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#034: MY STUDENT'S STRATEGIES (CASE STUDY #10)


The last couple of strategies were all for a smaller account, having maximum drawdown at about 3,000 USD. They were created mostly for index markets. Well, this time it will be something different. This time, it is for crude oil market (CL), using just one time frame, 15-minute and it trades both sides long and short.

Here are some basic facts:

  • Market: Crude Oil (CL)

  • Main time frame (data1): 15-minute

  • Time template: 8:00 - 14:28

  • Exit: stop-loss or at 14:28 exchange time (avg. winning trade +834 USD)

  • Stop-loss: 2,000 USD- only protective, barely hit (avg. losing trade -644 USD)

On the equity curve below, the system has gone through some drawdowns, some of them are quite high, and especially for beginning traders with 20,000 USD trading account, the maximum drawdown over 7,000 USD is too much. But the more experienced traders know that such a big drawdown is something that happens time to time and, as long the drawdown is within the limits from Monte Carlo Analyses, you should not switch off the system. As you can see, there is a rising period after every drawdown and in the last years that equity was quite smooth and steadily rising without any major drawdowns. And we also should not forget the profits - the strategy made over 90,000 USD in the last 5 years. That is over 18,000 USD per year on average for every contract.

The results below are just for period 2011-2016, the earlier data were used for the system development and the years 2011-2016 are Out Of Sample data that represent unknown future, as these data were not used for the system development. This method gives us realistic expectations of the future performance.

This system makes quite a lot of trades, over 400 trades in 5 years, making on average 80 trades per year. That is one trade every 3 working days. But even after including the transaction costs, this system still can bring really nice profits.

Net profit factor is 1.84 and the net profit is over 222 USD. That is 222 USD for every contract, every time you enter the market once every 3 days.

The year with the biggest drawdown is 2012. And yet the system was still able to get from the 7,140 USD drawdown and make over 14,000 USD profit that year. The year 2012 was the only year when the percentage of profitable trades was below 60%, it was 48.86%, but even with less profitable trades than losing trades, the system can still make really nice profits.

The systems for crude oil (CL) market usually perform well in E-mini crude oil market (QM). And this is not an exception. The system had done almost 50,000 USD in 5 years. And the characteristic of the equity curve is pretty much the same - there are some drawdowns in the first part, but the second half is much smoother and mostly constantly rising.

Adding one more filter to this system to reduce losing trades, that would reduce the number of trades from current 80 trades per year to about 50, might be another way to slightly improve this system, reduce transaction costs and reduce the drawdown, although it is already a nice system that will bring to the owner really great profits.

Click here to learn more about the workflow I teach and start creating your own similar systems today.

Happy trading!

Tomas

Click here to read more success stories.

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What others are saying

"Tomas is one of the most creative traders I know. He is able to generate unique trading ideas and elegant solutions to system development challenges."

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Andrew Swanscott, BetterSystemTrader.com

"Tomas has been a professional trader for more than a decade and I have had the privilege of monitoring his accounts in action since 2006. His systems are performing as some of the best I have ever monitored and executed. I have been in the trading industry since 2002 and worked with many developers from all over the world. Tomas is definitely the one to consider."

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Martin Lembak,

Systems Trading Expert,

MFRM, CAIA 

"Tomas is a professional trader, who for the last 10 years has specialized in developing trading systems. We have been tracking his trading systems for about 5 years and they generally show very robust, stable and above average performance. Striker is pleased to work with someone like him - a real professional with enthusiasm and deep knowledge of trading."

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William Galwas, President Of Striker Securities, Inc 

"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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Craig Peters,

semi-advanced trader,

United Kingdom 

"Tom's approach to Automated Trading Strategies design, tests of robustness and portfolio diversification is really unique. He has been a professional trader for many years and the depth of his understanding of Breakout strategies and Market Internals is hard to find elsewhere."

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Antonin Fisher,

Hedge Fund Manager,

Czech Republic 

"Tom´s systems and trading approach do really work and can bring good, stable and reasonable returns. I can highly recommend him as a teacher."

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David Hruby,

Trader, Czech Republic 

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Author: Tom Nesnidal (more about me) 
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