MY STUDENT'S STRATEGIES #19
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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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#054: MY STUDENT'S STRATEGIES (CASE STUDY #19)

Most of you probably already know from this success story, that due to low average trade value it is not so easy to find a profitable strategy for ES market. And one that is trading both sides - long and short -, is even more difficult to find. But once you do, you can can expect really low drawdown levels, making ES strategies suitable for smaller trading accounts (as mentioned in this article).

 

This is also the case of this strategy which makes over $100,000 profit in 10 years, all with just a $3,337 close-to-close drawdown - making an annual net profit to drawdown ratio of 3:1.

 

Here are more details about the system:

 

 

  • Market:                                            e-mini S&P 500 (ES)

  • Main Time frame:                         15-minute

  • Secondary Time frame:                Daily

  • Time template:                               8.30-15.15

  • Profit Factor:                                   1.77

  • Win %:                                             55.5%

  • Avg.Trade:                                       97.03 USD

  • Exit:                                                  stop-loss or at 15:15 exchange time                                                               (avg. winning trade +401.86 USD)

  • Stop-loss:                                        6,000 USD-only protective, never hit                                                           (avg. losing trade -291.41 USD)

 

When trading the ES market, you shouldn’t expect the strategy to bring you $20,000 or more every year. The beauty of this market is the low drawdown that you will mostly get. Thanks to this low drawdown, you can trade multiple contracts and experiment with them - you can use a profit target for one contract, or just use Market Internals as a filter and enter only when there’s a higher probability of profitable trade.

 

Regarding the equity below, there is a nice rise in the year 2008 (at about trade number 250), followed by a flat period for about a year or two (without any big losses), and then an almost constant rise to 2015, when the maximum historical drawdown occurred (-$3,337).

 

 

 

The strategy also has a nice number of trades - over 1,100 in 10 years - almost 2 per week. Most of them almost equally split into long (611) and short trades (490). There are also other characteristics of this system that are similar for long and short - the net profit of $54,875 for long and $51,950 for short; profit factor 1.87 (long) and 1.69 (short), and some more. This is just another good sign of the robustness of this system.

 

Let’s take a more detailed look at the numbers:

 

 

And what about performance on other index markets? How does this system perform on TF or EMD?

 

In both markets, the systems made similar profits as in the ES market; in TF it was almost $90,000, but with much higher drawdown - over $9,000. Since we are still using the 10-year period, the annual profit to drawdown went down to 1:1.

 

The equity is not perfect, there are several drawdowns, some of them reaching over the $9,000 level, but you shouldn’t forget that this system is still using the same parameters that we have from optimization on the ES market. Therefore, it is a good sign that it is still profitable and the equity curve is still rising.

 

In the EMD market, the situation is even a little bit better - the net profit is almost the same as was for ES - over $102,000 and the maximum historical drawdown is $8,000.The good sign is that the system is still keeping a pretty high number of trades and the same balance for the long and short sides, as it has for the ES market:

 

 

And here is the equity for EMD:

 

The system we’ve seen today really has some potential - similar characteristics for long and short sides, the fact that you can basically trade the system on the EMD market without a change of parameters, and that it also works on the TF market are really signs of a robustness - not the only ones, but it is a good start.

 

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

 

Happy trading!

 

Tomas

 

Click here to read more success stories.

 

 

 

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