Cable Glider — 1 win, 0 losses, 1 missed win

Euro Ranger — 1 win, 0 losses, 1 missed win

Darth Fader (ES) — 0 wins, 0 losses

Scalp — 3 wins, 0 losses

Last week, the systems were completely idle.  This week, I caught one nice short side move with the Cable Glider, and I nailed a top with a discretionary long side exit with Euro Ranger.  I shut the systems down prematurely for the week, but each system proceeded to have another winning trade that I missed.  It’s actually nice that the systems outperformed my discretion for once…as I’ve said in prior posts, almost all of my gains this year are from discretion, when in fact I’d prefer to trade systematically. 

I’m trying to learn how to scalp trade effectively, and I placed a few positive trades this week.  It’s not really my style at the moment, but it does feel like a solid way to expand my trading skill set. 

I’m at a new equity peak for the year (+30.9%), and thankfully, for the first time since January, so are the DESword systems.  Each new peak is an affirmation that the systems are still working.  I’m a little bit more skeptical about Darth Fader, but at least it has contributed positively to the overall actual (and walk forward) return this year.

Onward and (probably and eventually) upward.

Cable Glider — 2 wins, 0 losses

Euro Ranger — 2 wins, 1 loss

Darth Fader (ES) — 0 wins, 0 losses

More of the same over the last couple of weeks.  The systems’ win percentage is high, but the size of the wins is small.  Almost every trade is offering an opportunity to override the exit signal to improve the result.  Last week I did not override any exit signals, and I had a Cable Glider trade close with a tiny profit that I wanted to take sooner.  I also saw a Euro Ranger trade turn from a profit to a loss last Friday.

This week, I did override a Cable Glider system and took a profit instead of a loss.  I let Euro Ranger run without overrides, and it went 2 and 0, though the second win was quite small.

It’s another new equity peak for the year for me.  Year to date returns now stand at 26.9%…but again, the new peak is driven by these discretionary overrides.  These overrides have been the source of all of my profits this year, but a quick glance back to last August (in the chart below) shows that my discretion isn’t magical, and I’ve not yet been able to translate any of my discretionary exit rules into mechanical ones.

 

I picked up a copy of Larry Connor’s “Short Term Trading Strategies That Work”, because I keep hearing such good things about it.  Hopefully that will help to stimulate some new research ideas.

Cable Glider — 2 wins, 0 losses

Euro Ranger — 5 wins, 0 losses

Darth Fader (ES) — 0 wins, 0 losses, 1 open short (currently showing a loss)

Darth Fader Discretionary (EC) – 2 wins, 0 losses

The last two weeks were filled with good system trades, good luck, and profitable discretion.  Let’s look at the details, system by system.

Cable Glider, with its weekly range and economic event filters, rarely takes more than one trade per week these days.  In each of the last two weeks, the system was able to take a profitable short entry on Sunday or Monday, then the filters kept it out for the rest of the week.  The first trade’s profit was in the neighborhood of 40 points, and the second one was around 170 points.  I exited the second trade early, at my discretion, and that resulted in approximately 30 pips additional profit on the trade.  This system is still showing the biggest drawdown among the Troika systems, though not by much. 

I’m currently working to see if adding a long term filter from Darth Fader will improve Cable Glider’s results.  I don’t trust the results that I get from Tradestation when I try to mix intraday and daily data, so I may need to do this manually.  If I had applied the Darth Fader directional filter, I would have only been taking short trades since last August.  Since that time, long trades in Cable Glider have returned a net negative 2 percent…nothing eye-popping, but it’s certainly worth applying the filter if it shows itself to have been effective over the past several years, not just the past several months.

Euro Ranger has been plugging along quite nicely, logging 5 wins and 0 losses over the past two weeks.  The fifth and final win comes with an asterisk attached, and it is something that I can attribute only to good luck.  The March Euro futures contracts expire next week, so I was faced with the decision of whether to trade the March contract or roll to the June contract.  This decision doesn’t really come up that often for me, since the system spends more time out of the market than in it.  In any event, I have been using the convention of rolling to the next contract 4 days prior to expiration of the nearest contract.  Since I was holding an open short position this week, I got an email message from Tradestation alerting me that I held a deliverable position, and that I should roll to the next contract by March 11th to avoid liquidation.  So, on March 10th, I switched over to the June contract…it just so happens that the last trade of the week closed profitably when traded on the June contract (which was were I was trading), but didn’t quite hit the profit target on the March contract, and eventually would have been closed out at a loss.  Further testing indicates that rolling 5 days prior to expiration performs slightly better than rolling 4 days prior, so that’s what I will do going forward, both on Cable Glider and Euro Ranger.  It turns out that rolling 5 days prior to expiration is supposedly the convention on the floor as well, according to the CME.

So, the walk forward results for the DESword (CG + ER) will show a net loss for this week because of the one Euro loss that I not only dodged, but booked as a gain on the June contract.  The walk forward shows DESword in an 8% drawdown, but in reality, I’m doing much better.

Darth Fader opened a short on the S&P 500 futures on Friday morning.  There was a powerful rally this week, and in truth it felt like the system was getting short too soon…however, I took the signal, and I’m currently showing an open loss of less than 1%, as the equity market continued the rally on Friday.

In a prior post, I said that I needed to do some more work with Darth Fader on the Euro and natural gas futures.  I put on a couple of short trades in the E7 (CME Euro E-Mini) this week for the first time, just to reduce the risk and to avoid conflicts with Euro Ranger, which is trading the full Euro (EC) contract.  I managed to close a couple of small gains, but I’m really unhappy with the lack of liquidity in the Euro E-Mini.  Darth Fader says to be short the Euro right now, but so far the Euro is showing continued strength.  I have no open positions in the Euro right now, though I may look to trade in and out in the direction that Darth Fader recommends going forward.

Overall I’m showing a 19.5% year to date return with Troika and a 47.1% return since the launch of DESword last August.  I’m at a new equity peak with Troika, though the walk forward results are showing a 3% drawdown (from a lower peak). 

That’s enough detail for one week.  I’ll continue to work on refining Darth Fader and applying it to other markets.  Happy trading to all!

Cable Glider — 0 wins , 1 loss, 1 scratch

Euro Ranger — 0 wins, 1 loss

Darth Fader — 1 win, 0 losses

The currency systems are both continuing to struggle. I scratched a trade last night in the Cable Glider and pretended to be a scalper there for an hour or so, netting a total of 14 pips on 5 scalp trades…going 4 wins and 1 loss. The loss came last and nearly wiped out my gains. Maybe someday I can add scalping to the mix, but I was really just playing around last night. It’s funny just how much it got my adrenaline going. I should probably stick to systematic position trading if I want more profits than adrenaline.

This is a short month, and the currency systems have only 3 more trading days this month where they will be active.

Darth Fader netted 40+ S&P points on the short side from yesterday to today. But in fact, I completely missed a chance to get short last week at 871, then I got another chance to enter at that price yesterday. An updated backtest shows that I should be setting my take profit points tighter on the S&P trades, and if I had had that in place, I think I would have netted another 5% or so last week as the market swooned downward, completely recovered, and then re-swooned.

So then, that one actual S&P gain, combined with a couple of dodged currency trade losses, have landed me in a position of being up 1.1% for the month of February, and up 8.0% year to date, at a new high for the year.

The tracking error between my actual equity curve and the walk-forward equity curve is pretty large. The systems are showing a 4.6% year to date gain, with a lot more weekly volatility than I’ve actually experienced. I”m sitting at a new high with Troika, but my walk-forward numbers are showing the DESword currency system in roughly a 12% drawdown, with Troika in a 6% drawdown altogether.

It feels like I should be very careful now; DESword hasn’t seen this kind of drawdown since 2005…if it weren’t for all of bullets I’ve dodged, I’d be right there with it.

Cable Glider — 1 win , 0 losses

Euro Ranger — 2 wins, 0 losses

S & P System — 1 win, 0 losses

The two currency trading systems had a perfect December.  This is the first month that I’ve ever gone without a losing trade.  The high volatility in the markets propelled the systems to a 20.7% gain for the month of December. 

I make it a habit to step away from trading over the Christmas and New Year’s holiday week.  I’ve been working on various systems for the S&P 500 index futures during that time, and I’m nearly ready to go live with an end-of-day system based on ideas I’ve read about over at MarketSci.  In fact, I ran a little test trade over the last week, which closed for a small gain.

2008 was a rough year for my trading systems;  I suffered a 45% loss for the year.  Who would have thought that a loss of that magnitude wouldn’t seem so bad, given what stock indexes all around the world returned in 2008…

Anyway, most of that loss was suffered during two horrendous weeks in January 2008 when I was still trading with a suicidal level of leverage.  Luckily, that suicidal leverage served me well on the upside in 2007, and it looks like that even after the drawdown for 2008, my original stake has increased by approximately 70% over the 2007 – 2008 time frame,  Even after all the crazy ups and downs, the model portfolio has returned over 125% since inception on October 1, 2008. 

Since August 22, 2008 , I have been trading at much more conservative level with two uncorrelated systems (Double Edge Sword), and I’m up 26.5% since that date.

For 2009, I’d love to keep the leverage per system low, and develop more systems for my arsenal.  That certainly seems preferable to relying on Cable Glider and Euro Ranger to keep on working forever and ever…

Good luck to all in 2009!

Cable Glider — 1 wins , 1 loss

Euro Ranger — 4 wins, 0 losses

The DESword systems are now showing an actual return of 18.4% since August 22, 2008. 

The volatility had been scaring the hell out of me, so I missed trades and invented new filters to keep myself out of the market during most of November.  I was lucky to eke out a 0.4% gain last month.  This week has been the best in more than a year….I didn’t override or miss any signals.

I guess that there’s not much more to say right now.  I’m glad to be up and I hope that it continues.

Cable Glider — 1 win , 0 losses

Euro Ranger — 0 wins, 0 losses

Over the past two weeks, the account had a net gain.

This month, the Cable Glider is showing a net gain.

This month, the Euro Ranger is showing a net loss.

This month, Cable Glider has been more profitable.

More gut wrenching volatility and unbelievable range expansion occurred this week.  The British Pound moved in a range of just under 23 cents against the Dollar this week.  It wasn’t too many months ago that I instituted a volatility filter in the Cable Glider that shut it off after the market moves in a range greater than 3 cents! 

From open to close, the British pound lost over 1400 pips against the Dollar…and the only trade entered by the Cable Glider was a long trade that profited 7 pips.  Then the floor absolutely fell out of the market, but the Cable Glider was on the sidelines due to the volatility filter.

It is worth noting that the version of the Cable Glider system that I was running last year, which doesn’t have volatility filters in place, captured gigantic pieces of this downward move (over 1300 pips) and is now sitting at a new equity peak (when traded on a one – contract per trade basis).

Volatility filters also kept the Euro Ranger sidelined for all of the last two weeks.  Instituting this filter has been a net losing proposition so far, as the Euro Ranger (unfiltered) would have been a perfect 4 and 0 this week, netting over 250 pips.

So, on one hand, I missed out on a big opportunity.  On the other hand, I acted prudently to protect my trading capital (recall that I cannot cut my position size without switching trading instruments).

Surely it’s possible to make a killing in this environment, but surely it’s just as easy to get killed.

Cable Glider — 1 win , 0 losses

Euro Ranger — 2 wins, 1 losses

Over the past two weeks, the account had a net loss.

This month, the Cable Glider is showing a net gain.

This month, the Euro Ranger is showing a net loss.

This month, Cable Glider has been more profitable.

Again, I am having difficulties getting a clean chart presentation, but I did publish an update to the DESword results chart.  The systems are showing a combined gain of 4.2% since I formally launched the program in mid-August, and the systems are down a mere 0.6% so far in the month of October.  In the context of an absolutely brutal time for equity markets around the world (18% drow in the Dow30 this week, I believe), I’m absolutely thrilled that the DESword combination of systems managed to post a respectable gain.

However, the markets high level of volatility makes it very difficult to take trades confidently.  As such, I am installing a new filter in the Euro Ranger system that will shut it down in the event of excessive market volatility.  This measure is necessary because I am currently trading one contract per trade, so it is impossible to cut my position size without exiting the market entirely (or moving to a different instrument, such as the mini Euro Future or a mini account at a cash Forex dealer).

As for the play by play, the Cable Glider managed to enter and exit one trade profitably, and stand aside the rest of the time. No fuss, no muss.  The Euro Ranger, on the other hand, has had some bad luck followed by some good luck.  Late last week, my trading platform and / or connection malfunctioned, and the system exited a trade at a disaster stop level rather than taking a smaller loss as it *should* have under ideal conditons. 

Then, on Tuesday night of this week, the system entered a short trade.  I took note of the extreme volatility ( greater than 40 pips ATR on a 30 minute chart), and decided to exit the trade with a small profit.  Had I not exited at that time, I would have experienced the biggest losing trade in the Euro Ranger’s history, again owing only to the fact that the ATR is so high and that I cannot cut my position size.  The newly instituted volatility filter would have prevented the trade from triggering in the first place.  So when it’s all said and done, that one good but lucky decision to stand aside on Tuesday night has put my actual trading results since August 22 on par with the Walkforward (ideal) results.  Click the chart below for a detailed view.

Cable Glider — 0 win , 0 losses

Euro Ranger — 2 wins, 0 losses

This week, the account had a net gain.

This month, the Cable Glider is showing a net gain.

This month, the Euro Ranger is showing a net gain.

This month, Euro Ranger has been more profitable.

Wow, what a week.  News that Lehman Brothers would file for bankruptcy on Monday caused a large upside gap in the Euro which was filled (and then some!) for the second week in a row.  Later in the week, we got the news that the US government would provide an 85 billion USD bridge loan to AIG in order to prevent a gigantic bankruptcy.  Next, we got news that the US government intends to form an entity similar to the Resolution Trust Corporation to buy impaired mortgage debt, and finally, both the US and UK have temporarily banned all short selling of financial stocks.  Meanwhile, bad Lehman debt caused some money market mutual funds (MMMFs) to “break the buck”…the US government responded by announcing that it will temporarily insure MMMFs with money from the Exchange Stabilization Fund!  All of these events occured only one week after the US government took over Fannie Mae and Freddy Mac.  All of these are incredibly weighty financial events, and they seem to be occurring at warp speed.

Now then, in the midst of all of this, how did my little ol’ FX trading systems do?  Well, the Cable Glider has a volatility filter that kept it out of the market all week.  The Euro Ranger had two wins, one each on the long side and the short side, with no losses.  For the first time this month, I don’t have any errors or manual overrides to report, though I did have to fight off a strong urge to shut the Euro Ranger down on Friday morning.

I also did a little bit of work on a new results chart that’s intended to show my actual results compared to my system’s ideal walk forward results.  This should serve as another powerful indicator of whether or not my discretion helps or hurts my trading systems’ performance.  In just four weeks time, there’s already a noticeable gap between the two.  The walk forward results are up 7.3%, while my actual results are a mere 1.8%  Most of this difference is due to a coding error in the Euro Ranger that was discovered last week, but even so, if I had been more diligent, I could have avoided the error.

Euro gapped higher as well, but that market is larger and more liquid, so it’s trading with a normal spread.  I will leave Euro Ranger on for now.