#036: MY STUDENT'S STRATEGIES (CASE STUDY #11)
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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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#036: MY STUDENT'S STRATEGIES (CASE STUDY #11)

 

The strategy that I would like to present you today is designed for Soybean market and it is only trading short which might be a good strategy for most of portfolios because it is, in general, easier to create a long-biased strategy.

The strategy uses two time frames - 15-minute, and daily data - and trades less than 4 hours a day. Despite this fact, it can still make almost 45,000 USD in 7 years.

 

Let’s take a look at the strategy setup:

 

  • Market:                                            Soybean (S)

  • Main time frame (data1):             15-minute

  • Secondary time frame (data2):    Daily

  • Time template:                               9:30 - 13:15

  • Exit:                                                  stop-loss or at 13:15 exchange time                                                               (avg. winning trade +375 USD)

  • Stop-loss:                                       2,000 USD - only protective, never hit                                                           (avg. losing trade -259 USD)

 

The profits are equally distributed throughout the years with average profit a little over 6,200 USD per year (except for the first year, but we will get to this later). The equity curve is almost a straight line, but there are, as usually, some small drawdowns. The biggest one happened in 2013 and you can see it on the equity curve below, at around trade number 275. Luckily before this drawdown, there was quite a steep rise and also it didn’t take too long to get from this drawdown. The trade number 300 is creating new equity high (green dots), so it took about 25 trades to get from the 4,200 USD drawdown. Besides this moment, the equity curve is steadily rising and you can see that it takes 25-30 trades at most to create new equity high.

 

The system has done 471 trades in 7 years, with the average profit over 92 USD per trade, the profit trade is 1.82 and 54.78% of all trades were profitable.

 

The biggest drawdown we have already mentioned - it is 4,237 USD in May 2013.

 

 

Except for the first year (which was still profitable), the system had really nice profits, ranging from 4,350 to 9,650 USD, with the average slightly over 6,200 USD per year. The percentage of profitable trades is over 40% every year and in the best years, it gets over 60%.

But as you know from the previous systems, you don’t need a high percentage of profitable trades to have a profitable system, sometimes all you need is 40% to be constantly profitable.

 

 We can say that the system is robust and likely to be profitable in the future when it performs well also in other markets. Or in other time frames of the same market. The system behavior on these data, that were not used for system development, and simulate unknown future, can indicate how likely the system will be profitable in the future.

 

Let’s take a look how it performs on Soybean 30-minute chart:

 The equity curve is similar to the original one, the 15-minute time frame, and even the biggest drawdown happened in similar time.

 

But how about trying completely different grain market, like a 15-minute chart of corn?

 Well, the equity curve is far from tradeable, but at least there is a rising tendency and new equity high every 50-70 trades, which is a good sign.

 

In general, it is easier to create long-biased strategies. Therefore, it is nice to see really good short-biased strategy for a Soya market. This one has really nice almost flat equity curve and I am sure that it is a nice component of developer’s portfolio.

 

You can learn more about the workflow I teach, by clicking here and start creating similar systems by yourself today.

 

Happy trading!

 

Tomas

 

Click here to read more success stories.

 

 

 

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