#080: MY STUDENT'S STRATEGIES (CASE STUDY #32)
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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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#080: MY STUDENT'S STRATEGIES (CASE STUDY #32)

One of the reasons why I share with you my students’ results is to show you that you don’t need to use standard, recommended settings to achieve success. Usually, we have 15- or 30-minute time frames (or one of their multiples), but you can also use some non-standard solution like using a 100-minute timeframe.

 

When you combine it with a 5-hour (or 300-minute) time-template (8:45am to 1:45pm), you will get just 3 bars per trading session. 15 bars per week. Which probably won’t be enough for intraday trading, but instead of closing the position on close each day, you can hold your positions overnight and close them on Friday (swing trading), before the weekend (unless your stop-loss or profit target are hit).

 

Let’s take a look at the setup:

 

  • Market:                                              Soybeans (S)

  • Main time frame (data1):               100-minute

  • Secondary time frame (data2):      N/A

  • Time template:                                 8:45am - 1:45pm

  • Profit factor:                                      1.43

  • Win %:                                                57.35%

  • Avg.trade:                                           96.22 USD

  • Exit:                                                     stop-loss or on Friday at 1:45pm
                                                                 exchange time (avg. winning                                                                         trade +674.78 USD)

  • Stop-loss:                                            ATR-based (avg. losing trade                                                                          -423.92 USD)

 

For an intraday strategy, you should have about 40-50 trades per year. This strategy has 596 trades in a little over 9 years, which is more than enough.

 

Some people are afraid that for swing trading you need bigger capital - when you hold the position over several nights (2-5), the drawdown can get bigger. But this always depends on the market. In this case, the close to close drawdown is $4,400 which is actually lower than some of the intraday strategies mentioned in this series.

 

What is the distribution of profits? Let’s take a look at the chart now:

 

 

On the chart you can see that the drawdown happened at about trade number 160, from that moment on there was pretty much a constant rise, with some minor drawdowns which are part of trading, and a flat period at the end - between trades number 500 and 550. But from there, we can see rise to $57,350. This profit was done in less than 9.5 years, which means an average annual profit of over $6,000 per year.

 

Let’s take a look at all the details in the TradeStation performance summary:

 

 

What I haven’t mentioned yet is that the strategy trades both long and short sides and the ratio between the short and long trades is quite balanced - 319/277. Most of the statistics looks better for short trades - higher net profit (despite lower number of trades), higher profit factor, higher avg. net profit and lower drawdown, but even the long side doesn't look bad.

 

What about other related markets? Like soybean meal and soybean oil? Will the system have similar results in these markets as well? Let’s take a look at the soybean meal first:

 

 

There are some similar points - slow start with the biggest drawdown followed by nice equity rise with flat period at the end. But the overall rising tendency is really positive.

 

Will the soybean oil look the same?

 

 

It looks slightly worse, especially the $5,000 drawdown at the beginning, but from that moment on, there is some increase, which is not perfect, but it is still reaching a new equity high, which is also a good sign.

 

In general, it is good to start with intraday strategies (as they usually have a lower drawdown), but over time, it is good to start adding some swing strategies as well and keep the profitable trades running - as you can see, not all of them have high drawdowns. The basic trick is really simple - instead of closing the position at the end of the day, you close it before the weekend. It is a good way to avoid some unpleasant surprises that can happen over the weekend.

 

This is how you do it in Easylanguage (used by TradeStation and Multicharts):

 

If DayOfWeek(Date) = 5 then begin SetExitOnClose;

 

You can learn how to build similar strategies here.

 

Happy trading!

 

Tomas

 

Click here to read more success stories.

 

 

 

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