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Strategy Focus: Trading Systems
July 19, 2010
We have done ‘Strategy Focus’ newsletters in the past to shed more light on certain strategy types employed by commodity trading advisors in the managed futures asset class, such as spread trading, option selling, discretionary trading, and systematic multi-market strategies.
And while trading systems sort of stand on their own in this regard, not being a type of managed futures strategy, but rather a type of alternative investment strategy; many investors view trading systems as another type of managed futures strategy when building a portfolio of different managers – finding the diversification they provide, added alpha – etc.
We list the top 5 trading systems at Attain in this newsletter each week, and do trading system spotlights periodically – but have never really gone into depth on trading systems as an overall strategy. Without further ado, our newest strategy focus is on trading systems.
What is a trading system?
A trading system is computer code which analyzes market price action and other inputs, then outputs trading signals on when to buy, sell, put in a stop, take profits, and so on. Trading systems are known by many other names – including automated trading, trading strategies, black boxes, algorithmic (or algo) trading, high frequency trading, pattern trading, trend following, trading models, trading programs, and so on…
But all of these have the same basic make up. They are a compilation of rules, usually programmed into computer code, for how to trade a market. The market can be anything: an individual stock, bonds, ETFs, commodity futures, an exchange rate, and more. A simple example of a trading system would be a moving average cross over system with the following rules:
To enter a position:
1. If the 13 day Moving Average (MA) crosses above the 39 day MA, then buy at open tomorrow.
2. If the 13 day MA crosses below the 39 day MA then sell at open tomorrow
To exit a position:
1. Upon a long entry, place a sell stop at a point equal to the enrty price minus one Average True Range (ATR) and a Sell Limit order equal to the entry price plus one ATR.
2. Cancel either order if the other is filled.
3. Do the same, but in reverse for a short entry.
The grand majority of trading systems are based upon technical analysis as in the example above; which uses two pieces of technical analysis (moving average and average true range). Technical analysis is best explained as a method of finding trading ideas based upon the analysis of past prices only, with no consideration of so called fundamental factors such as supply and demand. (contrast technical analysis with fundamental analysis which considers a company’s product line, profit margins, management, etc)
As it concerns people looking to invest in trading systems, not develop them on their own – trading systems are usually ‘black box’, meaning the end user does not know what technical analysis is used inside of the trading system’s code. The technical analysis inside of the system can be as basic as moving averages, oscillators, and relative strength indicators; or very complex with the use of fibonnacci retracements, neural nets, artificial intelligence, chaos theory, and more.
It is important to note a few things that a trading system is not. A trading system is not the same thing as a trading platform. A trading platform is a ‘front end’ piece of software which allows people to enter orders for trading. Trading Technologies, E*TRADE’s online order entry, and TradeStation are examples of trading platforms; and while you can set up a trading system to trade on these trading platforms – they are not the same thing. And a trading system is not a ‘market letter’ or the like in which so called gurus put out support and resistance levels, outright buy or sell recommendations, or sector rankings. These “calls” are not rules based, and cannot be programmed into code; thus are not trading systems.
What is a Trading System Investment?
Most trading systems are developed by third party scientists or market specialists who either keep the system to themselves to trade with, or try and make a business out of their development by selling or leasing the trading system to hedge funds, CTAs, or individual investors.
The norm now is for the developer to simply lease the use of the system to clients on a monthly basis through a trading system broker such as Attain. A trading system investment involves the system assist broker running the system software on its machines on behalf of the client and monitoring the system signals minute by minute throughout the trading day, entering any buy and sell signals issued by the system into client accounts, while a monthly fee for the system comes out of the client account.
Characteristics of Trading Systems:
Perhaps the most important characteristic of trading systems is that their trading rules can be tested on historical data to see how that set of rules (how the trading system) would have done in the past. There are inherent dangers to doing this revolving around the old saying that hindsight is 20/20; but the ability to look backwards remains a defining characteristic of trading systems.
For example, we ran the simple moving average system outlined above on Crude Oil futures daily data back to May, 2001 – and found that it had 10 winning trades totaling $188K in profits, and 13 losing trades totaling -$65K, for a net profit of $122,000 on the hypothetical backtest with a drawdown of -$44K. (not bad – but again, it isn’t real – it just tells us what this code looks like looking backwards right now, not what actually happened, and not what is going to happen)
Trading system keep your trading consistent, and remove emotions from trading. If you have ever said you wanted to buy a stock when it got down to a certain level, then cancelled the order when you saw the Fed has just raised rates or – you have let emotions interfere with your trading (and I would wager the result was poor).
A trading system will execute its rules no matter what is happening in the outside world, for better or worse. This helps with practical matters such as eliminating the need for you to be sitting at a computer all day in order to place a trade when the perfect set up happens, and that in turn makes your trading consistent by applying the same rules to the market day in a day out, whether you are working, on vacation, or watching the market.
Trading systems have a long volatility profile. We’ve talked about trading systems being a long volatility investment in this newsletter often, and that stems from their internal makeup which more often than not looks to risk a fixed amount, while allowing for profits to run. This creates a return profile in which the system will have winning trades between 40% and 60% of the time (much lower than most would expect), but make more than they lose on the winning trades (sometimes significantly more). In times when markets are moving crazily (like 2008), this long volatility profile allows for the system to risk the same amount it always has, but now make several times more than it normally does thanks to the increased volatility. Many investors put trading systems into a managed futures portfolio containing short volatility option selling programs for this reason.
Two things which make trading systems a nice investment are 1. They generally have lower minimum investment amounts between $5,000 and $50,000 and 2. They can be traded for you by a professional trading system execution firm like Attain.
Finally, trading systems do have some characteristics which some investors may find unappealing. Chief among these are trading systems tendency to be more volatile than their managed futures program brethren. Because trading systems have nobody actively managing them, they tend to have larger swings up and down, and tend to stay in ‘out of phase’ periods longer – causing larger drawdowns.
Finally, trading systems have been plagued in the past by often unrealistic hypothetical results. This is usually a result of an overzealous system developer who may have curve fit the program to show an equity curve which goes straight up, or the result of an unscrupulous broker showing results without the inclusion of commissions, slippage (the difference between where the trading system signals a buy/sell, and where the client actually gets filled because the market is moving at the time of the signal). In fact, Attain was started with the idea to build a website focused on showing investors how trading systems had really done in client accounts.
Difference with CTAs
The most glaring difference between a trading system and a managed futures program is that a managed futures program is actively managed by the manager, whereas a trading system has no active management. It will issue its signals no matter whether it is at equity highs or at a 100% DD, whether there has just been a terrorist attack or it is a slow summer trading day, whether there is to be 1 contract traded via the signal or 1000.
Another important difference between a managed futures investment and a trading system investment are the fees involved. Unlike managed futures investments, there are no management or performance fees involved in trading a system. The investor only pays a lease fee for the use of the trading system. In most cases, this lease fee is a monthly charge between $50 and $500 depending on what market or markets the trading system operates on.
The final big difference between trading systems and managed futures programs is how they handle profits and losses in the investor’s accounts. While a managed futures program usually has money management in place to increase trading as there are profits and decrease if the account is below its starting point – a trading system has no such money management.
Brief History of Trading Systems
Trading systems trace their roots all the way back to 1949 when Richard Donchian launched the first publicly managed futures fund that used set rules to generate buy and sell signals. Obviously, without the internet and computers the systems of the 1950’s were much different than today. Back then system developers relied on ticker tape and charting individual markets by hand. A time consuming task for sure, and probably the only time that system trading was literally more of a “art” than a science. However, despite the challenges that early system traders encountered, an idea was born. Today, system trading has become the preferred method of trading by banks, CTAs, and individual investors from around the world.
The idea of rules based systems trading became more popular amongst traders in the 1980’s when famous traders like turtle trader Richard Dennis and Boston Red Sox owner John Henry began applying mathematical entry and exit rules to the commodity markets. As technology improved, the barriers to entry for retail investors to use trading systems became less severe over time. During the mid -1990’s some trend following models were made available for purchase as investors could use their own personal computers to crunch data and generate signals before calling their broker with trades for the day. It was not until the late ‘90s, that the enhancement of the internet allowed traders to begin running systems on live data and generating signals for their accounts in real time.
The advent of the Chicago Mercantile Exchange’s emini futures in the late 1990’s was the final push for trading systems to enter the mainstream, allowing traders to bypass the trading floor with orders routed to an electronic exchange called Globex. Now, a computer could not just calculate where orders should be placed, but actually place the trade direct on the exchange as well.
Trading systems as a standalone investment through your futures broker have partial roots back to Attain’s founding partner Walter Gallwas. In 1998, Walter asked one of his clients, Jack Telford, if Jack would consider allowing some of Walter's other clients to follow the signals of a trading system Mr. Telford had coded into TradeStation. Mr. Telford said yes, for a small fee - and in doing so the system assist model as it is known today was born.
Prior to that, people purchased trading systems and system developers had to support software, build websites, handle payments, and field customer calls. Today, most system-assist business is done via a monthly subscription to the signals, with the client never having contact with the developer of the system.
That system became known as Compass S&P, and over 12 years and hundreds of clients later; Attain is still trading the Compass trading system for its clients, making it the longest track record of actual client fills for a publically available trading system we know of.
Types of Futures Trading Systems
There are thousands of different futures trading systems which operate on everything from Crude Oil to stock market futures like the e-Mini S&P, with as many different methods for analyzing those markets as there are combinations of the hundreds of technical indicators in the world – making it somewhat difficult to categorize trading systems.
The easiest way we have found to categorize trading systems is by their hold period, or time frame they analyze and trade upon. The following are the four basic time frames trading systems operate on – and by connection, the main types of trading systems:
A day trading system is defined by a single characteristic: that it will NOT hold a position overnight, with all positions covered by the end of the trading day. This appeals to many investors who don’t like the prospect of something happening in China causing the US market to open down -5% against their open position. It also means there is no margin needed for holding positions, which equates to lower minimum investment amounts.
Day trading systems usually focus on a single market, and that market is usually one of the high volume, high liquidity markets such as emini S&P futures, 30yr Bond futures, and Euro Stoxx. They are often thought of as the high frequency trading outlined above, but in reality are no more active than most other trading – with about 12-18 trades per month.
Generally speaking, day trading systems identify a short term trend during the trading day, get in line with that trend, and look for the market to close at or near the high/low in that direction in order to be profitable. Range bound markets usually result in no tardes for day traders, while whipsaw markets which see prices up 0.5%, back down -0.5%, and finishing the day around even (for example) usually cause losses.
These types of systems hold positions for several days to weeks, and again operate mainly on highly liquid markets like the stock index futures, bond futures, and more recently energy futures.
Their general approach is to ride market "swings" for a few days, then exit or reverse the position and ride the swing the other way. This ability to ‘book profits’ after a few days allows them to not require long term trends to be successful – a benefit when traditional long volatility programs struggle during range bound markets. And their ability to hold positions a few days allows for them not to be dependent on the market closing at or near its high or low of the day as day trading systems usually require to be successful.
One downside to swing systems is their propensity to get caught ‘out of phase’. Whereas a day trading system has a new canvas every day on which to operate, a swing system’s trade today can be affected by whether it went long or short yesterday, and tomorrow’s trade affected by what happens today, and so on. This can create a scenario where losing trades beget losing trades until the phase is over with an extended move in one direction.
Despite the above, swing systems have become the most popular type of trading systems – merging the single market, low minimum, fixed risk characteristics of day trading systems with the more room to operate and let profits run multiple days characteristics of trend following systems.
The "old man" of trading systems, trend following is the classic approach employed by some commodity indexes, billion dollar hedge funds, and the infamous "Turtles". Trend following systems generally operate on a portfolio of commodity markets across the grains, energies, metals, softs, interest rates, and currencies. They continuously monitor each market, waiting for each one to "break out" of its normal trading range and begin a long term trend. The system attempts to ride these trends as long as possible. With huge, multi-year trends like Crude Oil going from $60 to $120 and Euro Currency futures moving from 1.50 down to 1.20 - the allure of trend following systems is easy to see.
There are many pros to trend following, including: the ability to ride the sometimes months long trends which do develop in commodity markets from time to time, following several markets and commodity sectors, a variable risk per trade based on the distance between the breakout level and the moving average, and fact that a form of trend following is used by some of the largest commodity trading advisors in the world.
The number one con, however; is the drawdowns which can be associated with trend following. Trend following systems are known for taking numerous small losses during false breakouts, in exchange for large (but rare) large winning trades when markets do trend. For most individual investors, those periods of small losses can prove psychologically overwhelming. Another con is that trend following trading systems usually require larger minimum investment amounts, so that there is sufficient capital to put on trades in several markets should trends emerge and have enough margin to hold those positions overnight.
Overall – we believe in the logic behind trend following systems and believe they will do well over the long term; but know that they will have down periods and large drawdowns, making managed futures programs which offer active management at essentially the same minimum investment amount a better choice for most investors.
Ways to trade trading systems:
While trading systems can operate on various markets, not just futures; our focus in this piece is on futures trading systems. There are many ways you can trade futures trading systems:
You can develop your own system using the built in indicators and backtesting functions of a program like TradeStation, (or purchase a trading system online from someone) and run it yourself, following each signal issued and placing the trades or letting the computer place the trades for you (this isn’t perfect technology yet – and we don’t recommend letting a computer run free following signals unless you have millions of dollars invested in technology infrastructure with backups, auto-failovers for internet connection, generators, and the like).
You can go onto one of the popular websites which list hundreds of systems posted by anyone with an internet connection – then subscribe to follow a system’s signals via email, instant message, or through an auto-trade service where trades are placed directly in your account. The trading system is then run on the developer’s computer, and the signals sent to a main server, which then tells your broker to execute the signals for your account.
The danger of investing through trading systems with this approach is that the trading system resides on the system developer’s computer – not your broker’s or the system subscription site. With the system on the developer’s computer only, there is no telling what that developer is doing to generate signals (buying when his dog goes to the green bowl, selling when he eats from the red bowl?), and no insight into what sort of technology the developer has (is backup in place, what happens when they go on vacation, what happens if the neighbors kid starts hitting buttons on the computer?) And finally, there is no way to know if the developer is changing the code every time there is a losing trade or the like. All in all, this may be a reasonable approach to get a taste of trading systems, but it sounds scary if considering putting a any real money towards trading systems.
Finally, you can enlist a firm like Attain which runs the trading systems on its machines in house. By requiring that developers send their trading system code into Attain to load on its machines, all of the problems with the code running on the developers’ machines are removed. The question of technology infrastructure is immediately answered – insuring a secure data connection and no missed signals, and new abilities such as testing the system on out of sample data or other markets is opened up.
While the trading systems automatically enter orders into the market without human interaction, Attain has a team of professionals monitoring the signals issued by trading systems throughout the trading day; not content to simply let the computers put orders in client accounts without real time human confirmation.
Trading systems have come a long way in the past 10 years, moving from mainly purchased trend following systems to leased day and swing trading systems. Unfortunately, many of the same problems which were around 10 years ago remain, such as developers and brokers showing performance without the costs of the investment (commission, slippage, and system cost), and new issues such as those surrounding automatic placing of trades being signaled by developer’s computers.
But through it all, systematic trading through automated trading systems has remained a viable piece of alternative investments. It is not a place where one should put their entire nest egg, and as noted above is more volatile than investments in managed futures programs; but it does have a place in some investor portfolios looking to boost returns a little or add some long volatility exposure.
To see the performance of our recommended trading systems at Attain, visit our trading system performance page.
IMPORTANT RISK DISCLOSURE
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Feature | Week In Review: Markets diverge with Wheat up 9%, stocks and energies down, and mixed foreign currencies
It was a tale of two halves last week as the beginning of earnings season fueled a nice rally for the first couple of days, while a flurry of dismal economic reports and anemic results from the investment and banking sector sent investors to the sidelines as the weekend neared. Market participants seemed eager to book profits as concern set in that the bump in the road following the best performing week in a year for the stock index futures could be a sign that the market might have gotten ahead of itself. The news from China during the week also hampered market performance as growth numbers released by the government were not as robust as analyst expectations, although the countries growth is still running at a very strong level.
Despite all of the economic drama the Food and Grain sector put in a very strong performance across the board with weather dominating trade as intensifying drought in Russia and dry areas in Europe and China aided strong rallies. Wheat +8.76% led the way with added support coming from a report that suggested world wheat production could drop by as much as 3% this crop year due to the weather damage in Russia. The news also directly contributed to the balance of the grain and livestock prices as Soybeans added +3.34% followed by Corn +3.04%, Live Cattle +2.35% and Lean Hogs +2.32%. The cavalry charge in the soft sector was led by Cocoa +5.64% which was backed up by Sugar +3.01%, Cotton +2.32%, Coffee +1.95% and OJ +1.89%.
Poor economic reports in the U.S. led by weaker consumer price and sentiment led to a correction in all sectors of Stock Index futures. The marketplace was also hamper by weaker revenue showing in the banking sector earnings releases which was not expected by analysts and led to ideas that quarters in the near future may not be as strong as originally anticipated. For the week Russell 2000 futures -2.77% posted the biggest correction followed by Mid-Cap 400 futures -1.03%, S&P 500 futures -0.88%, Dow futures -0.71% and NASDAQ futures -0.33%
Most Energy futures felt the pressure from weak economic expectations despite reports that usage from the previous week had drawn down stocks more than expected, but with future demand growth in question investors seemed reluctant to participate by week’s end. RBOB Gasoline futures -1.03% posted the largest price decline followed by Heating Oil -0.71% and Crude Oil -0.11%. Natural Gas futures +2.66% rebounded from the previous week’s debacle on ideas that hot temperature across the U.S. would spike demand for cooling purposes.
Metals price activity experienced and about face from the previous week as market participants questioned the health of global economic strength after a round of less than stellar reports not only in the U.S., but in Asia as well. Copper -4.28% took on the most pressure followed by Palladium -1.83%, Silver -1.62%, Gold -1.39% and Platinum -1.38%.
Currencies trading experienced added volume on weaker economic developments in the U.S. as the Dollar Index -1.68% felt the pressure of investors fleeing to other higher yielding currencies. The main beneficiary was the Japanese Yen +2.36% followed by Euro +2.25%, British Pound +1.55% and Swiss Franc +0.54%.
Interest Rate futures featured flight to quality buying after the poor economic and revenue reports in the U.S. with 30-Year Bond futures +1.54% and 10 Year Note futures +1.46%.
Last week many multi-market managers had a nice week of trading after a dismal start to July the week before. Long foreign currency including Euro, Pound, and Yen continues to be a nice trade for many programs as the US Dollar has moved considerably lower in July. Leading the pack so far is Applied Capital Systems at +3.59%. As we noted last week Applied Capital is an emerging CTA with a lot of potential and it is nice to see them at the top of the list so far.
The biggest gainer last week was Dominion Capital Management Sapphire, which now stands at +2.38% for the month. Dominion is a shorter-term multi-market trader and they have caught many of the recent short-term moves in the FX, energies, and fixed income sectors. Other managers that are up so far in July include Dighton Capital USA Aggressive Futures Trading +2.42%, Quantum Leap Capital +1.38%, Clarke Capital Global Magnum +1.37%, Clarke Capital Worldwide +1.31%, Futures Truth MS4 +1.17%, Auctos Capital Management Global Diversified +0.65%, and Hoffman Asset Management +0.55%.
Multi-Market managers that are down for the month so far include Futures Truth SAM 101 -0.06%, DMH -0.17%, Accela Capital Management Global Diversified -0.17%, GT Capital -0.23%, Mesirow Low Volatility -0.36%, APA Strategic Diversification -0.54%, Mesirow Absolute Return -0.74%, Integrated Managed Futures Global Concentrated -1.35%, 2100 Xenon Managed Futures (2X) Program -2.63%, Sequential Capital Management -3.02%, APA Modified -3.18%, Clarke Capital Global Basic -4.15%, Covenant Capital Aggressive -6.47%, and Robinson Langley Capital -7.26%.
In short-term index trading the Paskewitz Asset Management Contrarian 3X St. Index Program had a big week of trading and is now up +2.49% in July and is positive for the year! Both the Roe Capital Management Jefferson Program and the Roe Capital Management Monticello spread programs had a nice week of trading as well but remain down for the month at -0.75% and -0.54% respectively.
Option trading managers were faced with some mid month challenges last week causing for a shift in returns from mostly positive for the month toward mixed. New upward momentum in both the grain complex and foreign currencies causing for diversified managers to enact defensive measures while Index Option managers continued their strong month thanks to range bound index markets. Option managers currently in the black for the month include ACE SIPC +1.68%, Cervino Diversified Options +0.94%, Cervino Diversified 2x, Clarity Capital Management +4.10%, Crescent Bay PSI +1.03%, Crescent Bay BVP +2.91%, HB Capital +0.05%, and Kingsview Management +0.51%.
Those option trading managers in the red for July include, ACE DCP -2.10%, FCI OSS -1.26%, FCI CPP -0.16%, and Liberty Funds Group -5.52%.
Specialty market managers are holding relatively steady for the month with most managers +/- less than 1%. The one program that is making a mark thus far has been Oak Investment Group which is ahead +1.09% through Friday. Oak trades exclusively in the Agriculture Options market and has been on the comeback trail since dropping over 30% in March. Other estimates are as follows: Emil Van Essen Low Minimum Spread -0.25%, NDX Abednego -0.18%, NDX Shadrach -0.10%, Rosetta Capital -0.22%, and 2100 Xenon Fixed Income -0.50%.
Trading systems had a rough go of it last week. For the majority of the week day and swing systems were in the red. However, day trading systems took advantage of the sell off on Friday and were able to pare back their losses.
Taking a closer look at the swing systems, most of the trading systems got short early on in the week and were hurt by the rally that was taking place in the equity markets. For example, Strategic TF got short early on Monday and held on through the rally on Tuesday and got out near the close on Tuesday for a loss of -$2,120.00. Other negative results were Jaws US 60 at -$530.00, Moneybeans S at -$580.18, EVP 1 US at -$685.00, Jaws US 400 at -$780.00, AG Mechwarrior ES at -$830.00, Bam 90 ES at -$1,260.00, and Strategic EMD at -$1,810.00.
Some swing systems were able to make money last week though. Polaris ES stayed quiet early on during the week but then Polaris got short at the close on Thursday and rode the entire 2% move down and got out at the close on Friday for a profit $1,190. Other positive results were Bounce ERL at $50.00, Bounce Filter ERL at $60.00, Strategic NQ at $185.00, and Waugh CTO ERL at $760.00.
On the day trading side, most systems struggled early on in the week but did well at the end of the week. Upperhand ES was one day trading system that turned its fortune at the end of the week. On Thursday Upperhand got short early on and was actually up on the trade but got hurt by the 7 point jump in the last 30 minutes of pit trading in the E-Mini S&P market and took a loser of -$205. But then on Friday Upperhand got short in the morning and rode the entire move down and got out at the close. For the week Upperhand ES made a profit of $440.00. Other positive results included Beta-DT ERL at $98.48, NPI Traders C at $182.50, Waugh ERL at $285.00, Clipper ERL at $290.00, Bounce MOC ERL at $520.00, PSI! ERL at $1,000.00, and Rayo Plus DAX at $1,317.50.
Unfortunately, there were some day trading systems that couldn’t reduce all their losses. Compass SP got short on Wednesday and Thursday but got stopped out both times by the rallies that took place during the end of the day in the S&P 500 market. On Friday Compass once again got short and benefited from the big drop in the S&P market. For the week Compass S&P was down -$145.35. Other negative results were Compass ES at -$102.50, BetaCon 4/1 ESX at -$290.00, ViperA EMD at -$639.33, BalancePoint ES at $722.50, and NPI Traders CL at -$833.30.
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.