#015: MY STUDENT'S STRATEGIES (CASE STUDY #3)
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DISCLAIMER:  Futures trading systems and commodity trading bear a high degree of risk. People can and do lose money.
Hypothetical results have many inherent limitations. Past performance does not guarantee future results. 

 

ACTUAL RESULTS SHOULD BE VIEWED WITH CAUTION, BECAUSE PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. 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 IN ACTUAL TRADING. FOR EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR 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 OF WHICH CAN ADVERSELY AFFECT ACTUAL TRADING RESULTS.

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#015: MY STUDENT'S STRATEGIES (CASE STUDY #3)

In the first and the second article about successful automated strategies created by my students, I have presented to you nice strategies that can really bring beautiful profits with just minimum effort (once they have been developed, thoroughly tested and after they have passed all demanding checks which I teach all my students).

 

For the third article I have chosen, again, quite amazing strategy that was developed by David V., called Ranger:

 

  • Market:                                             E-mini S&P MidCap 400 (EMD)

  • Main time frame (data1):              15-minute

  • Secondary time frame (data2):     daily

  • Time template:                                08:30-15:00 exchange time

  • Exit:                                                   stop-loss or at 15:00 exchange                                                                          time (avg. winning trade +698 USD)

  • Stop-loss:                                         1,000 USD (avg. losing trade -552 USD)

 

This strategy trades both sides (long & short), works with just 2 conditions (one for every time frame), has 3 optimizable parameters and even though it has been created just recently (end of 2015), it has already passed a paper-trading period, proved its robustness and is ready to be traded live.

 

All the numbers and the equity curve below are from Out-Of-Sample data (data that were not used for strategy development) and from the paper-trading period. Therefore, this is how the live trading should with high probability look like (as you already know, there are no guarantees in trading). As you can see, the strategy keeps making new equity high and the developer doesn't have to be worried about trading it live (with these results I wouldn't be, either):

 

Almost perfect, steadily rising curve during previous 8 years. There are some drawdowns, but of course, it is part of the trading. The really important thing is that after each drawdown it doesn’t give up, keeps going and creates new equity high. And you should do the same - never give up and try to challenge your limits.

 

Do the numbers look as good as the equity curve? See for yourself:

 

 

The profit factor 1.82, average net profit 184.60 USD per trade and net profit over 115,000 USD in less than 8 years makes it really valuable part of a portfolio. Recently the strategy has experienced over 5,000 USD drawdown, but as you can see on the equity, it needed only a couple of trades to recover and create new equity high. This is what makes this strategy really valuable - when it experiences series of losses and goes to a drawdown, it doesn't stay there for long. Not to mention that the drawdown is close to one-third of an average annual profit which is over 15,000 USD.

 

Wouldn't it be a shame to trade only one market with such a promising strategy? With this one, you can trade at least 2 other markets: E-Mini S&P 500 (ES) and E-mini Dow Jones (YM).

 

This is how the same system, with the same parameters, works in ES market:

 

And this is the equity curve in YM market:

 

Both equities are, again, not far from a straight line, with only a couple of drawdowns and almost no stagnation periods that I have described in this article.

 

With a couple of strategies like this one, you can build a nice and robust portfolio bringing stable profits.

 

The code of this system is a little bit more complicated than the one from the previous article, but you still don't need more than 25 lines of a simple code. These are all simple conditions that I teach my students. You don't need to be a rocket scientist, you don't need to go to the university for 5 years to learn to understand how these strategies work and how to create them. My students have succeeded and there is no reason why you shouldn’t. Start studying today. How? Download my free ebook containing a profitable system from my portfolio.

 

You can also click here to learn more about the workflow I teach and start creating your own similar systems today.

 

Happy trading!

 

Tomas

 

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"Personal consultation with Tom helped me to re-evaluate the complexity of my robustness testing and optimization processes. Plus, it has helped me with a specific plan on how to take things forward. It has given me some great ideas on how to avoid overfitting and make my testing more robust and provided tips on low hanging fruit in terms of the best markets to trade for intraday/short-term breakouts."

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