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System Spotlight: TZAR

June 7, 2004

 

The popularity of the I-Master system in 2002 and 2003 led many developers to consider systems for the once forgotten swing trading realm. Our good friend Ziad Chahal may argue that he already had a good swing trading system in Onix, but he none the less launched the Tzar swing trading system in March of 2003. The following year has seen solid performance by the system - which is best traded on the e-mini markets in the Dow, S&P, Nasdaq, and Russell. Attain highlights the Tzar system below:

Who is the Developer?

The Tzar system was developed by Alfaranda CTA, a long time system development company owned by Ziad Chahal. Ziad, began writing systems in 1996 after his interest in the futures market was sparked in 1993 by the possibility of returns uncorrected with the stock market. At that time he was running his own consumer electronic business and was seeking some type of diversification.

He ended up losing money on discretionary trading, but immediately challenged that outcome through the research of systematic trading approaches. Only through a systematic approach, Ziad concluded, could traders avoid falling prey to their emotions where trading decisions are made by simply "shooting from the hip".

While researching for his trading systems he studied and obtained his CTA license in 1996. While studying he became a fan of the book “The Futures Game: Who Wins, Who Loses and Why”, which he recommends to all traders. Mr. Chahal's system research has resulted in over 20 systems over the years, with the most recent batch of AlfaMaxx, Brixx, and Tzar considered by Ziad to be the culmination of his years of effort.

Ziad currently resides in Lebanon with his wife of 26 years and his four children. He equally attends to his business as a trading system vendor and CTA. He continues to research and develop more trading systems which he hopes to release in the future.

How does it Work?

TZAR is a swing trading program based on technical trend and contra-trend models. Technical indicators are used to inform the system-logic that it should treat an ongoing market move as part of a consolidation pattern that should be reversed or as part of a trending situation that should be followed with trades placed in the same direction.

The switch between both functions is 100% mechanical and can happen in as little as 48 hours. Whether it is a trend or a contra trend consideration, TZAR does not carry any long or short bias. The conditions set to go long or go short are 100% symmetrical.

TZAR uses end-of-day bars. Only one set of orders is issued each day and that's done as soon as the traded market has closed its main pit-session. These orders are then placed for execution and potentially filled during the normal (pit) hours of the next trading day. There is no need to wait for the market to open and then calculate a price of entry that is an offset of the opening price like many other swing trading systems. New entries ( flat to long or flat to short ) and position-reversals ( long to short or short to long ) are handled with orders that can be issued targeting fills at Market-On-Open prices or fills done at specific predetermined LIMIT prices.

Exit-wise, the system carries a double protection layer: First, there is normal stop-loss order that is meant to protect against "catastrophic" moves. This stop is usually far away, meaning as much as 50 to 75 points away in the S&P futures. Similar adverse moves might occur while the system has failed to take an earlier exit. The second exit type is a price-based trigger that activates a market-on-open exit. This trigger is based on an adaptive volatility function, yet does not change during the life of the ongoing position. On average, TZAR takes about 20 trades per market per year ( excluding rollovers ) and is in the market around 94% of the time.

Attain Comments?

Tzar is the latest in a long line of good looking systems from Ziad Chahal and Alfaranda CTA, having been released in Spring of 2003 and actively traded since late last year. The biggest positive we see of Tzar is its very robust hypothetical testing across over 100 commodity markets. Alfaranda has gone beyond what most long term system developers test on, and way, way beyond what most swing trading developers test on. The results of the 100+ test are very encouraging, with just 10 or so markets seeing negative returns over that period. That would be an impressive number for a long term system designed to work on many markets, but gains extra props for being accomplished with a system designed solely for stock index futures.

Another positive sign is its impressive testing across 18 different stock index futures markets. By contrast, many swing trading stock index systems test very poorly on any markets outside of the US stock indices. Tzar was positive across all 18 global stock index futures markets in testing. Many of these markets are not practical for trading, however, causing Alfaranda to focus on just four US stock indices for its recommended portfolio.

One characteristic which is both a positive and a negative is the system's use of wide stops, which can be as much as 50% of the underlying futures market's value. (50 to 75 points in the S&P). These wide stops can take a big dent out of an investor's equity when hit, but they also allow the system "more room to work" by avoiding the choppy periods by simply holding it position.

A prevalent risk in trading Tzar is its design of being in the market nearly all of the time, and holding positions overnight. It is not too hard in today's world to imagine a terrorist attack or similar event which could shock the markets, and cause severe movement against an open position.

It is also important to note that Alfaranda's previous website no longer exists, with systems such as Zeeport, Onix, Weaver, and Basis II, no longer offered. This can be a cautionary warning about a developer, as the previous systems at one time looked as good as Tzar. Indeed, some of the aforementioned systems suffered huge drawdowns(Onix), some had flat performance for over a year(Zeeport) and some have evolved into new systems (Basis II became Brix).

For our two cents, Mr. Chahal is not hiding his previous systems, but rather more confident in his current ones, including Tzar. With the backtesting listed below, it is difficult not to be confident. Trading results using Attain's actual customer fills can be found on our website by logging in to www.attainaccess.com..