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CTA Spotlight:Dighton Capital USA
April 9, 2007
Are some people innately better at trading than others? Just as Michael Jordan was that much better of a basketball player than the rest of humanity, or Beethoven was that much better of a musician/composer? Well, Dighton Capital isn't in the rarefied air of those two just yet - but they honestly think their guy, who manages all trading and makes discretionary decisions on when and what the program buys and sells, has the track record to prove that he's pretty darn good.
Dighton's guy, Alex Moiseyev, who had posted annual returns over 40% per year working with European investors only up until last year, made a big splash in 2006 by opening up a program to US investors. The results were impressive - with gains of over 37% in the last six months of the year when Dighton the CTA began managing US accounts in earnest. They followed it up so far in 2007, with gains of over 5% for the year before suffering a loss of about -2.6% in March (estimated).
The program name of "Swiss Futures Program" is a bit of a misnomer, as the program doesn't specialize in Swiss Currency futures or anything like that. The Swiss name represents the former home base of the Dighton Capital USA parent company - Dighton Worldwide. But the focus of this month's CTA spotlight is the Swiss Futures Trading Program by Dighton Capital USA.
Who is the Manager?
The manager of the Dighton Capital USA's Swiss Futures program is Alex Moiseyev. Mr. Moiseyev is also involved with Dighton
Mr. Moiseyev has over 15 years of trading experience, having spent nearly his whole career in and around the commodity markets in one aspect or another since the late 1980's. He graduated from the Moscow Oil and Gas Academy with a degree in chemical engineering in 1987, and shortly thereafter co-founded the Joint Venture “Interfive” Moscow, which specialized in imports of physical commodities such as sugar and coffee as well as the export of oil products. This experience with physical commodities exposed Alex to different alternative investment strategies for trading the price movements, and he became one of the first members of the Russian Stock & Commodity Exchange in 1990, where he traded until November 1994.
In 1994, Mr. Moiseyev used his experience to become a professional trader and began research into non conventional trading techniques. Under his supervision, a team of Russian mathematicians have created numerous trading techniques and systems. In 2003, Mr. Moiseyev began to manage funds for select individuals and institutions under Dighton World Wide, which comprise a good portion of the Dighton Capital USA track record.
Alex now spends the majority of his time enjoying the warmth of South Florida instead of the cold Moscow winters.
How does the Program Work?
Unlike the rest of Attain's recommended CTAs, Dighton relies 100% on head trader Alex Moiseyev's decisions - making Dighton more of a discretionary trading approach than systematic. But having said that, Mr. Moiseyev does employ several different technical models and systems to generate his entry and exit points.
The main belief behind the trading program is a non conventional method of trading characterized by the effective use of market volatility as a driver of unique non correlated strategies and trade selection and exit techniques. Dighton believes their ability to blend systems, techniques, and strategies depending on current market conditions and levels allows for the best risk to reward potential.
The Swiss Futures Trading Program is a combination of systematic programs, technical chart analysis, manual (human) interpretation and analysis of economic and other fundamental data, and finally - the use of discretion by an experienced trader. The technical chart analysis techniques used include, but are not limited to wave analysis (Elliot Wave), W.D. Gann principles (angles), Fibonacci retracements, Time cycles, Volume, Trix Indicator, divergences, and pattern analysis.
In general, the Advisor uses these various techniques to try and locate points at which to buy in markets that have fallen, and at which to sell in markets that have risen. The theory is to simplify trading to one of the most basic tenets of investing - trying to buy when prices are low and to sell when prices are high. This approach is often over simplified in its description as counter trend trading - but Dighton believes it is more accurately categorizes as new trend anticipating.
When finding these extreme points where Mr. Moiseyev thinks the market will turn, Dighton does not wait for the market to get all the way to the extreme point, as it is hit only about 30 percent of the time. Rather, they establish part of the "full" position at earlier levels either above or below. If the market reaches the extreme point the Advisor will then establish the full position, so Dighton actually doesn't mind terribly if the market at first goes against the smaller position, so that he can get fully invested at the extreme point. .
When a position is established the Advisor lets the profits run and exits when the market gets to a point where a reversal in the trend could be expected by the same judgments used in determining the entry point. Although the program is at times discretionary - the trading does have a systematic component in it. The system has a set of rules which apply to all trades, but which are not 100% systematic - meaning they could be overruled if they do not make sense in a particular situation. But in general, this set of rules rejects a majority of trades and this explains why often the Advisor is only invested in one or two markets.
On the risk management side - Dighton uses its own method of both money and risk management. On the losing side, if the market goes to some extent against an existing position, losses will be limited. This limited amount is not calculated using a fixed stop loss level or as a percentage of capital. Instead, Dighton determines from the charts and other factors when a position has to be exited and losses have to be realized. Many times, Mr. Moiseyev will rather look at the time frame and determine in that window if the trade still has the potential for profits or has to be exited.
The Advisor's basket of futures they look at for trading covers most of the liquid US future markets like currencies, electronic e-mini stock indices, bonds and notes, energies, grains, metals and other "soft" commodities like cotton and coffee.
Jan. 22nd - Mar. 2nd: Japanese Yen futures traded to a low of 82.38 on 2/12 and a high of 86.08 on 3/02.
|1/22/07 - Buy 1 March Japanese Yen @ 82.81|
2/02/07 - Buy 1 March Japanese Yen @ 82.81
|3/02/07 - Sell 2 March Japanese Yen @ 85.30|
Total Profit: $5,865 (5.86% on $100,000 minimum account)
Past performance is not necessarily indicative of future results, as we all know and must acknowledge. But with Dighton having an average annual return of just over 75% through February of this year, there is a whole lot to like. The drawdown of 24% will likely scare some investors away, but that type of drawdown is to be expected for possible returns at the levels Alex Moiseyev has managed to hit over the past three plus years.
Dighton is not for the faint of heart, however; and its aggressive style will likely mean some big drawdowns in the future to go along with those big returns. Our research into the intramonth drawdowns showed they have reached even higher than that, to just over 30%. But there is a place for non option selling exposure to commodity markets, as well as a place for a discretionary trader of Mr. Moiseyev's talents if you can handle the volatility.
It's important to note that Dighton Capital USA has only been around as a registered United States CTA since the middle of last year. The results prior to that were mainly for the personal trading and accounts managed by head trader Alex Moiseyev
It is also important to keep in mind, Dighton trades in units of $100,000 - meaning an account of some odd number like $125,000 or $186,000 would still be traded as just $100,000. An account of $200,000 trades 2 units of a $100,000 account, an account of $300,000 trades 3 units, and so on.
The final take on Dighton Capital USA is that they do what they say they will. They are active, they tend to zig when others zag, and they do give exposure to markets like coffee and Japanese Yen that you're guaranteed not to get with an index option seller. There are not many discretionary traders who have been successful over the long term, but those that have tend to be very successful - and Dighton Capital USA is heading into that category in a hurry.
IMPORTANT RISK DISCLOSURE
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US Stock futures had another nice rally last week as tensions simmered down in the Middle East. Most of the rally occurred when Crude Oil futures fell quickly as it became apparent that the hostage situation was coming to an end. Positive economic news including a bullish unemployment report on Friday also helped fuel the rally. For the week SP futures climbed +1.50% while NASDAQ futures moved +2.09% higher and Dow Jones futures gained +1.46%. Smallcaps also traded higher with Russell 2000 futures rallying +1.09% and SP Midcap futures climbing +1.26%.
Energy futures backed off their yearly highs after it became apparent the British hostage situation in Iran was going to end peacefully. Tensions still exist and it doesn’t seem like it will take much controversy to push prices higher again but the energy markets have calmed down for now. Last week Crude futures fell -2.41%, RBOB gas futures were down -3.44%, Natural Gas futures dropped -1.59%, and Heating Oil futures fell slightly at -0.85%.
Elsewhere in commodity trading the metals markets continue to rally. High Grade Copper led the way once again due to supply concerns with futures gaining +7.34%. Silver was next inline after climbing +2.16%, followed by Gold which was up +1.55%, and Platinum at +0.88%.
Most other sectors enjoyed a quiet week of pre-holiday trading. The only markets with significant gains or losses were Wheat +1.27%, Live Cattle +1.53%, Coffee +1.46%, Cotton -1.23%, and the Japanese Yen -1.38%.
***Commodity Trading Advisors (CTAs)***
With Q2 now underway and the majority of CTA’s starting the year off slightly in the red (-1.29% per the Barclay Group’s composite CTA average), investors are likely to have a close eye on the next few months of trading to see which advisors push their investors back into profitable territory for the year.
Looking over the range of managers - none have stuck out more than FCI. FCI finished the 1st quarter up +1.5% and has an estimated 10%+ of potential income already booked into the current open options positions. Noting that several of their current positions are short in the energy markets, this past weeks move lower in energies (and today's big sell off), plus next week’s option expiration are currently playing well into their trading. If you did not see our CTA spotlight on FCI a few weeks back here is the link again: http://www.attaincapital.com/alternatives/alt_mar1207.htm#Topic.
In other trading, most short option sellers are looking forward to next Friday’s option expiration, and hoping we don't move too much by then - when most stand to add to the bottom line after having sold at higher prices during last month’s volatility spike. One exception is Argus, which is holding on to several short call positions that have been increasing in value as the markets trend higher – we can expect to see him roll out to further out strike prices should the up trend continue - although it is looking to be a race to the wire with the current pace of upward action looking to put S&P prices right at Argus' closest strikes by next week. Just one point below the strike price means the options will expire worthless.
***Day & Swing Trading***
Trading conditions were very slow last week ahead of the the long weekend for the Easter holiday in the US. On Friday, only interest rate products and currencies were open so the monthly Unemployment report could be released , but promptly closed at 10 AM.
Of the day trading systems last week, Phi Plus Dax was the top performer with profits of +$1,601.96 on a single trade from Tuesday. Compass SP had a small winner on Monday for a gain of +$150. Omega3 v1 Dax had similar results on one trade for a gain of +$131.80. Other systems that sunk into the red were Impetus eRL -$136, OPXP eRL -$330, Russell Daytrade -$420 and BWT Zones Classic SP -$1,000.
Swing systems that were holding long last week fared better than those on the short side. SeasonalST ES and eRL closed out winning long trades that have been on for several weeks for profits of +$1,732.50 and +$2,307.27 on the closed out trades after adding to gains early in the week. On the other side, Tzar continues to give back open trade profits and lost -$750 in the NQ, -$880 in the eRL and -$1,075 in the ES all on an open trade basis.
Interest rates were under pressure most of the week as signs of a fairly b economic environment kept pressure on the sector. Despite a lower trade the action did little to break the current sideways trend that exists in this sector as mixed economic signals have not given market participants a clear idea on long term market direction. Early week activity was firm ahead of the Unemployment release, but the market softened as the report did show a b jobs sector for last month. The recent volatility and lack of trend has sent the long term systems to the sidelines for the time being searching for a breakout of a new trend.
Activity in the currency arena last week was again choppy as differing economic data in the U.S. and abroad kept most markets confined to the recent sideways trade. Continued speculation of interest rate movement from the major international players kept the Japanese currency and the U.S. dollar in a sideways to lower trade. The recent volatile swings have been hard on long term trend followers as most systems remain on the sidelines.
Most Grains and Oilseeds experienced choppy sideways action last week as the sector continued to digest the recent USDA quarterly planting intentions report. The market also seemed to be focusing on ideas of corn planting problems in the Midwest as corn did seem to firm a bit after the recent hard sell-off. The live cattle market posted decent gains on a higher cash and product trade during the week prompting ideas the product market may be at or near the bottom following the recent break. Aberration currently is long BO making +$690.00 (open trade) and long LC making +$592.00 (open trade).
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IMPORTANT RISK DISCLOSURE
Futures based investments are often complex and can carry the risk of substantial losses. They are intended for sophisticated investors and are not suitable for everyone. The ability to withstand losses and to adhere to a particular trading program in spite of trading losses are material points which can adversely affect investor returns.
Past performance is not necessarily indicative of future results. The performance data for the various Commodity Trading Advisor ("CTA") and Managed Forex programs listed above are compiled from various sources, including Barclay Hedge, Attain Capital Management, LLC's ("Attain") own estimates of performance based on account managed by advisors on its books, and reports directly from the advisors. These performance figures should not be relied on independent of the individual advisor's disclosure document, which has important information regarding the method of calculation used, whether or not the performance includes proprietary results, and other important footnotes on the advisor's track record.
The dollar based performance data for the various trading systems listed above represent the actual profits and losses achieved on a single contract basis in client accounts, and are inclusive of a $50 per round turn commission ($30 per e-mini contracts). Except where noted, the gains/losses are for closed out trades. The actual percentage gains/losses experienced by investors will vary depending on many factors, including, but not limited to: starting account balances, market behavior, the duration and extent of investor's participation (whether or not all signals are taken) in the specified system and money management techniques. Because of this, actual percentage gains/losses experienced by investors may be materially different than the percentage gains/losses as presented on this website.
Please read carefully the CFTC required disclaimer regarding hypothetical results below.
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 OF ACTUAL TRADING. FOR EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR TO 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 WHICH CAN ADVERSELY AFFECT TRADING RESULTS.