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The New Breed; Class of 2004

May 3, 2004

 

As you can see from the comments above April was a great month for a host of SP day trading systems. When visiting our website you will find that actual customer traded records for many of these systems are not available. This is because most of the systems including Helix SP, AG-Xtreme, Sniper ES, RC Success ES, and to a lesser extent Blue Wave Zones SP are all new systems that recently started trading at Attain. Not to worry actual trading results for these “newbie’s” will be available after three months of live trading; but in the meantime we would like to explore why the sudden surge in new systems? Who exactly these developers are? What risks do new trading systems pose to the investor? Have we seen this phenomenon before? Finally, what does the future hold for the class of ’04?

Having worked with each new system developer for a time period of three months to a year and have found each to have a fresh new perspective on how to trade the market and each system to have its own unique identity.

In large, we can attribute the newest breed of systems to the recent increase in longer historical market data having become available (1990 – present vs 2001 – present) to the public through various data providers. Prior to June of 2003, system developers interested in the S&P 500 futures, Nasdaq 100 futures, etc were forced to purchase costly data and software in order to test market theory and eventually move that theory to reality by generating live trades at the risk of their account or that of their customers. The risk we are referring to is that of the unknown, which is always prevalent in the market, but at least in today’s world investors can rely on more than 1-2 years of hypothetical performance when evaluating the potential risk and return of their investment. There will always be limiting factors in the data available to developers; however it is getting better and with better data will arise the potential for newer and more accurate trading systems…Lets hope these new guys can set the trend!

Let’s meet the top performing new kids on the block: The Founder Trading family of systems has received much fan fare since their arrival on the trading scene last December grabbing headlines across several trading publications. Their developer is Dustin Dubia was a successful businessman in the cellular communications field before moving into trading. Founder’s benchmark product is Helix SP which can be described in one word “aggressive”. The system looks great in back testing and has performed well in its first month of trading at Attain. However it is not for the weak at heart with a max drawdown of approximately $30,000 and a strategy that trades up to three times a day. Only fully capitalized customers with account sizes of $70,000 to $100,000 per full size SP should consider trading this system. Founder’s two other products Magnitude SP and Cipher SP have also backtested well but are not currently being traded at Attain.

AG-Xtreme comes from abroad. The system was developed by Andrew Gibbs who is a resident of New Zealand and an employee of one of the world’s largest brokerage houses. AG-Xtreme is Andrew’s first venture into the system field and he uses a unique trading strategy based on 205 minute bars to enter and exit the market. The system isn’t quite as active as several of the other but the back testing is just as impressive.

Systems based on the e-mini SP have also become all the rage as developers try to capture profits in the U.S.’s most actively traded market. RC Success ES and Sniper ES both have been developed specifically for the e-mini SP market using volatility based breakout and countertrend strategies in an attempt to capture profits. Both systems have gotten off to a slower start than their full size SP competition however only time will tell who will eventually come out on top.

Because of enormous amount of success these new systems have had in their short trading history it is easy to forget some of the additional risks involved with new systems and new developers. Beyond the potential data issues mentioned above it is also important to understand that developing/writing a system is not easy and what appears to work on a computer simulation can be very different than what will work in real-time. As with every system traded in our office and other new systems that come across our desk (several per week) there are often minor problems that require program updates or rewriting of code in order to ensure the real-time tradability of the system for our customers. For some systems the problems go unresolved and as a result the system never makes it through the 3 month trial period. For this very reason we have taken additional time to evaluate each of the above systems live trading characteristics and later, once live trading has commenced compare the actual customer trading results to that of the hypothetical study.

Finally, in reference to risk, the largest risk any one system poses to investors is being “curve fit” to fit one market time frame (i.e 1st quarter of the year, or because the last 2 Monday’s were positive investors should buy the open every Monday, etc). Curve Fitting is when trading strategies are manipulated to fit a particular period of past data and do not trade as they were designed in the future. Forward testing and stress testing a strategy can tell you a lot about a program before getting stated and are methods we use on any new system before agreeing to trade.

Popularity has a way of turning a brush fire into a wild fire…so is it normal to see systems such as Helix and other new developers become so popular so fast? The answer is yes but again, a cautionary yes as many of the past successes are no longer being traded by our customers. In fact the rise of these programs has come so quickly that many of our investors are in a wait and see mode with respect to moving forward. Having noted successful systems such as LTS Breakout and Zeeport go by the way side after 1 + years of live trading is a reminder to all that there is no true guarantee that even the most thorough testing parameters will produce sure fire future success for any of the above systems. Of course with the unbelievable returns we have seen in the last month it is very tempting to start trading immediately, and it is ultimately up to each individual investor to understand the risks and assess his/her own risk level before deciding to become involved with a new program.

In conclusion; with the rise of these new day trading programs it is very tempting to build your portfolio around a system such as Helix , AG-Xtreme, or Blue Wave Zones. However it is important to remember that systems with extended actual trading records such as Compass SP, R-Mesa 5 SP, and Day Breaker SP have held their own and have done it for years rather than just months. While these older systems may not be as sexy or flamboyant as the new breed they are proven investment vehicles with proven track records. Each set of systems, both old and new, have unique characteristics that should be considered when building your portfolio in search of the smoothest equity curve

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.

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Except where noted, the below Profits/Losses are based on closed out trades. $50 per R/T commission included ($30 per emini) Percentage gains based on developer recommended initial balances as listed at www.attainaccess.com.

April 2004 handed traders and trading systems a consistent pile of market conditions to navigate as volatility levels were high, economic data was positive, and earnings announcements were free flowing.

The performance results were mixed however in favor of the day trading systems which recorded record profits for some and missed opportunities for others.

Many longer term systems (Andromeda, Aberration, Brixx, and Synergy), which had been holding long the interest rate and bond markets were in for a shock early in the month as a result of the April 2nd unemployment figure which sent the stock market soaring and bond/currency markets into a downward spiral eating away a grand majority of open trade profits in

***Day Trading***

Attain Capital’s system of the month turned out to be R-Mesa 5 (please note that in order to be eligible for listing on attaincapital.com a system must have three months of real-time trading results). R-Mesa locked in over +38 S&P points this month to move into the black for the year. Per contract profits in April for the system were +$8661 per S&P and R-Mesa 5 is now up 19.40% for the year.

BWT Zones turned in another positive month, making +14.20 points (+$2400 per contract). The system has been profitable in three of four months this year and is Attain Capital’s leading system YTD (year to date). Blue Wave Zones has returned 43.40% in 2004.

Day Breaker SP also posted another positive month and continues on its steady path for the year. The system has been one of the more consistent day trading systems since inception as it trades less often and takes profits more quickly than most systems. Day Breaker SP made +$3211 per contract on just nine trades.

Compass is glad to see April in the rear view mirror. A few positive late month trades helped to pick up some of the early pieces, but the system had a rough go at it for the month losing -$5806.50 per contract. The Sextant reversal strategy wasn’t much helps either as it lost -$3586.50 per contract on four Compass reversal trades.

The Trading Visions, Inc. family of day trading systems had a relatively quiet month. Early Bird III did not issue any trades and Cobalt NQ only traded twice. Cobalt finished the month down -$269 per e-mini contract on two trades. Impetus eRL had an up and down month as it seemed to go back and forth with winning and losing trades. The end result was a break-even trading month, with the loss of -$261 per e-mini contract mostly due to system costs and commissions.

If action is what you’re looking for Helix SP is your system. The system ended one of the most astonishing trading months ever recorded at Attain. Helix SP made +$20,340 per contract as it traded over thirty times. The system hit the month’s big moves perfectly, making over $4,000 per contract on 4/20 and 4/21. Helix is not eligible for real-time posting on www.attaincapital.com quite yet, but after another couple of trading months the real-time results will be made available. For more information please e-mail invest@attaincapital.com.

The other new kids on the block at Attain traded with mixed results. AG-Xtreme made +$7826 per S&P contract, RC Success was down -$299 per e-mini and Sniper ES lost -$2131.50 per e-mini. Please see the second section of today’s newsletter for more information on this “new breed” of day trading systems.

***Swing Trading***

Although the month of April proved to be a busy one for day trading systems in the realm of swing traders it was rather slow. I-Master spent the month giving back some of its early profits as it refused to reverse its profitable short positions mid month and gave way to the upside that followed.

I-Master was only able to make profits in the Nasdaq market. The system locked in $770 per e-mini contract on seven trades. In the S&P the system lost -$1940 per e-mini contract on just three trades. I-Master traded only four times in the Russell, losing -$1560 per e-mini contract. The worst market for I-Master this month turned out to be the Midcap as it lost -$6243 on eight losing trades.

Tzar suffered the same fate as I-Master this month and was unable to come away with profits. The system lost money in all three markets on two trades per market. In the S&P the system finished down -$2572.50 per e-mini, and in the Nasdaq it lost -$1470 per e-mini. Tzar was hit the hardest in the Russell market, losing -$3700 per eRL.

***Long Term Trading***

Long- term systems saw a large sell-off in both foreign currencies and bonds. The trend stated early in the month and continued throughout the month. Many long-term systems gave up open trade profits from long trades early in the month but were able to establish now profitable short positions.

Unemployment figures made April 2nd the largest single-day move in the Bonds as the market traded down as much as 4 ½ basis points in the trading session. With the FOMC’s statement that interest rates are expected to go higher at some point in the near future (12 months); many systems have begun to try and capitalize by reversing to short positions after being stopped out their recent long trades.

Brix is holding the Bonds short making +$3375 per contract and the Ten-Year note short making +$2468 per contract. Checkmate is holding the Two-Year Note short making +$1343 per contract. Mesa Bonds and Mesa Notes suffered large losses early in the month but are slowly coming back to life holding both contracts short making +$906.25 and +$453 per contract in the Bonds and Ten-Year Note.

In the currencies, Trend Channel is holding the Eurocurrency and Yen short making +$1275 and +$862.50 respectively. Dollar Trader is holding the Eurocurrency and Yen short as well making +$2887.50 and +$1462.50 per contract.

Finally, coming out on top was Synergy…The system entered long the London Copper on May 14th of last year (2003) only to exit just over 11 months later for profits of $22,822.71 per contract on 1 system trade or 4 total trades (rolled over). The system also hit several profit targets throughout the period, which in then end helped to carry the system through its recent drawdown. Many eyes will be on metals markets as demand from China continues to slide and may present selling opportunities for various systems in the months to come.

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

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   |