2007 Trading System Annual Review
January 7, 2008
RT Viper YM earns top spot as Day Trading systems return in 2007
What a difference a year makes. Our annual review last year spoke of the VIX volatility index being at 20 year lows, and how several systems didn't see as much movement in the markets they trade. Well, 2007 sure changed that, with the VIX volatility index spiking several times during the year to bring the average reading for the year about 1.5 times higher than in 2006.
This volatility spike marked the return of the day trading system, which had been nearly given up for dead as a viable type of trading after suffering through the low volatility of 2004-2006. Three of the top five systems at Attain were day trading systems, as day traders such as Compass (which hit new all time equity highs once again this year - its 8th year of trading) really benefited from the market coming back into day trading systems' comfort zone of wider daily ranges and more days closing at or near the high/low of the day.
The top performer amongst all trading systems at Attain with actual client fill results was day trader RT-Viper YM, which netted $7,200 in profits on an initial $10K investment for annual gains of 72%. But while day traders such as RT and Compass were performing, so too were systems highly rated in 2006. Eight out of the ten systems listed in Attain's Top 10 2006 performers were profitable in 2007, showing that most sought after of traits in a system - persistence of returns. These included the Bounce suite of systems, Ping ES, Mesa Notes, and Tzar ES & eMD.
Elsewhere, while we don't currently track the fill by fill results of long term, trend following systems such as Aberration, Checkmate, and the newer Relativity - we can tell you that trend following did make a comeback thanks to big moves in Wheat and the Dollar, and that they generally did well in 2007.
There were a few newcomers of note such as Signum and Waugh which came onto the scene in 2007, while there were struggles amongst other systems - mainly Mosaic, Adaptive US, and AG Mechwarrior.
Looking ahead to 2008 - with a weak US housing market, more shocks from the credit market likely, a presidential election looming in the US, $100 Oil, and continued instability in the Middle East, we fully expect volatility to remain high, if not eclipse 2007 levels. That would play right into the hands of most trading systems, and it could pay to add some systems as a volatility hedge to your portfolio.
2007 also marked the expansion of Attain's recommended CTA list, with several head of class programs being added. Attain will be doing a CTA by CTA review newsletter in about two weeks when the majority of CTAs post their final numbers for the year. But for now, you can check out our recommended CTAs by clicking here.
The following section lists a system by system report of many of the popular trading systems tracked by Attain, with a link to that system's performance using actual client fills where available, as well as a link to the developer's website. You will see systems that did well, and systems that did not. Many investors ask why we would possibly report on something that has lost money, and the answer is that we report on everything we have experience with - the good, the bad, and the ugly - so investors may get a better feel for what to really expect with a trading system investment.
Hypothetical Model Accounts using Actual Client Fills
| Important Risk Disclosure | |||
|
Day Trading Systems: (listed alphabetically)
BetaCon 4/1 ESX performance / website
BetaCon 4/1 ESX started off the year on the wrong foot after posting losses in Q1 and Q2 but came roaring back with a 79.3 % return in Q3 and a 21 % return in Q4 to finish the year up just under 50 %. Increased volatility in global stock markets played right into the hands of this program, which will catch extended moves in the Eurostoxx market and generally lets it profits run using wide stops that adjust to current volatility and trading ranges. Investors that are looking to get involved with a trading system that is actively trading while U.S. traders are sleeping (at a fraction of the risk to full-size products like Dax and FTSE) should keep an eye on this program, with its small minimum investment of just $10,000.
Bounce: performance / website
The Bounce systems had a second consecutive strong year in 2007, with the market setting up nicely for Bounce's method of catching a quick up move (or "bounce") after the US stock indices (Russell and MidCap) have been in a short term sell off.
Compass: performance / website
Simply put Compass SP was the "comeback kid" of 2007. The system, which had negative returns of -40.30% in 2006 bounced back with gains of nearly +40% in 2007. Perhaps even more impressive is the fact that the system was up +59.80% during the tumultuous summer months of June, July, and August when credit markets around the world simply crumbled and investors were panicking. 2007 also marked the completion of Compass' 8th year of trading, marking it once again as the longest track record we know of for any publicly available day trading product. Looking ahead to 2008, we fully expect volatility to remain high, and with it Compass continuing to see success.
Event Trading (McKenna YM): performance / website
The "Event Trading" method employed by Peter McKenna continued to be loaded with informative and detailed daily emails and constant instant message updates on the market. While the information was, in our opinion, accurate and informative, sadly this method didn't trade more than about 4 times all year on his auto trade advisory and ended the year with negative performance. When trading on fundamentals, discipline is definitely key, and while Peter McKenna is sincere in his interest in making money for his clients, he was not able to pull the trigger on trading opportunities often enough. While patience is a virtue, we feel the program should have been more aggressive in putting on trades in 2007, as there surely was not a lack of event driven market activity; and investors utilizing this system may wish to accentuate it with something which is more likely to capture some of the recent market volatility.
OPXP eRL: performance / website
OPXP eRL finished its first full year of trading with Attain in 2007, but unfortunately that year was a negative one as the system finished the year in the red after posting returns of -xx%. The system employs a simple, short only strategy that looks for weakness in the market just before the NY open. In the past, the developer has found that indications of weakness in the pre-market open period usually meant that stocks would push lower at the beginning of trading. However, this year this theory did not ring true, and the system finished the year with negative returns.
Rayo Plus Dax: performance / website
Rayo Plus Dax was extremely consistent in 2007….right up until December when it posted its worst ever losing month with a loss of 40 % to put it up only 9 % for the year. This program is not for the risk-adverse investor as it often holds trade for the entirety of the European trading session, but it has rebounded nicely from a dismal 2006 performance and did (until Dec.) perform well in the higher volatility environment. Think of it as Compass for the Dax.
RT Viper YM: performance / website
RT-Viper YM (mini Dow) also posted its first complete year of trading at Attain in 2007. This strategy came to us from Mr. David Bean of North Dallas Asset Management - who also has strategies available that swing trade energy and grain markets. The RT-Viper family can be traded on any of mini stock indexes although we have found that they system has had the most success on the mini-Dow contract. This is especially good for day traders who are looking for diversification as most day trading systems are focused on trading the e-mini SP and/or e-mini Russell contracts. In general RT-Viper will trade with the daily market trend and will wait for a pull back in the market before entering its trade (similar to Compass, but on the Dow) This strategy netted the system gains in excess of 70% in 2007.
Waugh: performance / website
Following the surge in market volatility it comes to no surprise that both the Waugh SP and eRL day trading systems had a spectacular year of trading. Based on a 10k recommended minimum per mini Russell the system was up +37%in just 10 months of trading in 2007. The success of the program falls solely on the system designers long time market experience and implementation of several basic trading rules (market range, time, and risk). For anyone considering this program it is also important to recognize that the success has not come without risk (i.e 34% drawdown on Waugh eRL this year) nor is the program expected to be successful in all market environments (i.e low volatility conditions are difficult). In our opinion the Waugh systems are the most valuable as a hedge to short volatility portfolios (i.e Option selling CTA's).
Swing Trading Systems: (listed alphabetically)
Adaptive Futures Index: performance / website
Adaptive US/EUR - Although the same logic is used to trade both the US and European markets, there was a significant difference between the two for 2007. The European strategy powered ahead aprox +35% while the US strategy gave back aprox -40%. In both cases the explosion of volatility (February 27th and summer credit crunch) led to a revision of the initial risk and capital requirements on the system. The system's "Adaptive strategy" includes adjusting both the initial risk per trade and profit targets on trades if and when market volatility expands or contracts - effectively risking less when markets are slow and more when markets are volatile. While this might sound counterintuitive the basic logic is that using a fixed risk per trade may risk too much during flat market conditions or too little during higher volatility causing for increased loses or more stopped out trades. All considered the initial capital levels were doubled from 30k to 60k. Looking ahead, investors should be aware that the Adaptive system has historically entered into 80-90% long trades with a very small number occurring on the short side of the market - this theory that the markets are biased toward the upside + the expanded risk of the system should be considered when adding either program to a portfolio. The Euro system could be in for drawdowns similar to the US system in the coming year, and investors should evaluate whether they are comfortable with such a risk.
AG Mechwarrior ES: performance / website
AG Mechwarrior ES is designed to benefit from increased volatility, and it did just that for the first half of the year as one of the top performers at Attain. But the 4th quarter was not kind to the system as it eclipsed its max drawdown levels at the end of the year and posted negative returns for 2007. The system finished the year down ~ 16 % but does show promise moving forward. The losses in the 4th quarter can be chalked up to bad luck as much as anything else. The system will get out of the trade if the position is losing money 45 minutes after entry, and we saw some incredible moves in those 45 minute spans in Q4 which caused larger than normal losses. The system is unique in that it is kind of hybrid between a day trading system and a swing system because it can and will hold trades overnight but usually only holds positions 1-3 days on average. This is a system which should perform well in higher volatility - but that volatility can't manifest itself in wild reversals on a 45 minute basis for AG to get back in the black.
Bond Surfer 60/Daily: performance / website
The dynamics in the bond market in 2007 proved to be ideal for the Jaws Bond Surfer 60/ Daily portfolio. For the year Jaws Bond Surfer 60 has realized $3870.00 in gains and the Jaws Bond Surfer Daily gained $1562.00. The Jaws 60 operates on 60 minute bars for the day session only and actively looks for trend breakout scenarios intraday. The Jaws Daily utilizes up to 5 days of data to determine an entry point and once in a trade uses dynamic entry/exit levels which are based on recent market volatility. The developer of the Jaws suite of systems is Australian company Midshipman Services, Pty. Ltd. and its owner David Imgraben - and Attain has been trading his systems for clients since 2002. With the recent increased volatility in the interest rate sector due credit woes worldwide, and a nice pedigree backed by 6+ years of actual trading - this system should thrive in 2008.
Bounce Swing Trade: performance / website
One knock on trading systems over the years has been top performing systems one year failing to repeat that performance in following years. In that light, it was great to see the Bounce system follow up top system honors in 2006 with more gains in 2007. Its patient style (only trading a handful of times throughout the year as it waits for the perfect "bounce" opportunity) cost it top performing honors again, but it was a mainstay in Attain's weekly Top 5 rankings of the best risk adjusted returns over the past 90 days. We continue to believe in Bounce and believe its low barrier to entry ($10K min) and low risk per trade make it a smart choice for any portfolio.
Mesa Notes: performance / website
Mesa Notes had moderate success in 2007 as the system posted a nice first quarter, had trouble in the middle part of the year when interest rate futures lacked a definitive direction, the performed in the third and fourth quarters of the year as the market direction became clear - leading to slight gains for the year. The change in market dynamics during the second part of the year with a strong uptrend and intermediate corrections seemed to be exactly what was needed to help the system post a second consecutive year of gains. The system update at the end of 2005 with volatility awareness coupled with the system logic of following the market trend prove to be a chief ally during the past year. Given the ebb and flow of the current world economic conditions, market dynamics should be conducive for Mesa Notes to again post a decent performance for 2008 while providing investors diversification into interest rate futures.
Mosaic: performance / website
Mosaic ERL was another new swing trading system introduced to Attain in 2007. Developed by Founder Trading Strategies, Mosaic looks to capitalize in the market using several proprietary sub systems to determine an upcoming trade. The system is a very active averaging about 20 trades per month and since it is a swing trader positions are held overnight. Mosaic did have early success at Attain, however it has fallen on hard times lately - moving past Attain's stop trade / reevaluation point. With many other systems available which offer more attractive risk adjusted returns, while trading only a fraction of the time, it is probably time to look elsewhere with Mosaic.
PGA: performance / website
Three swing trading portfolios from Mr. Michael Bird called PGA, PGA PowerGrowth 5 and PowerGrowth 6 became available to system investors at Attain in 2007. PGA is the original trading portfolio from Mr. Bird and is comprised of 3 swing trading strategies that trade a combination of the e-mini NASDAQ and e-mini Russell markets. The strategies were developed to work together, and the portfolio will often be short one market while long the other, at any given time. In 2007 the portfolio had gains of 15% which is inline with the average annual return of the SP 500. The PowerGrowth 5 and PowerGrowth 6 portfolios are similar to the original PGA portfolio in that they trade multiple swing strategies across multiple markets. The main difference is that these two portfolios will also swing trade the e-mini SP in addition to the e-mini NASDAQ and e-mini Russell markets. Both of these "fresh" portfolios are still relatively new at Attain and live stats will be posted in the coming months.
Seasonal ST: performance / website
With many news driven events in 2007 moving the market - SeasonalST posted mixed results. As its name suggests this strategy analyzes the markets and enters trades based solely on past seasonal biases (for example, if market goes up 78% of time between Dec 13 and Dec 20, the system will go long for that time period). This reliance solely on seasonal analysis cost the program some losses, as some seasonal patterns during the past year became distorted due to unforeseen events such as the credit crunch, Fed cutting interest rates, etc. The eRL suffered due to the tough conditions, although after a stellar 2006 some sort of drawdown was probably in the offing. Through it all Seasonal ST still produced a $1288.50 gain in ES for a third consecutive annual profit. SeasonalST can be used in all 4 major stock indexes including the e-mini Nasdaq and e-mini Midcap futures markets. Overall, SeasonalST continues to represent a completely different approach than other systems (seasonal versus technical) - and should be considered not only for its performance, but also as a diversification tool for many investors.
Signum: performance / website
The Signum TY (10 year note) and EBL (EuroBund) systems come to us for K-Partners Ltd. of Poland. K-Partners is run by Mr. Ryszard Krug and Jaroslaw Krol who have combined their trading experiences to develop the Signum systems. Signum TY and Signum EBL are the flagship products, and have been designed to swing trade the US 10 year note and German 10 year note markets over extended time periods. Both systems posted impressive returns in 2007 despite only trading for just over 6 months, as their choice of trading vehicle (interest rate futures) put them right in the thick of things as bond markets reacted to the liquidity crunch/credit crisis in the US . Signum TY led the way gaining over 30% while the EBL saw gains of just over 6%. Heading in 2008 we fully expect both systems to continue their run of success and both are excellent choices for any investor who is looking for more bond market swing trading exposure.
Targets eMD & eRL: performance / website
Both Target systems struggled in 2007, unfortunately, with the Russell Targets system only down a modest 1.5%, but the EMD down a hefty 20.9%. It is hard to say why there was such a disparity between the Midcap and Russell, but the main reason was more volatile intraday movements in the eMD. Last year we were calling for good performance for the Targets' systems due to our projected increased market volatility. And while we did get that increased volatility - it manifested itself not only in sharp, half day to two day drops, but also on a 30-60 minute basis, with prices making new lows, then new highs all within an 2 hours. This type of "bungee cord" type volatility intraday is not favorable for most swing systems working on shorter time frames (see AG Mechwarrior's struggles), and more "traditional" volatility with several hour moves in one direction (which we expect to see more of during 2008) should enable these systems to perform better.
Tzar: performance / website
The Tzar suite of systems continues to be among the top performers across all trading systems at Attain. The higher volatility in the stock indices in the second half of the year was a recipe for success for this system, which looks for overbought/oversold conditions in the market and then puts on an intermediate term counter trend trade. The ES was the top performer for the second year in a row followed by the eRL, while the NQ finished the year in the red. But investors trading all three markets in their portfolio were rewarded with a return of over 85 %. The filter developed by Attain to avoid losing streaks was traded on Tzar all year by some clients, with the filtered Tzar earning less than the original in both the ES and eRL, and the filtered Tzar having a smaller DD in the eRL and same DD in the ES. The bad part about Tzar, it is closed to new investors, and only those investors who have previously purchased the program or who trade it through Attain Portfolio Advisors' CTA programs can participate.
Ultramini: performance / website
The Ultramini swing trading system was introduced to Attain in 2007 by developer Mr. Alpesh Patel. Originally written to trade the large cap e-mini SP 500 market the systems logic was expanded to swing trade the e- mini SP Midcap 400 and mini Dow markets as well. As is often the case with many trading systems, the "original" SP 500 strategy has performed much better than the other two markets. The system posted returns of xx% in the ES during 2007 compared to negative returns in the eMD and YM. We expect that the New Year will continue to bring similar results as the strategy should continue to find success in the ES during these volatile market conditions, however the other markets most likely will continue to struggle and should be avoided.
Long Term, Trend Following Systems: (listed alphabetically)
Due to the numerous different portfolio combinations possible with long term, trend following systems, performance reports must be custom built. Please contact us at 800.311.1145 or email invest@attaincapital.com if you would like to see a performance report on any of the systems below.
Aberration: performance / website
Good market trends started to appear again for long term, trend following systems in 2007, and many returned to profitability. But the one problem with some of the sectors that did trend was the volatile swings that accompanied the big moves, which in some instances exhausted possible profits when the correction came. This was the case for some trades that Aberration participated in which was a bit disheartening, although this phenomenon was not wide spread and there were trades in grains and meats that were very profitable. Overall for 2007 Aberration did realize a small gain which is encouraging after tough times in previous years. Looking ahead to 2008 it seems that more trends should continue to evolve (perhaps a massive reversal in Grains, Metals, and Crude) after the surge in volatility in 2007 that was prompted by numerous changes in the supply/demand situations in many commodities prompted by growing economies worldwide namely in China. Attain continues to recommend investors have a portion of their assets trading a long term, trend following system.
Checkmate/Fusion: performance / website
Depending on your portfolio of markets, trend following systems including Checkmate and Fusion produced steady returns in 2007. There were an abundance of trends across all the different market sectors: long oil, grains, metals, bonds and foreign currency; short livestock, US Dollar and natural gas which the programs were able to "ride". There were several ten sigma moves in commodity markets, specifically in long Crude and Kansas City wheat positions that padded the bottom line for these systems. Trend followers were close to throwing in the towel a few years ago as global commodity market volatility was down, but those that have stuck it out were finally rewarded for doing so in 2007.
Relativity: performance / website
New to Attain for the last quarter of 2007 was Dean Hoffman and TradersTech's latest - Relativity. The program could best be described as an advanced trend follower, which not only has dynamic entry and exit points which try not to let big winning trades give back half of their profits (the long time knock on trend followers), but also has a dynamic portfolio of markets which it trades. Trend following systems have long suffered from the program doing well in certain markets, but not in others, and the investor having a fixed portfolio which may not contain those markets doing well. Relativity attempts to fix that problem by dynamically changing the portfolio of markets traded based on current market volatility, the system's success in that market, and so on. The results for those clients trading the system at Attain (albeit only since the middle of last year) have been encouraging, and we look forward to following Relativity more closely in 2008.
Looking for a system review that wasn't included on this list. We researched and tested hundreds of systems in 2007, and would be happy to share our thoughts on any system you are considering. Call us at (800)311-1145 or email invest@attaincapital.com for a review of any system not listed above - or for more detailed information about the above systems.
Chart of the week: 2007 Performance Overview
Top 15 Systems 2007 using Actual Client Fills
( Hypothetical Model Accounts Using Actual Client Fills)
| Rating | System | 2007 RoR | 2007 Max DD | Init Cap (000s) |
|---|---|---|---|---|
| 1 | RT Viper YM | 71.2% | 17.9% | 10 |
| 2 | Tzar ES | 66.4% | 18.3% | 30 |
| 3 | Beta Con 4/1 ESX | 44.4% | 55.1% | 5 |
| 4 | Tzar eRL | 46.1% | 53.1% | 30 |
| 5 | Adaptive Futures Euro | 45.7% | 38.2% | 60 |
| 6 | Compass SP | 45.2% | 32.5% | 30 |
| 7 | Waugh eRL | 37.2% | 55.9% | 10 |
| 8 | Signum TY | 31.1% | 11.5% | 30 |
| 9 | PGA | 26.3% | 30.7% | 35 |
| 10 | Ultramini ES | 19.6% | 18.2% | 15 |
| 11 | BounceMOC ERL | 19.2% | 23.9% | 10 |
| 12 | Bounce ERL | 12.4% | 17.1% | 10 |
| 13 | Bounce EMD | 9.7% | 18.3% | 10 |
| 14 | Jaws US 60 | 8.9% | 28.9% | 10 |
| 15 | Rayo Plus Dax | 8.7% | 45.4% | 30 |
| Important Risk Disclosure | |||
|
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 |
Feature | Week In Review | Chart of the Week |
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.