marked to market gain or loss (the month end price minus the entry price, and vice versa for short trades).

The actual percentage gains/losses experienced by investors will vary depending on many factors, including, but not limited to: starting account balances, market behavior, the duration and extent of investors participation (whether or not all signals are taken) in the specified system and money management techniques. Because of this, actual percentage gains/losses experienced by investors may be materially different than the percentage gains/losses as presented on this website.

Please read carefully the CFTC required disclaimer regarding hypothetical results below. HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN; IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR TRADING PROGRAM. ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE RESULTS IS THAT THEY ARE GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. IN ADDITION, HYPOTHETICAL TRADING DOES NOT INVOLVE FINANCIAL RISK, AND NO HYPOTHETICAL TRADING RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK OF ACTUAL TRADING. FOR EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR TO ADHERE TO A PARTICULAR TRADING PROGRAM IN SPITE OF TRADING LOSSES ARE MATERIAL POINTS WHICH CAN ALSO ADVERSELY AFFECT ACTUAL TRADING RESULTS. THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF ANY SPECIFIC TRADING PROGRAM WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL PERFORMANCE RESULTS AND ALL WHICH CAN ADVERSELY AFFECT ACTUAL TRADING RESULTS.

The information contained in the reports within this site is provided with the objective of standarizing trading systems account performance and is intended for informational purposes only. It should not be viewed as a solicitation for the referenced system or vendor. While the information and statistics within this website are believed to be complete and accurate, we cannot guarantee their completeness or accuracy. As past performance does not guarantee future results, these results may have no bearing on, and may not be indicative of, any individual returns realized through participation in this or any other investment.

The statistics on this page are calculated via the combination of three hypothetical data sets:

1. Back tested, 2. Tracked, and where available 3. Live.

Back tested performance is calculated by running a trading system backwards in time, and seeing what trades would have been done in the past when applied to back adjusted data. Tracked performance is calculated by running the trading system forwards on data each and every day, and logging the trades as they happen in real time day after day. Live performance is calculated by running the trading system on live tick data for actual clients and tracking the actual buy and sell prices those clients trading the system receive in their account.

We use Live results to calculate monthly returns for any month in which clients were trading for the entire month, Tracked fills for those months in which there are no client fills for the entire month, and computer generated fills for those months occurring before we loaded the system onto our trade servers. The results are hypothetical in that they represent returns in a model account. The model account rises or falls by the single contract profit and loss achieved by the system in whichever data set is available. The hypothetical model account begins with the Suggested Capital listed, and is reset to that amount each month. The percentage returns reflect inclusion of commissions, fees, slippage, and the cost of the system. The commission, slippage, fees, and monthly system costs are subtracted from the net profit/loss prior to calculating the percentage return.

Please note that the method of resetting the model account to the initial value at the start of each month creates a track record which is representative of the simple returns for each time period, but that it does not, by definition, show how returns would compound over time. Should an investor following said program trade a single contract indefinitely without also resetting their account to the initial capital amount each month, their performance will differ from the performance detailed herein.



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About the author


In systems trading, Leslie runs a spread sheet of a number of systems to monitor the trends of the systems themselves. She believes in filters to increase probabilities. Perhaps this part of her was found back in college when she proficiencied out of statistics.

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