Checking in on the 'Class of 2004': AG Xtreme, Blue Wave Zones, Helix, RC Success, and Sniper.
May 23, 2005
In the May 3rd Alternatives newsletter a little over a year ago, we introduced investors to what we dubbed the "Class of 2004". This "new breed" of systems included AG Xtreme, Blue Wave Zones, Helix, RC Success, and Sniper. View the 3/03/04 newsletter here: http://www.attaincapital.com/alternatives/alt_may0304.htm
With each of these "new breed" systems now having over a year of actual trading history under their belts, we thought it would be telling to 1) check out how they have fared, and 2) revisit the year ago newsletter to see whether we were on or off the mark in our review.
One year later:
Looking at this list of systems one year later, we quickly see that one is no longer trading (Sniper), two have traded about in line with expectations (AG Xtreme, RC Success), and two have had somewhat wild rides with both dazzling returns and dizzying drawdowns (Helix, BWT Zones).
The charts following this section show the equity curve for each of these systems (except for Sniper), with both the computer generated backtested results AND the results using actual client fills. As we only had the computer generated backtest results available one year ago, it is interesting to see how the systems have done "since release".
As we stated in our year ago newsletter, "what appears to work on a computer simulation can be very different than what will work in real-time." The "since release" equity curve is the ultimate test. It is the proof, and in our opinion shows a system's true colors. Whether intentional or not, there are just too many biases built into computer backtesting using past data. After all, you KNOW what happened.
The "since release" equity curves for the Class of 2004 are definitely mixed. AG Xtreme and RC Success started a little slow, but have both been impressive over the past 12 months as they have moved close to new equity highs. It was particularly good to see each system's (AG Xtreme's and RC Success) equity curve maintain the same general slope and consistency.
AG Xtreme was built to capitalize on volatility, and you can see how the system's equity curve flattened out between 2003 and the end of 2004, but has started to resume its upward slope as volatility has started to pick up off its historically low levels in 2005. The system has stayed within its historical parameters and is an excellent choice for investors thinking a higher volatility market environment is in our future.
RC Success has been very consistent 'since release', and has separated itself from the other this year as the class of this 'class of 2004'. The developer touts his other systems as his best, and even has different versions of RC Success at different brokers - but the Attain version of RC Success is the best of the RC systems we've seen and works just fine for our investors.
In contrast, Helix has seen its "since release" equity curve generate a slope nearly inverse of its computer generated equity curve. This is a bad sign, and frankly shows that Helix has been consistently losing money since putting in a new equity high shortly after being released. The mere fact that Helix is showing a negative slope on its equity curve shouldn't be alarming in and of itself, but when paired with a backtested equity curve that shows no similar moves, we can conclude that the system is trading well outside of its tested parameters and should be approached with a great deal of caution.
Our year ago newsletter described Helix in one word: "aggressive". We cautioned that "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." and likewise warned that it was only suitable for "fully capitalized customers with account sizes of $70,000 to $100,000 per full size S&P"
While our year ago newsletter didn't quite focus on Blue Wave Zones, as it was released towards the end of 2003, we thought it deserved mention as one of the "new breed" then, and it definitely deserves mention now. It has been a wild past year for Blue Wave Zones.
Blue Wave Zones burst onto the scene in 2004 as it earned the best performing system honors on its way to posting gains of close to 80% for the year (on starting capital of $30,000). You can see Zones' impressive run to the upside 'since release' in the equity curve graph below. But its been a near opposite look so far in 2005, as the system is down over 56% for the year and has had a drawdown of over 70% (including $50 commission per R/T and the $350/mo system cost).
What's going on here? Is Zones broken? Is it time to pull the plug? The full equity curve below can give us some insight into these questions. Unlike Helix, which is in the midst of a downward sloping equity curve unlike any other portion of its historical equity curve, Blue Wave Zone's current downward sloping equity curve looks just like its computer backtested equity curve in early 2001.
The system had a big drawdown back then, and this drawdown is very similar, both in terms of depth and duration (we hope). While it definitely takes a certain type of investor to be able to stomach such sharp downturns, the silver lining is that the current downturn is within the system's parameters.
Perhaps coming to the rescue for BWT Zones is a new version, due out by the end of the week. Blue Wave developer Randy Sarrow believes in tweaking his systems and keeping them in tune with the current market environment, whether at new equity highs or near drawdown lows. The system has struggled amidst some increased volatility in 2005, and we fully expect Randy's update to address that.
Looking back on the Sniper system, it was a swing trading system designed for the e-mini market which never really got a chance to prove itself. The developers opened an account and traded the system with their own capital, but chose to keep the system to themselves rather than available to the public.
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 |
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Feature | Week In Review | Chart of the Week |
Many investors expected to see activity during a strong week for US stocks which saw SP futures gain 2.90% for the week, and most systems were profitable. NASDAQ futures finished 3.83% higher and Russell 2000 futures gained 4.19%.
The US Bond markets also climbed higher, albeit only slightly. Thirty year bonds climbed over a basis point by midweek only to pull back on Thursday and Friday. In currency trading the US Dollar climbed to its highest levels since late October 2004 as Dollar Index futures climbed 0.60% higher for the week.
Commodities were more active than the financials with grains, energies, and softs (tropicals) all posting big moves. Grains rallied hard due to crop production concerns. Corn led the way climbing 4.91%, followed by CBOT wheat which gained +3.38%, and soybeans which climbed +3.14%.
In contrast, cotton prices fell -6.88% as this year’s crop is expected to be strong. Finally, energy prices continue to move lower as the weather warms. Positive production related comments out of Saudi Arabia caused crude oil futures to drop -3.24% although unleaded gas futures fell only -0.50% last week.
**Day Trading**
The markets were really moving the first three days of the week, but ultimately came to a standstill by Thursday. Most of the systems that were profitable were able to capitalize on the huge upward trend of the first few days of the week. We constantly stress consistency-and this serves as an example of where a few trades can make or break the entire week of trading.
Compass saw gains last week to bring it back to roughly break even for the month - with profits of $2837.50 last week adding to the stellar year it is having so far. Performing similarly was Clipper, which was able to profit $793.30, the majority of which was made the first two days of the week. Day Breaker was very quiet, only electing one trade for the week but was able to make $606.00. The Electric Day Breaker portfolio has really kicked it up a notch recently and profited $745.00 per contract with the majority coming from the eMD and eRL.
RC Success continues to keep its position at the top of the list for year-to date returns and posted another gain of $1,555 last week. BWT Rock N Russ had steady gains throughout the week for a grand total of $1,150.60 per money management unit using the position manager. BWT Zones Russell was also hard at work making $995.70 per contract. Helix, Cipher and Magnitude were all profitable for the week making $557.50, $522.50 and $297.50 per contract. Impetus made a modest $11.60 for the week.
On the losing side, BWT Zones SP lost a total of $850.00 for the week but was able to make up for some lost ground with profitable trades late in the week, while RC Miracles got caught on the wrong side of the market a few times during the week and lost $410 per contract. Finally, R-Mesa traded just once for a loss of $896.00.
**Swing Trading**
With US stocks rising in 4 out of 5 trading sessions last week, swing trading systems were forced to adjust and try and get in line with the short term up trend.
Out of all the system activity last week no system capitalized on the wide range more so than Eclipse eRL. The system entered the week short and was able to lock in a small profit of +$100 on Monday before entering long on Tuesday. The current position, as of Friday’s close, was making +$1,300 per contract and has moved its trailing stop well above break even. Eclipse has been running in a drawdown since late March, however is fighting back here in May after a difficult April.
In other trading Axiom Index started out slow but was able to recover by the weeks end. The only two markets to trade were the ES and eRL. Axiom ES was earning +$332.50 and Axiom eRL was ahead by +$262.50 including both open and closed trade profits. Axiom has also moved its trailing stops above break even.
Tzar, on the other hand, was on the opposite side of the index markets. The system had been holding short since late April to early May and unfortunately was forced out of 1/2 of its positions last week. Tzar ES was the hardest hit losing -$1,965.50 on its short from April 27th. Tzar NQ also closed out for a loss of -$1,280 per contract. Coming into the week both the eRL and eMD were holding short with open trade losses of -$880 and d-$1,280 respectively.
Finally, Mesa Bonds and Notes continued to hold long only to add to their current open trade profits. Mesa Bonds is earning +$6,157.50 and Mesa Notes is earning +$2,657.50 per contract. Bonds are currently trading at levels not seen since February and are not showing any sign of slowing down…..despite the FED expected to raise rates again.
**Long Term**
Long term system investors had an up and down week as most are holding long in the US bond markets and short in the grains.
Andromeda has been the most aggressive system in the bonds as it is holding long in the thirty year, ten year, five year, and muni-bond markets. The system is profitable in three out of the four markets and is posting open trade gains of +$668.75 in the thirty years, +$1637.50 per contract in the ten years, and +$731.25 per contract in the muni-bonds. The five year market has been more of a struggle as the system has open trade losses of -$1175.00 per contract. Andromeda has also been holding long in the Eurobund (German 10 year) for open trade profits of +$1250.00 per contract.
Other systems with long bond positions include Aberration Plus which is long in the Eurobund for open trade profits of +$1430.00 per contract. Axiom LT is long in the t-bonds for profits of +$2075.00 per contract and is holding long in the ten year notes for profits of +$1153.13 per contract. The system is also holding long in the two year notes for an open trade loss of -$362.50 per contract. Axiom LT has also found profits in aggressive markets like crude oil and the foreign currencies. The system is holding short in crude for open trade profits of +$2200.00 per contract. In the foreign currencies Axiom LT is short the Swiss France for open trade profits of +$2812.50 per contract and the Japanese Yen for open trade profits of +$700.00 per contract.
Aberration Plus is holding both long and short in the currencies. The system is making +$400.00 per contract in open trade profits on a short Canadian Dollar trade, while holding long for gains of+$87.50 per contract in the Mexican Peso. SEMA4 Symmetry has taken the same approach and is short in the Yen for open trade profits of +$1212.50 per contract, while holding long in the Aussie Dollar for a open trade loss of -$3620.00 per contract.
Finally, Andromeda is short in the Swiss Francs for open trade profits of +$900.00 per contract. Closed out trades from last week include Aberration Plus exiting a long cotton trade for profits of +$535.00 per contract and a short bean oil trade for a loss of -$796.00 per contract, while Andromeda exited a short e-mini Russell trade for a loss of -$30.00 per contract.
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.