#072: MY STUDENT'S STRATEGIES (CASE STUDY #28)
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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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#072: MY STUDENT'S STRATEGIES (CASE STUDY #28)

Emini Russell 2000 is quite a popular market among my students. One of the reasons for this is that you really can find a robust system quite quickly (when compared to other markets) and once you find it, most of the times it works on EMD or other index markets. This helps you to diversify your portfolio faster. Like today’s system, which works really well in 5 markets.

 

But let’s start from the beginning.

 

The systems have been created for the Emini Russell 2000 (TF) market, 30-minute time frame, trades both sides long and short, it uses 9:30am to 4:15pm time template and the exit time is set to 4:00pm.

 

Here are the rest of the numbers for this strategy. All of these values already contain transaction costs and slippage:

 

  • Market:                                                Emini Russell 2000 (TF)

  • Main time frame (data1):                 30-minute

  • Secondary time frame (data2):       Daily

  • Time template:                                   9:30am - 4:15pm

  • Profit factor:                                        1.42

  • Win %:                                                  48.99%

  • Avg.trade:                                             107.42 USD

  • Exit:                                                       stop-loss or at 4:00pm                                                                                     exchange time (avg. winning                                                                         trade +736.99 USD)

  • Stop-loss:                                             1,200 USD - only protective,                                                                           barely hit(avg. losing trade                                                                             -497.19 USD)

 

One of the things that is special about this strategy is the stop-loss. It has a regular $1,200 stop-loss, but it also contains an ATR-based stop-loss which makes the stop-loss more flexible when it comes to different market situations. When the market is not so volatile, the stop-loss is tight, and when the market is volatile, the stop-loss is wider. But it will never exceed the protective $1,200 stop-loss.

 

With this setup, the strategy has over $90,000 profit in 12 years. Which is $7,500 per year. And bear in mind that transaction costs and slippage are already included in these numbers. As well as in the equity below:

 

 

When looking at the equity curve, we can see a steady rise; the biggest drawdown is at around trade number 250, and there is a flat period between trades #400 and #500. And since the strategy makes over 70 per year on average (841 in 12 years), it means about 1.5 years. But it still was able to create a new equity high in the middle of this period (trade #450).

 

All these 841 trades are evenly distributed between long (427) and short (414), as we can see in this table:

 

 

The profits are also almost perfectly distributed between both long and short sides. The total net profit of short trades is even slightly higher than the net profit of long trades, which is not too common. The profit factor of short trades is slightly lower (because of the lower percentage of winning trades), but on the other side, it has a higher average trade net profit than the long trades.

 

The maximum drawdown (close to close) is $6,334, which is still acceptable when compared to the average annual net profit ($7,500).

 

But as I mentioned in the beginning of the article, what is really worth noticing on this system is the number of markets it works on.

 

Most of the systems that are created for Emini Russell 2000, also work on E-mini S&P MidCap 400 (EMD). And so does this one:

 

 

A slow start with about $6,000-$7,000 drawdown, followed by steady rise and in the end almost $100,000 profit in 12 years and 850 trades.

 

The next also popular market is the E-mini Dow (YM):

 

 

We can see another nice equity, with not so many flat periods, total net profit over $60,000 and about 1,050 trades.

 

The next market that can also present a nice equity is E-Mini S&P (ES):

 

 

We can see pretty much the same performance as in previous cases. Steady rise, not so many flat periods and the number of trades is close to 1,000.

 

And a similar performance, with just a few more drawdowns, we can also see on E-Mini Nasdaq 100 (NQ):

 

 

In all five cases, the system performs really well and was able to present a really stable equity which is a good indication of the robustness of this system and a solid foundation of a small portfolio. As you can see, even with a single system, you can start building your first portfolio and diversify it.

 

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

 

Happy trading!

 

Tomas

 

Click here to read more success stories.

 

 

 

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