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System Spotlight: Spartan ES
August 14, 2006
It is often hard for new systems to break through at Attain, as a chicken vs. the egg paradox is created, where clients like to see actual fill results before investing in a new system - but the new system needs new clients in order to start building a track record of actual fills.
The answer to this dilemma is for the system's developer to fund an account and trade the system his or her self. Many developers don't follow this path, however, for lack of funds or a dearth of courage. But this month's system spotlight, on Spartan ES, is the story of a developer who had the courage and confidence to back his own program, and has been rewarded with 5 straight months of profits since starting. This month's system spotlight is on the (so far) undefeated, Spartan ES.
Who is the Developer?
The developer of the Spartan ES system is Joseph Ford, of Wautauga, Texas just outside of Dallas.
Mr. Ford's background is in science, of all things, with a BS in Biology and an MS in Aquatic Biology from Stephen F. Austin University. Through these disciplines, the analytic foundation of system development began for "Joey", as he delved deeper and deeper into number crunching and statistics while measuring and analyzing water samples.
Joey became a student of the equity index markets in 1996, where he first began following and trading the S&P 100 (OEX) using the analytics background science had afforded him. In 1999, Mr. Ford began publishing OEX option day trading suggestions via the internet, which he continues this day.
Trading & publishing emini day trading suggestions became an obvious and natural fit for Joey, and he started to devote a greater amount of his time to this in 2003 - with an emphasis on the S&P and Russell emini. But running a business full time and trying to day trade his own account became difficult to maintain, and an automated strategy started to appeal to Joey more and more. This led to the research, development, and implementation of a needed swing trading system on the S&P emini, which he named Spartan ES. The system was developed in 2005 and went live in 2006.
Visit the Mr. Ford's website for more information on the developer: www.daytraderfutures.com
How does it Work?
Spartan ES is swing trading system which operates on e-Mini S&P futures, holding positions for several days to weeks.
The main logic is a trend reversal trading system. A reversal signal typically occurs after 3 - 5 weeks of trending prices in which the market's momentum eventually fades and price reverses. The system doesn't try to predict where the market will reverse - or when - it simply lets the market show when those reversals happen.
The idea is simple, according to Mr. Ford, and goes something like this: . Short term trends typically last 3 - 5 weeks. When fresh money is no longer entering the market, the S&P pulls back because its the least path of resistance. Spartan's indicators quickly pick up on this pull back and signal an entry. The opposite is true for buy signals, selling gets exhausted, new money flows hit the street and the least path of resistance is to the upside.
The Spartan ES indicators hope to "sense" this change in sentiment via an expansion of momentum. Profit targets are adaptive to current market conditions and are calculated via a proprietary indicator. The higher the current volatility, the greater the targets. The targets do move on a daily basis with each daily bar close and act as a minor price magnet. Therefore, the faster a move develops, the greater the target. If a move takes many days to develop, the magnetic effect kicks in and the target size is reduced.
The idea is to get in and get out as quickly as possible, trying to take what the market will give you with with minimal exposure. If a trade triggers its stop (typically 25 - 50 points) it can also reverse direction, but not always. If the system does reverse price, it rides the wave indefinitely until a new signal in the opposite direction occurs.
The system averages 9 — 10 trades per year with an average holding period of 10 days.
The theory is that in entering the market in a trend reversal manner, you stack the odds of success in your favor. This is done in three ways according to the developer - One, the market has run out of momentum, whether that be buying interest or selling interest, so the chance of a continued move against you is low. Two, equity index markets have an elastic effect where price tends to revert to the mean after an extended move. Spartan ES's targets are in the path of this migration from the extended move to the mean. Three, Spartan's exposure to the market is limited to approx. 10 days on average as this is the general time needed for price to consolidate gains or losses.
One thing it is very important to look at with a new system is how its actual results line up with its backtesting. You of course want to see the nice upward sloping equity curve continue on in real time trading. Our first comment on Spartan ES is to look at how well the post-release, actual trading is lining up with the backtesting.
The backtesting shows an average annual return of 39%, the actual fill results show an annualized return of 49%. The backtesting shows a winning percentage of 76%, the actual fill results are clocking in at a winning trade rate of 83%. It's very impressive to see a system tracking its backtesting so closely in real time.
The system’s secret so far seems to be its ability to avoid false moves and other market head fakes, which usually encourage more active systems to enter the market. This has kept the system away from the whipsaws which have plagued other swing trading systems operating on the stock indices.
Finally, something needs to be said for developers who trade their own product alongside their customers at Attain. More often than not we are approached by system developers who are not willing to risk their own funds on their own strategy even though they expect their customers to put their hard earned $$$ at risk.
Mr. Ford insisted that he trade his own account on his system before allowing any customer funds to trade the product, and he continues to trade the system for his own account (good choice, given the returns) At the end of the day, it is refreshing to find a developer who is willing to stand alongside his customers and put his own money at risk. This proves a developer is just as interested as you are in having the program make money, and not just content in taking in lease fees each month.
There have been very few success stories swing trading the S&P futures over the past few years, as it has been a very tough environment in which to make money. But Joey Ford and his Spartan ES program have started to write a success story of their own, leading us to recommend keeping a very close eye on Spartan for an opportunity to add the system to your portfolio.
- John Cummings
IMPORTANT RISK DISCLOSURE
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US Stocks fell again last week as terrorism fears scared many traders out of the market. Many traders thought that the previous week’s interest rate pause would cause the market to rally but that was not the case as SP futures fell -1.07% last week. NASDAQ futures also fell into the red with NASDAQ futures losing -1.29%. However most of the weakness could be found in the smallcaps with Russell 2000 futures falling -3.07% and SP Midcap 400 futures dropping -2.57% for the week. All these losses occurred even though the Fed decided to at least temporarily pause from raising interest rates last week.
Even more surprising was the fact that the stock losses came as energy prices were moving lower despite the terrorism fears. Crude Oil futures remained unchanged for the week and remained stable even though BP Oil had to shut down one of the main oil lines in Alaska due to corrosion. Unleaded Gas futures sold off hard on Thursday and Friday (-7.49% for the week ) perhaps in response to an impending deal over the Middle East conflict at the U.N. Heating Oil and Natural Gas also moved lower with Heating Oil futures losing -2.50% and Natural Gas futures losing -2.52%.
The metals markets also cooled considerably. The highly volatile Silver market pulled back and was down -4.81% last week. High Grade Copper followed suit and fell -4.29%, while Gold (-1.77%) and Palladium (-1.59%) were also down for the week. Platinum futures were unchanged for the week.
Foreign currencies pulled back after the FOMC decision. Eurocurrency futures fell -1.26% for the week, while Swiss Franc futures were down -1.78%, and Japanese Yen futures dropped -1.81%. Dollar Index futures rose +1.20%. US Bond futures moved lower after the Fed announcement and closed -0.89% lower for the week.
Volatility picked up significantly in the grain and tropical markets as markets like Corn, Wheat, Soybeans, and Sugar all suffered heavy losses last week. The lower prices aren’t too much of a surprise after a round of bearish supply reports last week. Sugar output is reportedly at a record level and with prices near all time highs who can blame the farmers? However, this commodity appears to be heading much lower after losing -7.29% last week. The grains were also hit hard with Corn losing -7.82%, Wheat was down -5.10%, and Soybeans fell -4.82%. Finally, meats rebounded last week with Lean Hogs gaining +4.62% and Live Cattle climbing +3.41%.
Stocks continued their summer lull last week despite tensions in the Middle East and volatility in the energy sector. S&P futures finished the week down 14 points, but several intraday trend reversals made for mixed results amongst day trading programs.
Compass SP was the top performer among the day traders with profits of +$1,725.85 on two trades last week. The program went short on Wednesday for the bulk of the weekly profits but followed it up with a small winning long trade on Thursday. Tanker, by Mariner Futures as well, had one trade last week that made +$650 on a long trade.
On the other side of the world, Phi Plus Dax profited +$437.61 on a total of four trades. Similarly, Omega3v1 Dax profited +$301.63 on two trades for the week. Kappa Dax was active with four trades that were good for +$180.47. BetaCon 4/1 ESX barely stayed in the black with a gain of +$8.47 on one trade from Wednesday.
Elsewhere, Beta Con 4/1 Dax had two trades that lost -$137.22. Epsilon 12/12 Bund traded every day of last week but lost -$242.21. RC Success eRL traded every day last week as well and lost -$305. Impetus eRL jumped into the action twice last week and lost -$330. Beta v1 Dax had one trade that lost -$980.77 while Beta V2 Dax had three trades that lost -$1,259.16. Finally, Rayo Plus Dax had two trades that lost -$1,372.34.
This week’s top system goes to the Tzar suite of systems which combined for a solid gain of +$6,353.50 during last week. Trading the 4 market US portfolio of the eRL, ES, NQ, and eMD Tzar is up just over $20,000 for the year.
The Ping system also had a good week earning +$4,333.80. Ping has been struggling in the face of a trend-less summer; however it is weeks like this that proves Ping is a valuable part of the portfolio.
Other index trading for the week included Seasonal ST eRL +$610, Adaptive Futures US +$520, Seasonal ST ES +$295, Axiom eMD -$491.10, Axiom eRL -$760, Delphi eMD -$1,013.30, SC Trader eRL -$1,040, Targets eRL -$1,070.52, Eclipse eRL -$1,380, and Delphi eRL -$2,470.
Finally FX trading experienced some added volatility during Tuesday’s FED meeting causing for a sharp shift in the currency trends and several systems to get stopped out. The results were as follows: Volcano FX EURUSD +$60, Delphi EURUSD -$80, Volcano FX EURJPY -$115.70, and SC Forex -$1,900
Last weeks big downward move in Sugar and in the grains came at the right time for long term trend followers. Some systems had already established short positions in these markets while others where able to jump in line with the downward moves last week.
One popular trade heading into last week was holding short in Sugar, which has been in a downward trend for most of the summer. Systems holding short positions include Trend Simplicity which is making open trade profits of +$2022.00 per contract and Aberration Plus which is making open trade profits of +$1036.40 per contact. Axiom LT is holding short in the London Sugar contract for open trade profits of +$2385.00 per contract.
Other short grain trades include Axiom LT making +$562.50 per contract (open trade) in Corn. Trend Simplicity is short Soybeans and making +$737.50 per contract (open trade) while Andromeda is making +$1337.50 per contract (open trade). Finally, both Aberration and Andromeda where stopped out of long Bean Oil trades for losses of -$1550.00 per contract and -$1424.00 per contract respectively.
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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.