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'Create your Own' Multi-system Portfolio

June 5, 2006

We've spent countless hours and paragraphs in this newsletter telling you how valuable we believe diversification amongst different systems and markets is to an investor's portfolio, but until now it has been very difficult for individual investors to test their own ideas and see how different combinations of systems perform. Until now....

Attain's online portfolio tool has brought advanced portfolio construction tools to individual investors, allowing investors to see how different combinations of systems perform when traded together.

The Portfolio Tool is Available Here: Create Your Own Multi-System Portfolio Wizard

You will need you Attain Access username and password to access the Portfolio Wizard. If you have misplaced or forgotten your username or password, please call us at 800.311.1145 or click here to have your username and password emailed to you.

Step 1: Pick your Systems

Once you have logged in, you will be on the first page of the portfolio wizard, which looks like this.

To select systems to include in the portfolio report, select the system you're interested in from one of the three menus, day trading, swing trading, and long term, and click the green 'Add to Portfolio' button. The trading system will then be added to the lower "Portfolio" box. Systems are in alphabetical order in each of the three category listings. We have selected the Top 5 systems from our rankings at the beginning of the newsletter to use in these screen shot examples.

If you're not sure which systems to put in a combination, check out some of the most popular portfolios Attain clients and web users have run by clicking on the "click here" link above the Day Trading systems listing of systems on the Portfolio Wizard page - or use the links below:

Popular Portfolios
$10,000	$25,000	$50,000
$75,000	$100,000	$250,000

Step 2: Set the Quantities

The next step for the Portfolio Wizard allows you to enter how many contracts you want to test per system. In the example below, note how we have selected to test Impetus eRL with 3 contracts and AG Mechwarrior ES with 2 contracts. You will also notice the "Portfolio Suggested Capital" in the white box at the bottom of the screen. This is the sum of the developer recommended initial capital levels for each system. The suggested capirtal will increase or decrease as you add or subtract contracts.

When finished setting each system's quantities, click the green 'View Report' button to generate the report.

Step 3: The Portfolio report

After a brief pause while our servers crunch thousands of data points across the combination of systems, the "Portfolio Performance" page appears. Sticking with the portfolio of systems and quantities outlined in the above screen shots, the Portfolio Wizard shoots out the following. Click the images to Enlarge:

While most of the portfolio performance report speaks for itself - there are several parts worth pointing out. First, make sure you notice the hypothetical disclaimer preceding the report. These systems may not have been traded together in this exact manner over this time period, and the composite performance record is therefore hypothetical. The full disclaimer is at the end of the report.

The next cool feature is found at the top right of the screen. The boxes marked 1X, 2X, 3X allow users to change the leverage of the portfolio. In our example above, the suggested initial capital is $163,000. Clicking on the 2X leverage button will cut that equity amount in half, to $81,500 - thereby doubling all of the monthly and annual returns and drawdowns.

Finally - the three green boxes on the bottom left of the screen allow users to modify the existing portfolio. Clicking on the top button will load the exact portfolio in the wizard again, allowing you to quickly re-run the same portfolio with an added system, or different quantity, etc.

The next section of the report lists the all important correlation matrix. Things to be wary of in this matrix include systems too highly correlated with one another, and systems too highly correlated with the portfolio as a whole. If any one system has a correlation coefficient greater than 0.80 with the overall portfolio, you are not getting the diversification you are after - with results relying too heavily on that particular system.

The notes section of the report displays the material assumptions of each system in the portfolio, and specifically over what time period actual client fills were used in calculating results for each system, and how much slippage was used in calculating results using computer generated results.

And the last bit on the screen is the ever-present disclaimer. While many investors gloss over these as regulatory necessities - it is very important that investors understand the risks not just of futures trading, but of building a portfolio in general. Most portfolios do benefit from hindsight (who would include a losing system in their portfolio anyway?), as most investors put the systems that have done best in their portfolios.

Try not to fall into that trap, and instead build portfolios that make sense on a fundamental level as well as a statistical one. What do we mean by that? Well - try and include more than just the top 5 systems as we have done above. Try and diversify between markets, time frames, and developers to get as much diversification as possible. While the portfolio returns may not be as high as a composite of the top performers this year - the long term prospects may be much better.

- Jeff Eizenberg

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.

Feature | Week In Review | Chart of the Week |

Chart of the Week : Tzar eRL Performance Summary

Feature | Week In Review | Chart of the Week |

The Week in Review: Day trading systems enjoy Volatility spike

***Overview***

With Market uncertainty (as measured by the VIX) at 2 year highs, the US Stock market continued to slide in May. NASDAQ futures led the way falling -8.24% with several tech companies including Microsoft and Dell lowering income estimates for the fourth quarter. SP futures were also hit hard falling -3.33% with the retail sector taking the brunt of the blow. Leading retailers including Wal-Mart have all felt the effects of inflation as consumers have cut back on discretionary spending. The smallcaps also sold off hard with Russell 2000 futures falling -6.06% and SP Midcap futures moving -6.51% lower.

Energy prices were also on a roller coaster in May. Unleaded Gas futures traded higher gaining +1.18% as traders expect consumers to be paying more at the pump this summer. The remainder of the energy markets traded lower despite rising political tensions in the Middle East and Nigeria. Crude Oil futures fell -2.77% in May but are now back over $70 per barrel. Heating Oil futures were also down falling -1.86%, while Natural Gas futures dropped -6.19%.

Trading in the grains was mixed as well with Soybeans falling -3.58%, wheat climbing +9.76%, and corn staying nearly unchanged at +0.90%. In meat trading, Live Cattle climbed +7.65% while Lean Hogs fell -0.97%. Meanwhile, in the tropical markets both Coffee (-9.80%) and Sugar (-11.30%) were hit hard during May.

In currency trading the Euro and Swiss Franc traded higher against the Dollar as the EU is expected to begin raising interest rates as well. Eurocurrency futures rose +1.36% last month while Swiss Franc futures were up +1.53%. Canadian Dollar futures (+1.51%) and Japanese Yen futures (+0.52%) also traded higher while both the Aussie Dollar (-0.95%) and US Dollar Index (-1.43%) moved lower on the month. Finally, US Bond futures remained nearly unchanged in May.

***Day Trading***

May 2006 should go down in the books as one of the most lucrative overall months in the past few years for day trading programs, thanks to the spike in volatility mentioned above.

The benefits of diversifying one's assets into short term, day trading models was also very clear in May, as investors could actually profit during some of the stock market's big down days by taking short term short positions. Many day trading programs reached new equity highs in May or broke into profitability for the year after a slower start to the year.

Phi Plus Dax was the top performer last month with profits of +$14,947 per contract. The system was one of the more active programs for the month with 19 trades and often took multiple contracts on high probability days which proved to be beneficial to the bottom line this month. SPmd was close behind with profits of +$12,409 and doubled down a few times as well with multiple contracts.

Three other Eurex systems were right there as top performers for the month. Beta V2 Dax, Theta V1 Dax and Rayo Plus Dax had breakout months with profits of +$8,519, +$7,775 and +$4,477 per contract respectively. RC Success eRL and eMD continued their hot streak, meanwhile, with profits of +$2,547 and +$2,472 per contract respectively. That's close to a gain of 25% for the month based on the developer recommended initial capital of $10K.

Some old standbys also had good months, with Impetus eRL making profits of +$2,033.70 per contract as it has really come alive in the second quarter amongst the higher volatility in the Russell.(you'll see it as the top ranked system above), and Compass SP adding to the bottom line with profits of +$2,012.22 (+$397.50 per ES) for the month.

The excitement didnâ€™t stop there... Beta V1 Dax had four trades for a gain of +$1,989, BetaCon 4/1 Dax gained +$1,878.35 and RC Success ES made +$1,867.50. BetaCon 4/1 ESX made +$1,164.52 trading the Eurostoxx which is similar in value to an Emini S&P. McKenna YM (Mini Dow) had just one trade that made +$88.55 per contract.

There were just a handful of systems that ended the month in the red. Bounce eMD MOC lost -$230 on a pair of trades. Epsilon Bund struggled to find direction in the European bond market and lost -$399.02. Bounce eRL MOC had just one trade after attempting to capitalize on a rebound in the market that never materialized. Kappa Dax lost -$1,268.51 after exiting several trades prematurely that could have developed into good trades if there were given a little breathing room. RC Miracles eMD and eRL both ended up on the wrong (long) side of the market several of the big down days and lost -$2,175.60 and -$2,379.20 respectively. Tanker CL had 8 trades that it would like to take back after losing -$2,500.

***Swing Trading***

May was either a boom or bust month for many swing trading systems depending on the time frame and risk criteria. The swing system of the month for May was SC Trader eRL, which successfully entered short early in the month and then held on to total gains of +$5,090 for the month. SC Trader is a new strategy to Attain and can be found in the New Systems and Computer Backtesting section of the Attain Access website.

Other Boom systems included Axiom eMD and eRL which came out of hibernation in May and captured +$3,777.60 and $3,420 respectively per contract. Targets eRL earned + $1,640.46, Targets eMD added +$1,398.14, AG Mechawarrior ES +$1,222.5, Tzar eRL +$1,060, Delphi eRL +$1,060, Spartan ES +$957.50, and Tzar NQ +$744.80.

Those systems that did not fare as well in May were strategies that tend to focus on longer time frames (i.e daily or weekly bars). In an environment like May where prices turned around very quickly, many longer term strategies experienced swift drawdowns as they lost open trade gains before they eventually reverse. Such systems included Ping Systems -$6,222.7, Pivots Weekly -$4,925, Pivots Weekly NQ -$2,560, Pivots Weekly ES -$1,035, and Hourly eRL -$2,492.94. Other index strategy losses included Eclipse eRL -$1,056.70, Seasonal ST eRL -$1,040, Gettess -$977.50, Seasonal ST ES -$780, Bounce eRL -$690, and Tzar eMD -$610.

Forex trading experienced a difficult May following a large run up in overseas currency markets. After a large run up, markets often tend to consolidate before presenting the next opportunity. This monthâ€™s consolidation ended up with losses of -$1,630 for Hurricane FX, -$4,110 in Delphi GBP and -$5,160 in Delphi EUR. Looking ahead to June we will be looking for the next trends to develop and for the systems to subsequently jump on board!

Finally Energy trading had mixed results with Phoenix Energy earning +2.68% trading the combined mini Crude, mini Natural Gas, Heating Oil, and Unleaded gas futures. Axiom CL 90 lost -$8,350 per contract.

***Long Term***

After a series of great trending moves over the past few months, most commodity markets were due for period of choppiness in May. Some would say that a market pull back and subsequent period of sideways trading is a sign of a healthy bull market, but that doesn't help you when you're stuck in the choppy conditions. Most commodity sectors were choppy, although several markets - particularly the grains - provided good trading opportunities for system traders.

The wheat markets (Chicago, Minneapolis, Kansas City) continued their run as the cash cows for long term systems in May, with systems holding long positions across all three. Leading the way is SEMA4 Symmetry, which is holding long in KC wheat for gains of +$6625.00 per contract and in MW Wheat for profits of +$3975.00 per contract.

Other systems with long wheat positions include Trend Simplicity, with is long in Minneapolis Wheat position making $1050.00 per contract, Brix long in KC wheat for profits of +$2550 per contract, and Andromeda long in KC Wheat for profits of +$5400.00 per contract. Finally, Axiom Long Term is long Minneapolis wheat for profits of +$1337.50 per contract.

Notable trades (both good and bad) from May include SEMA4 Symmetry exiting a long Sugar trade for profits of +$5567.20 per contract. Aberration exited corn for a loss of -$737.50 and mini Crude Oil for a loss of -$2000 per contract, while Andromeda also exited corn for a loss after losing -$587.50 per contract. Finally, Trend Simplicity went long in crude oil several times and lost -$3270.00 per contract after 3 trades. The system made it back on a long Eurocurrency trade however taking profits of +$4637.50 per contract.

Please Login to: http://www.attainaccess.com for the latest updated statistics.

Feature | Week In Review | Chart of the Week |