mechanical systems


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In the longer term portfolios that I run I make use exclusively of ETF’s. With an ETF you can gain a diversified exposure to a market segment. The diversification is important as following individual companies is fraught with risk as their financial statements are often hideously distorted and even then the ‘market’ sometimes runs with the ones that you would discard.

In the larger ETF’s, should a company [stock] go bust, sure the ETF takes the hit, but that stock is replaced and life goes on, the dip becomes a buying opportunity. The risk of selection is removed and leaves you only with market timing risk.

Market timing risk is a lot easier to manage than market timing risk and stock quality risk. It lets you focus on the big trends that play out over years rather than the short term wiggles that incorporate earnings risk, legal risk and a myriad of other risks.

Of course the market ETF, say SPY, can be broken down into sector ETF’s which will allow the same market, viz, SPY to be outperformed by the market composed of sectors. I haven’t actually implemented this idea yet, I’ve just been thinking about it after watching a bit of a stoush on CNBC the other day with regard to just this question.

In the discussion healthcare and utilities were identified as outperforming, while materials was identified as one of the under-performers.

All that is required is a methodology for balancing allocations, which is another way of saying ‘market timing’. If I’m correct, then a market composed of individual ETF sectors should over time outperform exactly the same market composed of all the same sectors.

I’ll set up my little experiment and trade it over the next four years and see how the theory stacks up in reality.

The inspiration behind the ppt?

From this post.

My trading partner and I have been working on a pattern recognition algorithm as a side project for over a year now. We’ve been chipping away at the various problems and bugs associated with new software, but we’re definitely getting closer to completion. For those who haven’t read about it here’s an over simplified abstraction of what the software does from a previous post:

To visualize how the software works, imagine drawing a line graph of every single trading day (intraday) of the Dow on a separate sheet of paper. Now take the humongous stack of paper and press the it up against a sunny window like a kid with tracing paper. Even if the sun could shine through the stack of paper, you’d still have an unrecognizable blob, right? Wrong. Our software can intelligently processes HUGE amounts of data and reveal the true nature behind the noise — even if the nature of the data is in fact actual random noise (in which case it will generate no patterns, smart huh?).

Except for the fact that truly random noise, as generated by a Monte Carlo engine, will generate ‘patterns’ which rather makes a nonsense, and a potentially dangerous error of the entire concept. The two key concepts here are [i] independence and [ii] path dependency. True ‘independence’ or actual random noise, will generate ‘patterns’ but possess no ‘prediction’ qualities other than the odd random one generated via ‘luck’. ‘Path dependence on the other hand can account for the sometimes bizarre ‘trends’ that develop in the markets against all rational analysis.

I’ve quietly been working on my adaptive system for a while now, the results are just starting to show through in the last month or so. Previous incarnations have had periods of outperformance, then problems. Currently, those problems have been ironed out.

What is the difference between a mechanical backtested system and a forward tested adaptive system?

Essntially the amount of data that one can access immediately. A mechanical backtested system can backtest as much data as one can get hold of. Woodshedder has this historical period:

The data runs from 1990-Dec 2004. This is a very discrete period of market history. Does it adequately represent the 1969-1975 period? How about 1929-1937? You take the point.

Adaptive, or future testing, can only test 1 day at a time, in real time, thus the data is unoptimised, it is, exactly what it is. You succeed or fail, there is no inbetween. Of course due to this variable, there can be no lovely data generated predicting expected returns based on historical data.

From marketsci

I’ll take a month of real-time trading over a 10-year backtest any day of the week.

That may be a surprise coming from someone whose blog almost wholly consists of backtests, but at the end of the day I know (and so should you) that NONE of this really matters. The only thing that matters is what you do in real-time, audited.

That’s why I don’t release backtests for our own proprietary strategies and I raise a wary eyebrow anytime I see a sexy backtest bandied about.

It’s not that I don’t trust the backtester. There’s a whole universe of good folks whose workmanship I respect very much, but at the end of the day ‘the best laid schemes of mice and men often go awry’.

The table above lists the evil little demons that lead our backtests astray. None of these are new…just a reminder of what we already know (but sometimes forget).

There are things we should be able to control…the hard-and-fast, black-and-white “math” of backtesting.

Have we accurately modeled the trading environment including transaction costs, slippage, realistic quotes, and survivorship bias? Small mistakes here compounded = hugely inaccurate results.

Have we built a mathematically-sound model? You would be shocked to know how often I test published strategies only to find that the results rubbish (reader beware).

And there are things we can try to control but never totally will…the far more fuzzy “art” of backtesting.

We have to cope with curve-fitting and other biases (read more from CXO), markets that are constantly evolving at the most fundamental level (an example) and markets that inevitably go through abrupt “abnormal” periods where nothing works the way it’s supposed to (another example).

The only way – the ONLY WAY – to judge how well a trader has responded to this myriad of challenges is real-time audited results.

It’s easy to churn out fancy charts showing what has worked in the past. It’s a very different thing to put yourself on the line each and every day.

Done right (independently-audited without cherry-picking) there are no mulligans. Your moments of glory and defeat, of brilliance and stupidity, are laid bare.

We the investing community get way too excited about sexy backtests and make way too half-hearted a demand for the real-time.

In my mind, in your mind, in all of our minds, 1-month of real-time audited trading should mean more than 10-years of backtesting any day of the week.

My month of forward testing:

# of trades…………………4
# of winners……………….3
# of losers…………………1
Total trades……………….4

Largest % winner………..+50%
Largest loser……………..[-10%]
Net profit [loss]………….+18.75%

So that’s an 18.75% return since 14 July or three weeks. If I annualise this then we have a 325% annual return [always looks impressive] I shall contine to trade this live certainly over the next month or so. The % are due to the leverage of using Options rather than common stock.

Of course this return includes the internet blow-up, which would have eliminated the 10% loss, into a profit, which would have taken me north of 20% for the period.

Woodshedder has a graph depicting what a 48% compounded annual return looks like:

Imagine if you will 325% compounded annually.

Enjoy the free updates [testing in real time] while they continue, as, should the results continue as they are at the moment I’ll be selling the signals direct to some smaller Hedge Funds.

The 2% Risk, 3ATR stop YTD performance is surprising, since that model has out-performed historically. The under-performance is due primarily to bad luck. Yes, I know that sounds like a cop-out, but it’s not. Simply put, the position-sizing allowed for a perfect storm of sorts where it has had the cash available to take more trades than the 2% Risk, 10% stop model, but those extra trades have had turned out to be losers. To make matters worse, the 2% Risk, fixed 10% stop model was able to have some larger positions that turned out to be winners while the ATR position-sizing resulted in those same winning trades being smaller positions.

Overall, I am pleased with the performance, and while I would love for it to be at 20%-30% for the year at this point, the bottom line is that almost half of 2010 has been spent in a downtrend. This affects opportunity. As I have stated numerous times, the variable that most affects performance is opportunity. The Power Dip System trades have a positive expectancy. Accordingly, more trades (opportunity) equal more profits.

As The Power Dip System requires stocks to be in an uptrend, when the market is in bear mode, there are simply not as many opportunities. This is a difficult but necessary trade-off between risk and reward. Most steep corrections do not turn into a prolonged downtrend (like 2008), but when a correction does become severe, we do not want to keep dip-buying. We instead want to sit in cash. As you can see from the monthly results, when the SPY dips, so does the system. Should the indices fall far enough, the system will simply quit trading.

There is a bit of a lag between the indices and The Power Dip System. As the indices come out of a correction, the Power Dip will not have much exposure as it is waiting for the universe of stocks to begin new uptrends. Once there are plenty of uptrends, The Power Dip System will reach almost 100% exposure as the number of opportunities become greater than the available cash.

Finally, I have been tracking the monthly performance by calculating that one started trading the system on the 1st trading day of the month and closed all positions on the last trading day. My thinking behind this is that potential subscribers would probably think something along the lines of, “If I tried a 1 month subscription, what might my results be?” In hindsight, this was probably an error. To make the monthly performance more transparent, I am now reporting it as if one started trading the system at the beginning 2010 and has continued to the present.

***The first time I posted this I had run all the numbers with an error in my position-sizing code which affected the YTD figures. I have fixed the tests so that this won’t happen again. The code was a remnant from me tweaking the position-sizing, but it lead to an inconsistency as no one, not even myself would have been able to trade the system with those position-sizing rules. (Not yet, anyway). If you saw the first iteration, the numbers were significantly better I don’t want to let the cat out of the bag too early, but nothing about the system was changed except position-sizing… More on this in the future.

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Ok, so it’s a Sunday, and I’ve just been watching “gladiator” for the umteenth time. It is however a good introduction to this opportunity for those who walk-the talk. This is from the “ms” blog, and his affiliated business.

We are a team of industry professionals who want to develop the next generation of professional market timing strategy developers. What we’re proposing is quite a commitment on the part of all parties involved, so we want to take a step back and first explain the Timer Seeds vision.

First, a little bit about us. As mentioned, we are a team of market timers from multiple successful firms. The manner in which we each monetize our work is different (some manage client accounts directly, others act as pure signal sellers to other financial professionals), but at the end of the day we’re all in the business of developing effective market timing strategies.

We play in a pretty large arena with a lot of competition. What experience has shown however, is that (a) there are only a handful of players that are consistently good performers (others come and go but the core group stays the same), and (b) the vast majority of wealth invested in these types of systems is traded by these consistently good performers. A side note, everyone selected for the Timer Seeds team is from this exceptional core group.

What experience has also shown is that out of this core group, each of us is approaching the markets from completely different angles. Our strategies exhibit low correlation to one another, yet we are all over time consistently profitable. The logical conclusion is that there are many solutions to the market timing puzzle. Each of us has found what works for us and while the way we get to our results is different, we all still find a way to get there.

The Vision

During our careers we meet lots of promising individuals doing the same things we do to create our own strategies – spending long hours hunched over computer screens or piles of charts looking for patterns, or inefficiencies, or whatever. Many have created trading strategies that have done as well or even better than our own, but those strategies never saw the light of day outside of the developer’s own accounts.

Why? Because they didn’t know how to monetize their work. That’s why our vision was born. We want to use our industry knowledge and experience to help these developers move from the lab to the street, from designing strategies for themselves to designing strategies for the financial industry – while still protecting their intellectual property rights. This last point is key – people like us work hard to create our strategies and should never be asked to divulge specific trading rules…period.

Our four-step process:

DEFINE:
Molding the strategy to fit what investors and (by extension) financial professionals want. This is really about defining the “personality” of the strategy and how that personality will be received by the investing community.

AUDIT:
Auditing past results and setting up a process for continued auditing. This is absolutely vital to becoming a professional market timer. There are really only two ways to be successful in this business: (a) be a well known personality a’ la “Cramer”, or (b) prove that you are very good at what you do (and seldom do the two go together). As a matter of personal pride and a lack of TV good looks, we want to build our businesses on being very good at what we do.

SELL:
The Timer Seeds team has as much as fifteen years of experience selling market timing strategies. We want to leverage the relationships we’ve built in the industry to connect our developers with the end users who use people like us: individual investors, financial advisors, hedge funds, and other industry professionals. This is the most significant barrier to entry for most new timers – it’s one thing to be a success in the confines of your own account – it’s an entirely different thing to get the attention of people that move money.

MAINTAIN:
Almost as important as selling a strategy (and definitely as time-consuming) is maintaining the relationship with the end user (individual investors and financial professionals). This includes but is not limited to: periodic discussions and meetings to discuss the program and performance, providing back-office legal and accounting support, ensuring timely and accurate payments, auditing reported assets under management, and ensuring compliance on all contracts.

Our Motivation

The most logical question after reading our vision, is why? Why would we want to help new competitors enter an already competitive field? The answer is two-fold, part altruistic and part profit-driven.

Altruistically, we want to be the good guys. This industry is rife with charlatans and snake oil salesmen, touting their successes and conveniently forgetting their failures. We want all of the strategy developers we grow through Timer Seeds to succeed the right way – on the back of strong audited track records. This improves the legitimacy of our industry which (a) makes us feel good because this is what we do for a living, and (b) encourages more investors to employ market timing.

There’s also a profit-motive. We spend a lot of time working directly with our timers sharing our hard fought experience and we stake our reputations on their work. In exchange, as is customary in this industry, we receive a percentage of the compensation from any contracts we negotiate or introduce. This is a very transparent process and our timers always have the absolute final decision on any contracts involving their strategy.

The Next Step

If you are a market timing strategy developer interested in joining the Timer Seeds team, or have any questions at all about what we do, please contact us. Tell us a little about yourself, your experience, and what you want to accomplish. Be sure to include any backtested or real-time results. The Timer Seeds team will review your information and contact you shortly.

We appreciate the time you’ve taken to learn more about our vision.

– The Timer Seeds Team

To contact “Timer Seeds”
http://www.timerseeds.com/vision.html

See also this post on “ms” blog
http://marketsci.wordpress.com/2008/12/11/timer-seeds-developer-rh/#comments

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Jack Telford

Founder/President of Mariner Futures ( http://www.marinerfutures.com )
System Developer of Compass.
Interviewed by John F. Gallwas, Founder of Striker Securities, Inc. – March, 2005

Introduction Comments by John Gallwas: Jack Telford is the founder of Mariner Futures and is registered as a Commodity Trading Advisor (NFA # 339212)) with the Commodity Trading futures Commission. On a personal note, he is an ardent ice hockey fan and devoted to his young son’s participation in the game.

This is the fifth anniversary of Striker‘s tracking of Mr. Telford’s original and best-known Mariner Compass S&P Trading System. To mark the occasion, we thought it would be a good time to interview him regarding his systems and their outlook.

By way of introduction, to those who do not know Jack Telford, he has a degree in computer science, and while working as a software developer in 1986 he became interested in the futures markets, an interest which eventually led to Compass’s unique analytical approach to generating trading signals. The Compass system in actual trading (including commissions) has been profitable in all but one of the last five years at Striker, and 2004 was not only difficult for Compass but many other day trading systems as well.

John Gallwas: Before we discuss the nature of your trading systems, what is your company’s mission and can you give us the risk profile of a typical customer?

Mariner Future’s mission statement is pretty simply. To provide a low-risk, low-drawdown day trading system that returns consistent monthly profits. My intention when I designed Compass was to have an S&P day trading system that would consistently generate $5000 per month and would allow me the luxury to quit my day job and do market research from home. Of course being constantly under capitalized I’d have to be able to do this with an account size under $10,000. As usual, things don’t always work out as planned.

John Gallwas: We mentioned in our introduction that Compass has a unique methodology in generating its trading signals. What can you tell us about this proprietary system, and what are its optimum market conditions

Jack Telford: Well John, as you know Compass is designed specifically for the S&P 500 stock index futures markets. Compass is distinctly different from any other mechanical day trading system because of the unique concept it uses to day trade the stock index futures markets. Instead of dependence on individual bars like systems based on technical indicators, Compass attempts to identify and isolate a small number of consistent and reliable patterns that have always existed in the stock index futures markets. The design of Compass relies on the consistency of the index markets to repeat those specific patterns, patterns that should exist as long as stock index futures markets trade. Compass is also unique in the fact that it relies exclusively on price and time, and contains no technical indicators. Compass identifies a specific type of trading day in which a trend is established in the morning, has a shallow pullback during midday, and then is re-established the in the afternoon. Once the midday pullback begins, Compass identifies the pattern and attempts to enter the market in the direction of the trend. Trades are exited at the end of the day, and the initial stop is trailed at a predetermined level. Compass generates only one setup per day and trades on average 10 days per month.

John Gallwas: After four good years, 2004 was not good for Compass. Can you tell us what went wrong in 2004, and have you made any changes to the system, hopefully in order to avoid the problem in the future?

Jack Telford: That’s a great question John, and right to the point. As you know you’re only as good as your last month’s performance. I’ll try to answer your question without getting too technical. In a nutshell, starting in July 2003, the S&P futures market’s range and volatility began to shrink. For example, the preceding years leading up to July 2003 the average daily range for the S&P 500 futures market was over 16 points. Today the S&P 500 average daily range is half of that. That’s the bad news. There is good news however: Compass was designed utilizing advanced artificial intelligence techniques, and has been busily re-training itself over the past 18 months to be able to trade in reduced range markets. Compass’s efforts are evident in its last quarter’s results. And to answer your question fully, there are no changes scheduled for Compass.

John Gallwas Looking forward, are there S&P market patters that are more favorable than others for the Compass trading system?

Jack Telford: Not really John, the most favorable pattern for Compass remains the standard 38% retracement against the morning trend. However, Compass also does very well with consolidation patterns in very bullish or bearish market conditions.

John Gallwas: Do you have anything in the “what’s new” department that you would like to share with us now?

Jack Telford: Well John, your question relates back to your first question, so I’ll relate my answer to an old adage, when I went in to drain the swamp 15 years ago I was sure that I would be able to design a trading system that would produce $5000 consistently every month, well that hasn’t happened. What Compass is, is a really good blue collar trading system that sticks its nose to the grindstone and attempts to produce profits within the framework of having its first priority being damage control. The fact of the matter is that Compass does not produce a monthly paycheck. Some months it produces more and some months nothing. In an effort to reach my original goal that I set for myself 15 years ago, I have been working for the past two years on three new trading systems. The new systems code named Schooner (Euro), Typhoon (Yen) and Clipper (Russell) are designed with the same philosophy as Compass, with the goal of maintaining a very low drawdown. The systems are in beta testing and all can be traded at Striker Securities, Inc. by contacting your son William Gallwas for further information. William and I have a common passion, the game of Ice Hockey, as William plays in an adult hockey league in Chicago and I coach a team here near Cincinnati so while it is sad the National Hockey League was cancelled this season – at least a few of us are keeping the game alive!

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The updated results from a number of systems designers that are traded in the various markets. I have some background information on the systems that I’ll post later.

Archer January, 2008 …………………………59.54%…………………. Morgan Tuck
Axiom mini Midcap August, 2004…………… 40.06%………………….. Lincoln Fiske
Battalian January, 2008…………………….. 92.36%………………… Morgan Tuck
Brigade June, 2008 ………………………….199.00%…………………. Morgan Tuck
CA system (ES) August, 2007…………….. 2.03%……………………… Dr. Emini
CA 777 November, 2007…………………… -7.22%…………………….. Dr. Emini
Charge(ES) January, 2008 ………………..139.96%………………….. Morgan Tuck
Clipper mini Russell July, 2006…………… -10.28%………………….. Jack Telford
Compass January, 2000………………….. 431.97%………………….. Jack Telford
Crescendo Mini Russell May, 2007……… 142.53%…………………. Jonathan Clair
Crossbow June, 2008……………………. 106.33%………………….. Morgan Tuck
Delphi II mini Midcap June, 2007……….. -67.98%………………….. Lincoln Fiske
Delphi II mini Russell May, 2007…………. 83.31%…………………… Lincoln Fiske
eMiniz mini S&P September, 2006………. -77.77%……………….. John F. Ehlers
Helix S&P January, 2004…………………. 27.77%…………………. Dustin Dubia
Impetus mini Russell December, 2003…. 235.46%………………….. Lincoln Fiske
Mesa Notes January, 2004…………….. 67.38%………………….. Barna & Ehlers
Navigator mini Russell February, 2007…. 3.20%……………………. Jack Telford
Polaris mini S&P October, 2006………… 4.75%……………….. Robert Steelman
R-Mesa 5 May, 2002……………………. 64.30%………………… Barna & Ehlers
Sextant mini S&P January, 2007 ………25.74%………………….. Jack Telford
Tzar Nasdaq January, 2004………….. -9.07%…………………….. Mike Barna
Ultramini mini Dow June, 2006……….. 29.20%………………….. Alpesh Patel
Ultramini mini MidCap June, 2006……. -8.30%………………….. Alpesh Patel
Ultramini mini S&P June, 2006………. 140.59%………………….. Alpesh Patel
Venus Bonds January, 2006…………. -7.85%…………………. Brady Preston

Name………………Since………………..Return…………..Name

Archer……….. January, 2008……….. 83.86% ……..Morgan Tuck
Axiom…………. August, 2004……….. 54.81% ……..Lincoln Fiske
Battalian…….. January, 2008……….. 87.23%……. Morgan Tuck
Brigade………….. June, 2008………. 131.45%…… Morgan Tuck
CA (ES)………. August, 2007……….. 23.90% ……….Dr. Emini
CA 777 ……..November, 2007……… [-7.22%]……… Dr. Emini
Charge(ES)….. January, 2008………. 75.59%……. Morgan Tuck
Clipper………………July, 2006…….. [-10.28%]….. Jack Telford
Compass……… January, 2000……… 408.14% ……Jack Telford
Crescendo……….. May, 2007………. 25.65%….. Jonathan Clair
Crossbow………… June, 2008………. 80.50%…… Morgan Tuck
Delphi II……………June, 2007……. [-108.56%]…. Lincoln Fiske
Delphi II……………May, 2007……….. 52.52%…… Lincoln Fiske
eMiniz………September, 2006………. [-77.77%].. John F. Ehlers
Helix S&P…….. January, 2004………. 27.77%……. Dustin Dubia
Impetus……..December, 2003……… 132.87%…… Lincoln Fiske
Mesa Notes….. January, 2004………. 53.35% ….Barna & Ehlers
Navigator……..February, 2007………. 8.60%……. Jack Telford
Polaris…………October, 2006……….. 4.75%……. Robert Steelman

It’s come to our attention that a number of our clients and other interested persons may have some questions regarding systems trading at Striker, and systems in general. While we have covered some of the following topics in the past, we feel that given the increasing interest in the systematic approach to trading futures and trading in general, it is only appropriate to revisit some of these themes.

Is system trading a valid approach to trading futures?
We feel certain that it is, and that it is reasonably safe to say that most professional traders will trade using a system of some sort in trading the futures markets. A system in this regard can be any strategy ranging from simple entry and exit criteria, money management rules, the use of stop losses to protect positions or lock in profits, to the more complex use of technical indicators and mathematical formulae. A system provides a consistent and logical approach to trading. Whether simple or complex, a trading system is usually most effective when implemented consistently. One problem frequently encountered by individual traders is the difficulty in following a system, whether their own or a professional developer’s. Sticking to a system requires discipline, and discipline is often difficult to maintain in the heat of live market action, where emotions can rule the day, and a trader may be tempted to second-guess his or her system. Striker’s clients enjoy the disciplined execution of system signals, since our professional operations team has been specifically trained to faithfully execute these strategies.

I have purchased a system which is currently being traded at Striker. What is the relationship between Striker and the system developer?
One of our goals at Striker is the unbiased evaluation of system performance. To this end, Striker has no financial ties to systems developers, nor does Striker have any in-house systems. Our financial independence allows us to be objective in evaluating systems. The leasing or purchasing of proprietary systems is a matter between the client and the developer. While we strive to work with reputable developers of robust and legitimate systems, we see our role as primarily one of service, execution, and the accurate reporting of information. To this end, we do not tamper with system signals, but faithfully strive to execute them in a timely fashion. We then report the actual trading performance at striker.com.

Help! The system I’m trading isn’t doing as well as I thought it would. What can I do?
While it is always preferable to see winning trades in one’s account, the fact remains that the futures markets, like other markets, tend to fluctuate. Futures markets can also be more volatile than equity (stock) markets. Trading futures using a systematic approach offers specific advantages (such as establishing rules of risk and money management), but does not guarantee success. Nevertheless, merely because a system is struggling at the moment does not mean that it will not offer positive returns over the long run. A number of systems traded at Striker have gone through periods of “draw downs”, but have gone on to make money for our clients. For example, the Compass S&P day trading system, which trades the S&P futures on $30,000 has returned over 235.29% since January 2000 as of April, 2007. However, the system, which can also trade the e-mini S&P on $5000, actually lost money in 2004, but went on to continue to return profits in 2005. In its trading life at Striker, it has averaged over 32% a year, as of April, 2007. In other words, patience and an accurate assessment of one’s financial situation are key factors in systems trading. However, Striker’s professional staff is happy to work with clients in terms of recommending alternatives if a system appears to be underperforming.

Why are Striker’s results different than the developer’s?
Striker reports only actual trading performance, where a number of developers report hypothetical performance. The difference is that hypothetical reports do not represent actual account activity, but rather represent a computer generated snapshot of the system’s trading signals. In the case of systems traded at Striker, these signals are generally identical to those generated in our operations center, but where a hypothetical report begins and ends in the computer, Striker takes these signals “live”, and in to the hurly burly of real market trading conditions, where they must compete with other traders’ orders. Market conditions can change very rapidly, and even with Striker’s superior execution and expertise, fill prices can vary depending on the market. The difference between an ideal price and the actual price fill is known as “slippage”, and is an inevitable component of futures trading. Nevertheless, Striker’s experienced team works hard to get the best price fills for our clients, and our results always reflect any slippage.

I’ve been looking at systems on the Internet. There are quite a variety of them. Can Striker recommend one in particular?
In the client section at http://www.striker.com, we keep actual trading performance records for systems that have traded or are trading at Striker, with commissions included. These records represent real trades for our clients’ accounts. We feel these records can be highly useful in evaluating and choosing a system. However, we are aware that there are many programs available for sale or lease on the Internet and elsewhere that have not been traded at Striker, and we recommend that you engage in careful due diligence in evaluating these systems and their developers.

For example, it is important to do your homework in looking at the developer’s background. What is their trading and business history? Are they registered with a regulatory body such as the NFA? Do they have a good business record? Have they had complaints registered against them with the Better Business Bureau, or other consumer protection agencies? These are all questions to consider when investigating a system developer.

There are a number of important questions to ask when evaluating a given program’s trading record. Are the trades shown actual, or hypothetical? If they are hypothetical, what methodology was used in implementing the hypothetical model? Has the model attempted to accurately reflect a real trading environment, with slippage and commissions factored in?

Finally, if you are looking for a specific recommendation when looking at systems traded at Striker, don’t hesitate to contact system specialist Dan Neenan.

I see some of the systems traded at Striker are struggling. Do systems ever completely fail?
The systems you see at Striker are not “ours”; we do not sell systems. These are third-party trading programs for which we are doing the execution. In many cases, they are systems that clients have purchased on their own, and have decided that they prefer to have Striker execute the trading for them. We only show trading performance for systems actively traded at Striker. Should a system show little or no promise at all over a period of time, our clients are likely to stop trading it, and the performance record for the system would end. So to answer the second qustion, systems do on occasion chronically underperform. Futures trading is inherently risky, and while systems in general are developed in order to manage risk and improve a trader’s chances of obtaining a successful outcome, traders should nevertheless trade using only risk capital.

My system is losing money. What should I do?
At Striker, our priority is your comfort in trading. While we don’t advise that clients abandon a system merely because a series of losing trades, we are here to take your direction in trading your account. If you feel uncomfortable with the direction of your current trading approach, we recommend that you stop trading, take a deep breath, and look at your options in terms of exploring an alternative or more conservative strategy.

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