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System Spotlight: Helix - www.foundertrading.com

September 13, 2004

 

It has been hard to travel too far in the system trading universe this year without running into the name HELIX. This day trading system announced its arrival in 2004 by being ranked #1 in Futures Truth - then backing up the hypothetical performance with an unbelievable gain of over $22,000 per contract in April.

Never ones to pass on the next hot thing, investors poured onto the Helix system following its impressive April like moths to a flame - and were similarly burnt as the system suffered three losing months in a row. The popularity of the system led to the developer removing it from Futures Truth (for fear of too much attention and therefore overtrading), and swirling rumors of Russian hackers, closing the system to new investors, and launching of a fund.

Amid this roller coaster ride - Helix kept plugging along, bouncing back from a three month drawdown by posting over $18,000 in profits last month. Suffice it to say that Helix is on the minds of many trading system investors, making this month's system spotlight an easy choice - the Helix S&P day trading system:

Who is the Developer?

The Helix system was developed by Dustin Dubia of Founder Trading Strategies. Mr. Dubia is the epitome of the self-made trader, having dropped out of college in 1994 to start his own business running a chain of cellular phone stores in California and Washington state.

After working hard to build up some risk capital, Mr. Dubia tried his hand at investing in 1996 when he began trading S&P index futures. Dustin was hooked immediately and hasn't stopped trading since. But like many developers before him, the Helix developer soon found that following an objective trading plan appeared to be the best way for him to profit from any financial market.

With seven years of experience behind him, Dustin began trading and developing system full time in 2003, launching Founder Trading and its flagship system Helix that year. Dustin was born and raised in California, and enjoys playing chess, a friendly game of poker, or hitting the links for some golf in his free time. Founder Trading also offers the Cipher and Magnitude systems.

How Does it Work?

All of Founder Trading's systems rely on simple observations of market behavior as evidenced by that market's price action. They are not optimized, mathematically complex trading algorithms such as moving averages or price oscillators, with Helix having no more than a single mathematical variable.

While watching Helix day in and day out gives many the impression that the system is a counter-trend system - Helix is actually a combination of both trend-following and counter-trend models. Helix is comprised of twelve different subsystems, with those subsystems including strategies ranging from breakouts to reversals, and pivot points to the previous day's price action.

Helix is a very active system capable of up to three trades per day. The system often establishes a position early in the day - and will hold that position seemingly forever should the market move substantially one way or another. If prices appear to be in a consolidation phase, the system usually reverses direction - hopefully at a profitable price. The system does employ a reversal logic which puts it in the market most of the day.

Both Buy and Sell signals are mirror images of each other, meaning Helix is not optimized for a buy or sell side bias. Similarly, exits are exactly the same for both long and short trades. For trades held through the end of the day, the system gradually moves its stop closer to the market throughout the last 40 minutes of trading to allow the system to minimize losses and maximize gains.

The system is designed to allow the market "latitude", with the risk per trade amounts seen in Helix often larger than most day trading systems utilize. Founder Trading's view on stops is that: "they should not materially affect a given system’s performance; allowing it to do so is just another form of optimization. We employ stops merely to eliminate extremes of market action, as determined by the market traded. We allow the market to tell us where a stop should be, not some arbitrary dollar amount that fits our risk profile but will ultimately cause a much larger drawdown than would otherwise occur, through a long series of stopped-out trades."

Attain Comments:

Wow! That little word best sums up our reaction to Helix after seeing the program at near max drawdowns then near new equity highs in a very short period (May – August). The system is aggressive - trading several times per day while selling at prices and times other systems shy away from. To post over $22,000 per contract in a single month(April) day trading the S&Ps is similarly amazing.

But the obvious question surrounding Helix is: "At What Cost". There is no such thing in any type of investment as high profits and low risk, and Attain has been very cautious about Helix for that reason. The developer smartly recommends $70,000 for trading the system, and rightly so given hypothetical testing shows a drawdwon of approximately $35,000.

The aggressive nature of Helix may make it a good fit for several portfolios which have day trading systems which rely on large daily moves and market follow through to profit. Helix doesn't necessarily need large moves or a market closing at its highs or lows, because it contains subsystem logic designed to profit in choppy, directionless conditions. Its ability to profit in conditions which are less than ideal for systems such as Compass and R-Mesa

Execution:

Because the system will attempt to trade any condition it sees, instead of filtering conditions out, this system does trade very often. This characteristic makes good execution extremely important. At an average of 35 trades per month, just one tic of slippage per trade equals $875 per month.

Attain compared our clients performance utilizing Helix, with those of the broker executing the tracking account reported on the Founder Trading system website, and found the Attain advantage to be just over $50 per trade, and $1,761 per month. On an annualized basis, that represents savings of over $20,000 for the year, or 28% on the developers recommended minimum of $70,000.

It is very important for any investors interested in trading Helix - or already trading it - to insure they are getting the very best execution possible. Many investors wrongly focus on commissions when looking at a system which trades frequently - believing that enlisting a broker who charges less commission execute the signals will save them money.

Table #2 below shows that this thinking is flawed, and that execution makes much more of a difference than commission charges. Consider that over the April through August period, a $10 cheaper commission at the tracking broker would save an investor just $1,700 - while costing that same investor $(8,805 ) in missed profit. At the end of the day the investor at the tracking broker is $7,100 worse off - or $1,421 worse off per month - by paying a cheaper commission. You get what you pay for.