#062: MY STUDENT'S STRATEGIES (CASE STUDY #23)
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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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#062: MY STUDENT'S STRATEGIES (CASE STUDY #23)

A lot of beginning traders ask me what the best market to start with is. What I always recommend them is to start with index markets. In most cases, it is easier to find a profitable strategy on index markets like Russell 2000 (TF) or E-mini S&P MidCap 400 (EMD), that have a low drawdown under $5,000, an acceptable stop-loss, a profit factor over 2 and average trade over $100. And this is exactly the case of today’s strategy.

 

It has been created for E-mini S&P MidCap 400, the total number of trades is 910 in a little over 15 years with an overall profit of $93,660. That is giving an annual profit of almost $6,000. And with a close-to-close drawdown of just $2,890, the annual profit-to-drawdown ratio is more than 2.What timeframes does it trade in? Let’s take a look:

 

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

  • Main time frame (data1):               15-minute

  • Secondary time frame (data2):      Daily

  • Time template:                                 regular session

  • Profit factor:                                      2.01

  • Win %:                                                59.89%

  • Avg.trade:                                          102.92 USD

  • Exit:                                                    stop-loss or at 15:15 exchange                                                                        time (avg. winning trade +342.77                                                                  USD)

  • Stop-loss:                                          750 USD - only protective, barely                                                                  hit(avg. losing trade -263.14 USD)

 

This system is making, on average, about 60 trades each year. And all of them are long. In general, it is easier to find a system that is long-biased. Sometimes, they can be a bit less robust, than systems trading both long and short, but of course the overall robustness of the system depends on robustness tests, like performance in other markets.

 

But before we move to other markets, let’s take a look at the equity curve on EMD:

 

There are a couple of drawdowns, but mostly steadily rising (sometimes it is really steep), and overall it looks like a really nice strategy. The first drawdown we can see is in about trade #450 and the second bigger drawdown is at about #800. In both cases, it took about a year to make the new equity high. Besides these two, there are a couple of flat periods, but overall, the system has recovered from all drawdowns pretty fast.

 

More details about this system are in this table:

 

As you can see, it’s a really nice system when you want to start with a smaller trading account.

 

But what about other markets? Is this market an exception, or does it also perform well in other markets? Let’s take a look at Russell 2000 (TF).

 

The equity curve is a bit less smooth, but it has pretty much the same shape. There are also some drawdowns, the biggest one is at about $5,000, which is still acceptable for TF market. The profit is also similar (almost $90,000) and overall this equity curve is really a good sign.

 

How about one more index market, the E-Mini S&P (ES)?

 

Here we can see a slower start, the equity is even less smooth than the equity for TF market, but it is still rising and it has done over $40,000 of profit, with the biggest drawdown just at about $3,000-$4,000 which is still good - don’t forget that the strategy was created for a different market.

 

Overall it looks like a robust strategy, with a nice number of trades in all three cases. 60 trades per year on average is really nice and there is still space to apply another filter to reduce the losing trades and improve the overall performance.

 

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

 

Happy trading!

 

Tomas

 

Click here to read more success stories.

 

 

 

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