{"id":245,"date":"2009-08-05T07:51:44","date_gmt":"2009-08-05T14:51:44","guid":{"rendered":"http:\/\/trendfindertrading.com\/blog\/?p=245"},"modified":"2009-08-05T07:51:44","modified_gmt":"2009-08-05T14:51:44","slug":"first-half-of-2009-terrible-for-futures-traders","status":"publish","type":"post","link":"http:\/\/trendfindertrading.com\/blog\/first-half-of-2009-terrible-for-futures-traders\/","title":{"rendered":"First half of 2009 terrible for futures traders"},"content":{"rendered":"

2009 has been a terrible year for futures trader.\u00a0 Quite simply, if you haven\u2019t lost too much money this year in futures you are doing much better than most! \u00a0To quote from Attain Capital’s weekly newsletter: \u201cIn looking through the early July estimates of many popular managed futures programs, it appears July is shaping up to be the 6th<\/sup> losing month out of the first 7 months of the year for managed futures. (source Credit Suisse\/Tremont Managed Futures Index).\u201d<\/p>\n

The average of all 5 Trendfinder systems is similar – 2\/7 winning months.\u00a0 However, Bobcat I and Bobcat II are positive for the year with 4\/7 winning months, which I am proud of given that the average of all the CTA\u2019s only had 1 winning month and are negative for the year.<\/p>\n

I think the following excerpt from a post in the Traders Laboratory Forum is good to keep in mind during this rough year:<\/p>\n

\u201cWhen you’re trading based on probabilities of success (any bona fide edge), you’re playing a game that I’ve told several newer traders. Pretend I have a 6 sided fair dice. If 1, 2, 3, or 4 rolls, you pay me $10. Otherwise, if a 5 or 6 rolls, I pay you $40. You’re allowed to play as much as you want. Do you play the game? I would in a heart beat: the expected value per roll is +$6.67. However, on any one roll, I’ll likely lose. Further, the outcome of any one roll doesn’t matter at all.<\/p>\n

Trading is the same. With an edge, you’re playing a probabilities game. The outcome of any one trade doesn’t matter. You’ll have streaks where you lose several in a row, and you did nothing wrong. A losing trade shouldn’t bother you at all, just as a losing throw of the dice wouldn’t bother you. But you’ll never know until you form a solid plan.\u201d<\/strong><\/p>\n

In this example the winning percentage is only 33% yet if you make enough rolls you have a very high likelihood of winning money!<\/p>\n

Mechanical\/algorithmic trading systems are a solid plan that play a probabilities game.\u00a0 For example, the expected value per roll (trade) for Bobcat II is $117.63 ($77.63 after $40 for commission and slippage) with a 50% win rate based on data going back to 1\/1\/04.<\/p>\n

One thing I believe you must take into consideration when looking at different systems and their probabilities is commission and slippage<\/strong>.\u00a0 I have seen far too many people get lured into something that is a mirage.\u00a0 Make sure the average trade is at least $50 after commission and slippage (or at least $90 before commission and slippage) or I don\u2019t believe you have a chance of being profitable.\u00a0 Also, be sure commission and slippage are included in the drawdown statistics.\u00a0 Bobcat II has an average drawdown of $763.88 and a max drawdown of $3410 ($40 r\/t commission and slippage included) \u2013 I know of no other futures system with at least 50 trades a year that has that low of a drawdown (when $40 commission and slippage are included).<\/p>\n

Will the poor trading results continue for the rest of 2009?\u00a0 In my opinion (and many others) – no.\u00a0 The following excerpt from Attain Capital’s newsletter sums it up so well I am just going to quote it:<\/p>\n

“Conclusion:<\/strong><\/p>\n

In the end \u2013 we are mired in a poor managed futures environment, as evidenced by the various managed futures indices showing losses through the first seven months of the year and several historically successful programs on Attains recommended list at new maximum drawdown levels. There is no denying the poor environment.\u00a0 But time has shown that these periods eventually do end, and trendiness returns to markets singularly and in aggregate (past performance is not necessarily indicative of future results). In a perfect world, investors would patiently wait for these periods in order to start their managed futures investment and in doing so greatly increase their chances for long term success. But unfortunately most people are taking this poor environment as a reason not to invest in managed futures, or as a reason to exit an underperforming program.<\/p>\n

In our opinion, this is a recipe for losses. It usually entails locking in losses as the investor gets out of a program near its bottom, and then entering into the next investment at or near its highs. The next investment will then likely turn over, reverting to its mean and taking a breather, just as the old one starts to perform. If you have lamented on your poor luck, saying something to the effect of \u201cright when I get in it goes down\u201d, you are stuck in this never ending cycle of chasing returns by getting in at the tops and out at the bottom. This poor 2009 environment thus far for managed futures is a great opportunity to break out of that defeatist cycle. This is the opportunity to cash in on the huge stock rally and put money to work with solid managed futures programs offered at a discount because they are in a drawdown. This is your chance to be someone who sells the high and buys the low, and get rid of that pesky buy the high, sell the low persona.”<\/p>\n","protected":false},"excerpt":{"rendered":"

2009 has been a terrible year for futures trader.\u00a0 Quite simply, if you haven\u2019t lost too much money this year in futures you are doing much better than most! \u00a0To quote from Attain Capital’s weekly newsletter: \u201cIn looking through the early July estimates of many popular managed futures programs, it appears July is shaping up […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"sfsi_plus_gutenberg_text_before_share":"","sfsi_plus_gutenberg_show_text_before_share":"","sfsi_plus_gutenberg_icon_type":"","sfsi_plus_gutenberg_icon_alignemt":"","sfsi_plus_gutenburg_max_per_row":""},"categories":[4,1],"tags":[],"_links":{"self":[{"href":"http:\/\/trendfindertrading.com\/blog\/wp-json\/wp\/v2\/posts\/245"}],"collection":[{"href":"http:\/\/trendfindertrading.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/trendfindertrading.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/trendfindertrading.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"http:\/\/trendfindertrading.com\/blog\/wp-json\/wp\/v2\/comments?post=245"}],"version-history":[{"count":4,"href":"http:\/\/trendfindertrading.com\/blog\/wp-json\/wp\/v2\/posts\/245\/revisions"}],"predecessor-version":[{"id":249,"href":"http:\/\/trendfindertrading.com\/blog\/wp-json\/wp\/v2\/posts\/245\/revisions\/249"}],"wp:attachment":[{"href":"http:\/\/trendfindertrading.com\/blog\/wp-json\/wp\/v2\/media?parent=245"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/trendfindertrading.com\/blog\/wp-json\/wp\/v2\/categories?post=245"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/trendfindertrading.com\/blog\/wp-json\/wp\/v2\/tags?post=245"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}