Futures Truth Magazine Issue 2016

Educating stock & commodity traders on mechanical systems since 1985.  

#2-2016 Issue

Visual Energy Analysis by Charles Drummond and JB Wells

Developer Interview: Clockwork Group

System Spotlight: Gatts QM   by Joe Bobek   Phalanx Futures Trading by Dean Handley  Futures Truth™  ·  Issue #2‐2016  ·  www.FuturesTruth.com 

 

Top 10 Tables 5 │ Master Performance Table 14 │ Vendor Index 63

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Futures Truth MAGAZINE 

REGULAR FEATURES 3

Mission Statement

5

Top Ten Tables

Issue # 2 · 2016 FALSE PROFITS: EXPOSING BIAS WITH INDEPENDENT PERFORMANCE AUDITS (PART 2 PROMOTION & PERSUASION)

5 Hypothe cal Performance Disclaimer & Risk Informa on 6

Systems Tracked in this Issue

10 Systems Ranked by Commodity 13 Tes ng Informa on 14 Master Performance Table 34 Margin Table 60 For the Record

™

Andrew Danik con nues his "False Profits" series, this  me fo‐ cusing on system vendors and what to look for when choosing  

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a trading system.  Specifically, he talks about marke ng techniques  used by vendors to a ract poten al customers, and the difference  between seasoned and non‐seasoned vendors approach to en ce con‐ sumers. 

63 Vendor Directory FTC was established to bring truth to the world of publicly offered trading systems. The public is literally flooded with trading systems which carry promise of great wealth, if one only has the discipline to “follow the system”. Many traders have purchased systems for large sums of money only to find out later that the system is worthless. Our purpose is to provide information to assist you in both the purchasing of and the actual decision to trade a system. It is up to you to reach your own conclusion from the facts we present. There is a substantial risk of loss in futures trading. The high degree of leverage that is found in futures (because of small margin requirements) can work against you as well as for you, i.e., you can have large losses as well as large gains. Computer studies for this publication were done by George Pruitt and Joe Bobek. Copyright© 2016 by Futures Truth™ Co. The information in this publication is confidential and for the exclusive use of FTC subscribers ONLY. No reproduction in any form is permitted without written consent. The contents of this publication have been carefully gathered from sources believed to be reliable, but accuracy of the information is not guaranteed. Use it at your own risk. No representation can be made that future performance of any system will bear any relation to past performance. CONFLICTS OF INTEREST: • Futures Truth™ is a registered CTA & trades for its own account. • The owner of Futures Truth™ has an affiliation with the brokerage firm, Commodity Research Institute (CRI), a registered IB. • Brokers with CRI have systems that we track in Futures Truth™ Magazine. These systems are Stafford S&P Daytrade, FT S&P Daytrade, Universal, Universal LT, Pendulum, and Universal 2.0. • Futures Truth™ Magazine does track and may trade systems that are created and sold by Futures Truth™ Company. These systems are Samurai 7, Samurai 31, Samurai 35, Dynamic Breakout, FT Version Turtle Trading, and Dynamic Moving Average Crossover.

Futures Truth™  ·  Issue #2‐2016  ·  www.FuturesTruth.com 

 

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GEORGE’S CORNER: AMIBROKER REVIEW In this issue, George Prui  evaluates the Amibroker trading  pla orm and how it can be u lized most effec vely.  He details  the Amibroker Func on Language (AFL), which serves to trans‐ fer a trading idea into something easily testable. 

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SYSTEM SPOTLIGHT: GATTS QM Joe Bobek highlights one of the many outstanding systems  tracked by Futures Truth, Ga s QM, providing a brief de‐ scrip on and performance numbers to the reader. 

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VISUAL ENERGY ANALYSIS

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Market veteran, Charles Drummond, and his long me asso‐ ciate, JB Wells, discuss Visual Energy Analysis (VEA).  The  ar cle focuses on how Charles developed this interes ng  method from its incep on, and also shows how it is applied to chart  analysis.  A very insigh ul read! 

Futures Truth™  ·  Issue #2‐2016  ·  www.FuturesTruth.com 

Table of Contents con nued on next page.  

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Futures Truth

TOP TEN TABLES

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MAGAZINE  Table of Contents Continued...

PHALANX FUTURES TRADING Dean Handley con nues his quest in finding the best trading rooms available today.  In his latest in‐ stallment, he reviews Open Range Trader, Trading Futures in Ac on and Trade for Greatness trading  rooms. 

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DEVELOPER INTERVIEW: CLOCKWORK GROUP We recently interviewed the developers at Clockwork Group.  Find out what they believe are the best  financial opportuni es now, advice for new traders, and more.  

TOP TEN SINCE RELEASE DATE

TOP TEN FOR PAST 12 MONTHS

System Annual % Ret 1 TSL_CEL_NG_1.1 120.2% 2 Ga s QM 119.1% 3 TrendModelSys 93.3% 4 LRKage Sys5 81.3% 5 MAR Copper Sync 72.7% 6 Clockwork—Paper Barrels 57.4% 7 NatGator 55.6% 8 MAR CrudePlus Sync 48.9% 9 Clockwork—Angus 43.9% 10 TSL_US_1 40.7%

System Annual % Ret 1 Clockwork—KellyV 178.3% 2 MAR CrudePlus Sync 155.1% 3 LRKage Sys5 143.2% 4 MAR NewBondLive Sync 136.3% 5 Clockwork—Angus 133.9% 6 Alpha DT 117.1% 7 Clockwork—US Captain 103.7% 8 Ruggiero Bond Sys 94.2% 9 TSL_ES_1.0Z 89.5% 10 Strategic 500 83.4%

TOP TEN SINGLE MARKET SYSTEMS SINCE RELEASE DATE

TOP TEN MULTI‐MARKET SYSTEMS SINCE RELEASE DATE

1 2 3 4 5 6 7 8 9 10

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System Annual % Ret TSL_CEL_NG_1.1 120.2% Ga s QM 119.1% TrendModelSys 93.3% LRKageSys5 81.3% MAR Copper Sync 72.7% Clockwork—Paper Barrels 57.4% NatGator 55.6% MAR CrudePlus Sync 48.9% Clockwork—Angus 43.9% TSL_US_1 40.7%

1 2 3 4 5 6 7 8 9 10

System Annual % Ret Super Turtle 32.0% FedSwing 31.9% Simple Harmony 28.5% MeanSwing 2 26.1% RUMI 25.3% I‐Master 22.7% Hi‐Prob 18.4% Dollar Trader for Currencies 18.3% Hi%Mid 17.1% Catscan III 15.5%

Systems included in the “Since Release Date” Tables, must have been released for at least 18 months.

HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR TRADING PROGRAM. ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE RESULTS IS THAT THEY ARE GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. IN ADDITION, HYPOTHETICAL TRADING DOES NOT INVOLVE FINANCIAL RISK, AND NO HYPOTHETICAL TRADING RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR TO ADHERE TO A PARTICULAR TRADING PROGRAM IN SPITE OF TRADING LOSSES ARE MATERIAL POINTS WHICH CAN ALSO ADVERSELY AFFECT ACTUAL TRADING RESULTS. THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF ANY SPECIFIC TRADING PROGRAM WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL PERFORMANCE RESULTS AND ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL TRADING RESULTS. THERE IS A SUBSTANTIAL RISK OF LOSS IN FUTURES TRADING. THE HIGH DEGREE OF LEVERAGE THAT IS FOUND IN FUTURES (BECAUSE OF SMALL MARGIN REQUIREMENTS) CAN WORK FOR YOU AS WELL AS AGAINST YOU, I.E. YOU CAN HAVE LARGE LOSSES AS WELL AS LARGE GAINS. Futures Truth™  ·  Issue #2‐2016  ·  www.FuturesTruth.com 

 

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TESTING INFORMATION BLACK BOX SYSTEMS !

Black Box” Systems are software products which normally run on an IBM or Apple computer wherein the trading decision logic is not revealed. The vendors decision is somewhat understandable in view of the widespread plagiarism that takes place. CAUTION should be used in viewing results from these systems because the vendor has the opportunity to selectively do more curve fitting than usual. In some cases the logic has been revealed to us and we can attest to an orderly procedure in optimization. We encourage all vendors to do this.

ACCURACY ASSURED

tem and want it independently checked. If you own a system not listed in our tables, we would be happy to test it for you.

DATA PROVIDERS

Futures Truth™ employs CSI’s Unfair Advantage® database resources to backtest and report on trading performance for systems tested on select markets. In addition, Futures Truth™ incorporates data from Prophet® and Tick Data, Inc®.

CALCULATIONS USED IN TABLES

ALL results are shown AFTER a Commission and Slippage Charge of $100 per round turn trade for S&P’s, $200 per round turn for the Nasdaq, $25 for e-mini’s, 2 pips for FOREX, and $75 for all other commodities. New systems with less than 3 months of testing by us, or less than 4 trades will show zero % in the ranking. This will eliminate huge adjustments to Annualized percent returns. ALL results are based on a single contract basis. There is no pyramiding or reinvestment of profits reflected. Notes are located in the VENDOR INDEX. (1) Rank by Column (16). (2) System Name (3) System # is arbitrarily assigned for reference. (4) Systems were tested with commodities recommended by the vendor (Up to 7) (5) The date the system was released. (6) Yearly performance since 1987 or system released date. (7) Month by month performance (Results are for most recent 12 months or since the system was release, if less) The Last month includes any Open Trade Equity. This may cause the months numbers to change from report to report. On longer term systems this will change substantially. (8) 12 Month Net $Profit/Loss after commission/slippage (9) Maximum Drawdown - The highest point in equity to a low in equity after commission each day a trade was made. This is NOT intraday drawdown, which includes open trade equity, which would always be higher. (10) Number of closed trades. (11) % of profitable closed out trades (12) Average profitable trade after commission (13) Average losing trade after commission. (14) Most consecutive losing trades in the 12 months. (15) Minimum Required Capital - Minimum capital required to trade the system effectively. Calculated as 5 times Margin. Margin is the current margin to trade, daytrading systems will use half the usual margin. (16) % Change on Minimum Capital. Rate of change of Column (8) divided by Column (15). (17) Combined %Change is shown for systems which trade several markets. This is the average % of each market traded rom column (16). This should give an idea of how the system performed trading all shown markets. (18) Total Net Profit/Loss after commission/slippage since the system was released. TESTING (19) Maximum Drawdown since the system was reMost studies were carried out on an Apple Power Mac G3 leased. (20) Max draw down as a percentage of required capital computer using EXCALIBUR™ Software. Many tests are done using tick by tick data when needed to assure accura- (5 x margin). (21) % Change on Minimum Capital. Annualized rate of cy. All Tests begin using the release date or January 1, change of Column (18) divided by Column(15).  1987. An extra effort is made to test each system exactly as the developer presented it. We produce thousands of   numbers for each issue and will occasionally make mistakes. When found the proper results will be published. If   you plan on using any of these systems it is recommended that you obtain the Detailed Report for that system, to see   actual trade-by-trade results after optimization. We receive systems for evaluation from vendors, our own   purchase, and from individuals who have purchased a sysOur studies are in no way intended to reflect the integrity or reputation of the vendors. Hopefully it will complement their research and make it more useful to the investing public. The vendor may have presented their facts in the best possible light and the numbers may be for a particular period of time when the system performed well. In some cases, a system is good over the long term, but one needs to be aware of the capital necessary to trade it. Our studies hopefully will help answer these questions. Futures Truth™ Co. will not publish numbers on a trading system if and when the vendor: • Disagrees with the results and we are unable to resolve the differences. • Sends us threatening and/or harassing letters. • Has their attorney write us a letter. This policy has resulted in several systems being dropped from the Master Performance Table. We have no interest in putting up with such behavior and the headache associated therewith. However, freedom of speech still prevails and private opinions are available. Futures Truth™ does not permit any “tweaking” of numbers in our report. Not one number in our report has the benefit of hindsight, with the exception of the detailed reports. The only numbers we show are after a vendor’s most recent modification. This is clearly pointed out. We only publish history and one should be aware that past performance is not indicative of future results. Our Top Ten long term systems change very little from one report to the next, and is an area of additional exploration for a system trader. However, prior to buying/trading such a system, one should look at a minimum 10 year record of detailed performance. One is at considerable risk if he looks at only one year of a system’s performance and uses that information to either buy and/or trade a system. The Top Ten performing systems for the past year changes quite often and should only be used as a possible screening for further exploration. Futures Truth™ does not recommend trading a system with this limited amount of data.

Futures Truth™  ·  Issue #2‐2016  ·  www.FuturesTruth.com 

 

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HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. THERE IS A RISK OF LOSS INVOLVED IN TRADING FUTURES. PLEASE READ THE FULL DISCLAIMER ON PAGE 3 FOR MORE INFORMATION ON HYPOTHETICAL TRADING RESULTS. THERE IS A SUBSTANTIAL RISK OF LOSS IN FUTURES TRADING. THE HIGH DEGREE OF LEVERAGE THAT IS FOUND IN FUTURES (BECAUSE OF SMALL MARGIN REQUIREMENTS) CAN WORK AGAINST YOU AS WELL AS FOR YOU, I.E. YOU CAN HAVE LARGE LOSSES AS WELL AS LARGE GAINS.

Click on any Issue for more informa on!

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PROMOTION & PERSUASION

    

 

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There may be altruistic reasons for selling trading systems and related education materials. We all benefit from shared knowledge; it encourages personal growth, mentorship relationships and a sense of community as a whole. We also want to promote the wisdom, truth and integrity which are necessary to perpetuate the profession of trading into future generations. Then again, there are some “educators” and “vendors” who sell their wares merely for the purpose of making money. They may not trade themselves or know how to develop and execute trading systems. They need to make a living and they choose to do so promoting and selling material related to trading and systems.

By Andrew Danik Trading systems are advertised for sale, lease or subscription everywhere: in books, magazines, direct marketing advertisements, online forums, eBay, and trading rooms. A recurring theme in these advertisements is the promotion of profit. Celebrity traders and famous trading firms make us continually aware that some people are very successful at trading. It seems easy to imagine installing a charting or trading application, loading a trading system and watching the money roll in. Sometimes trading systems are promoted using that very imagery. Just open an account with a few thousand dollars, trade this system, and you will become wealthy and have enough free time to retire and travel the world over! While not all trading systems are advertised this way, we naturally hear about the potential upside of trading a system without including the potential downside, which always accompanies trading and trading systems. There is no reward without risk in this business. For this reason we need independent performance audits to filter the inherent bias in trading system advertisements and help us more accurately weigh the associated risks. First, let us tackle the topic of why there is a market for trading systems in the first place. It is crucial to recognize the main motivations of trading system vendors that determine why they are selling trading systems. From there we can scrutinize the claims being made by these vendors and filter them through a selection process to arrive at an informed decision which reflects our accepted risk and desired potential reward. We all need money to survive in this world. It is the medium of exchange that enables urban civilization and drives our modern culture. We also generally accept that a person is entitled to some reward for work effort expended and a (potential) reward for taking on risk. These foundational assumptions are important to remember because we all have basic needs, standard of living expectations and lifestyle choices that we wish to maintain.

The result of all this motivation is a veritable glut of trading systems available from a wide variety of sources using every possible media and covering every tradeable market (and some not so tradeable). Regardless of the vendors’ motivation and ethical standards, the competition is fierce and there is a lot of noise and smoke in the marketplace. It really is difficult to get any attention if you want to sell trading systems or education materials in this marketplace. Therefore, vendors must become marketers, using the latest inbound and outbound marketing techniques just to get their products noticed. Trading system vendors typically employ marketing techniques that are a good match to their motivation. There will always be some overlap in the techniques used; equity curves and performance reports are universal and expected for describing trading systems in the same way that prospectus are associated with other types of investments. However, there are definite clues that provide strong evidence about the vendor’s ability, credibility, and motivation. This evidence does not necessarily predict the amount of risk associated with a system vendor’s product, but it does give us a useful indicator to include as part of the due diligence vital to the decision making process. Generally, the most robust trading systems come from seasoned, professional trading system developers. These vendors have spent years learning what works and what doesn’t. They start to generate a reputation and a performance track record once they learn how to develop and test robust trading systems. The marketing techniques they employ are heavily focused on establishing credibility and demonstrating professionalism in the marketplace. This is to emphasize that they know what they are doing and that they are interested in the success and professional development of the retail trader and customer. These professionals often earn respect and authority by educating the public in seminars, authoring books and magazine articles, and sharing useful information such as trading indicator code and utilities. These attributes, together, tend to demonstrate the characteristics of a professional trading system developer who enjoys or loves the work and is in it for the long haul.

Some people sell trading systems to generate “regular” income which covers the monthly expenses of running a business. There are salaries and wages to pay, software and equipment costs and infrastructure and utility costs as in any business. Preferably, these expenses are not paid from profitable trading capital gains. Withdrawing money from trading accounts to cover expenses on a monthly basis is the opposite of compounding and limits trading capital allocations, constrains money management and reduces the overall growth potential of trading and investing. This is one reason that some vendors sell trading systems and subscriptions to trading signals.

Less experienced trading system developers may also offer good or even excellent trading systems to the public. Because they lack a robust historical presence and sufficient track record for use in the due-diligence decision making process, newer vendors may attempt to piggy back on the authority of veteran traders through association with their names and methods. Potential customers are more likely to encounter equity curves and performance reports on trading systems that benefit from hindsight; systems that are updated to show performance on in-sample trades only. It is relatively easy for a developer with weeks or months of experience to generate a beautiful equity curve and enticing performance statistics. A good programmer can even do it within hours or days of developing sys-

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PROMOTION & PERSUASION

    

 

                         (con nued) 

tems for the first time. Some rookies display trading systems with too few trades to get an idea of the long term possibilities of the system’s performance. The inherent bias of looking only at insample performance is dangerous to your trading account and a common rookie mistake! The key concept we need to understand here is that rookie trading system developers may have good and honest intentions while not having the experience to know if a trading system is robust or over-fit. Everyone starts out as a rookie! Unfortunately, naivety and ignorance increase the risk of losing money and decrease the probability of a profitable outcome. If a system looks good, ask for a brokerage statement confirming the trades listed in the performance report or request a third-party audit of the trades for verification. A newer system developer that has robust strategies should willingly agree to these measures. Some trading system vendors and educators are only interested in making money selling products to the general public. They may never intend to personally trade their systems and they might not even know how to develop a robust strategy at all. They just know how to sell products well. These vendors rely almost exclusively on persuasion as a marketing technique. With little to no track record or established reputation, they focus on manipulating your emotions. You will see more exaggerated claims of profitability and ease of use along with little to no mention of the risks involved. Often these claims are accompanied by time limits – act now or lose out! Such assertions may be totally unverifiable and even blatantly “too good to be true.” It is even possible that you will get evidence of their Holy Grail find in the form of a nearly perfect equity curve (figure 1) and some tantalizing performance statistics (figure 2). Producing beautiful equity curves and performance statistics is easy enough on curve-fit historical systems that even vendors with questionable ethics can make a living on the internet. There are downright dishonest people selling what they know to be bad systems with manipulated statistics and no underlying profit potential. The temptation to go this route lies in the belief that it is much easier to manipulate emotions and statistics than it is to develop robust systems and generate a longFutures Truth™  ·  Issue #2‐2016  ·  www.FuturesTruth.com 

 

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PROMOTION & PERSUASION

    

 

                         (con nued) 

term out-of-sample track record. A strong motivation to persuade and sell with no verifiable way to determine likely future performance are the hallmarks of a trading system vendor that does not develop or trade systems. It is said that all trading systems eventually stop working. They have a useful life and then expire. Some last longer than others. It is difficult to impossible to know the future performance potential of any trading system. What we can know is that some systems are overfit to historical data and will fail horrifically in the near future. Other systems are lucky and may or may not work well in the future. There are also good systems that will become weaker and eventually fail as market conditions change and become less favorable for that system. Markets tend to be non -stationary; meaning their statistical characteristics change with time. Short-term performance over a small number of trades is often very misleading even for robust and stable systems with long-term track records. It is for all of these reasons that we must be diligent and make sure we are fully informed before trading any system. The most important information on trading system risk and profit potential comes from the live track record of a trading system. This live track record needs to be free of any manipulation by the developer or promoter of the system. Parameter value changes and revisions to the rules and logic cannot be applied retroactively or the track record becomes historical with the benefit of hindsight. We need to inspect the performance statistics of a trading system without the benefit of hindsight in order to get the truth about what would have happened to our trading accounts if we actually traded that system with real money in real time as the signals were generated. It is for this reason that we rely on independent performance tracking of trading systems like those from Futures Truth Magazine.

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AMIBROKER REVIEW       

AmiBroker Review (www.amibroker.com) AmiBroker is a complete database management, charting, testing, trading and optimizing program. So far we have covered many different trading algorithms and every one of them can be easily implemented in the AmiBroker Function Language (AFL). There are several features that make AmiBroker a serious contender as a go-to trading platform: Price - The cost of the software ranges between $279 and $339 and once you purchase its yours. There are no lease fees. You get free upgrades for one year after purchase and it’s up to the purchaser to upgrade thereafter. Speed - AmiBroker utilizes multi-thread processing which means it can utilize multicore processors and carry out sub-processes or threads simultaneously. In other words, it is very fast. Power - Portfolio level back-testing is paramount when evaluating the robustness of a trading algorithm. If an algorithm works on multiple markets, it demonstrates a high level of robustness. Robustness and positive expectancy is all you can ask from a trading algorithm. AmiBroker provides Exhaustive Search and Genetic forms of parameter optimization. Data - AmiBroker is compatible with many End Of Day(EOD) and Real Time data feeds. It includes a very simple to use ASCII data importer. Broker Integration - Several brokers can be linked with the software for automated order execution. Integrated Development Environment - AmiBroker has two IDEs to help the user develop complete trading algorithms and technical analysis tools. The main IDE (AFL Editor) is a complete scripting tool and the AFL Code Wizard utilizes a drag and drop development paradigm. Both IDEs utilize the AmiBroker Function Language (AFL) as its programming/scripting language and a vast library of strategies, functions and indicators. Support - Tomasz Janeczko, the founder and chief software architect of AmiBroker holds Ph. D. and M.Sc. degrees in Computer Science and Telecommunication received from Wroclaw University of Technology. This developer really loves his software and stands behind it and provides much of the tech support. There is a devout, almost cult-like, following for AmiBroker and many questions can be easily answered be searching the internet and/or joining the user groups. If you have purchased my prior books you will know that I use TradeStation. I love its tightly integrated components and EasyLanguage. However, I felt like I would be amiss if I didn't show off a little bit of AmiBroker. I was first introduced to the software through Howard Bandy's excellent book, "Quantitative Trading Systems.” The software that was described in Mr. Bandy's book really piqued my interest so I contacted Mr. Janeczko for a review copy and he more than graciously provided his complete software suite. I fell in love with the AFL Wizard and the speed of his backtester. Coming from a bar-by-bar algorithm development par 

 

 

 

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adigm I was really impressed and initially confused by Dr. Janeczko's array processing. Array processing is extremely fast versus bar-by-bar and in many cases easier to learn. What is also very cool about AmiBroker is that you can flip from array to bar processing quite easily.

by George Pruitt

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Array programming or vector languages generalize operations on scalars to apply transparently to vectors, matrices (2d-array) and other higher-dimensional arrays. Sounds complicated, right? It really isn't. An array is simply a list of like data. In most testing scripts price data is held in arrays. When we code and use the word High we are usually referring to the High array (list) prices of the underlying instrument. When we use a subscript in the array we are referring to that singular element in in the list: High[6] is the High price six bars ago. Most of the programming discussed in most of my George’s Corners has dealt with a scalar programing and pseudocode framework. The fundamental idea behind array programming is that operations apply at once to an entire set of data. An example will help clarify. How do we calculate a twenty-day moving average of price bar's midpoint in a scalar (bar-by-bar) framework? sum = 0 for i = 1 to 20 sum = sum + (high[i] + low[i]) / 2 #notice the subscript i next i avgMP = sum / 20 Here's how it is done in an array programming framework: avgMP = MA((H + L)/2,20) A new array labeled avgMP is created and completely loaded with a twenty period moving average of price bar's midpoint. avgMP is not a scalar or single value - it is a full blown array just like the High and Low arrays. Array processing eliminates the need for additional looping and this means much quicker execution. If you have a lot of experience with scalar programming (Java, C++ or EasyLanguage) then picking up AFL might require a little patience but it will definitely be worth it. As you know learning a new programming script/ language is best performed by examining examples. Here is an example of a Bollinger Band type trading system that incorporates optimization. This optimization will search the entire portfolio space. In other words, the optimization applies the different iterations across each market in the portfolio. You don’t have to optimize each market separately and try to configure one set of parameters for the entire portfolio. PositionSize = MarginDeposit = 1; len = Optimize("Len",60,10,80,2); width = Optimize("Width",2,0.25,3,.25);

Buy = Cross(C,BBandTop(C,len,width)); Short = Cross(BBandBot(C,len,width),C);

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) 

Sell = Cross(MA(C,len),C); Cover = Cross(C,MA(C,len));

Here are the results of testing a basket of 30+ markets for the past 16 years optimizing the lookback Len from 10 to 80 by 2 and the Width from 0.25 to 3 by 0.25. This equates ((80 – 10) /2)+1) *( (3.00 - .25) /.25 + 1) iterations. Or 36 * 12 = 432 iterations across a 16-year history on 30+ markets. This optimization took less than 3 minutes on my somewhat typical lap top. Take a look at AmiBroker. It would be worth your time and efforts. I give the software two solid thumbs up!

“An investment in knowledge               pays the best interest.”    ‐ Benjamin Franklin (1706‐1790) When it comes to inves ng, nothing will pay off more than educa ng yourself. Do the necessary research, study and analysis before making any investment decisions. Futures Truth™  ·  Issue #2‐2016  ·  www.FuturesTruth.com 

 

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SYSTEM SPOTLIGHT   

SYSTEM SPOTLIGHT

     

  

 

 

 

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by Joe Bobek

Gatts QM Ga s QM by Ed Hambrick is a swing trading system that we’ve been tracking since the beginning of 2014. As you can see from the numbers below, the past 5 years have been impressive, averaging almost $13k profit per year. Ga s QM has been ranked second in our latest Top Ten System since Release table and is one of our top consistent performers in the crude market. The system is fairly aggressive, being in the market over 75% of the me, and trad‐ ing an average of around 130 mes per year. Although suffering a somewhat significant drawdown recently (as with most other mechanical systems), overall performance remains robust and we feel this system is worth taking a look at. If you are interested in a more detailed analysis of Ga s QM, please visit our website at www.futurestruth.com.

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SYSTEM SPOTLIGHT   

     

  

 

 

 

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RISK, AND NO HYPOTHETICAL TRADING RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK OF ACTUAL TRADING. FOR EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR TO ADHERE TO A PARTICULAR TRAD‐ ING PROGRAM IN SPITE OF TRADING LOSSES ARE MATERIAL POINTS WHICH CAN ALSO ADVERSELY AFFECT ACTUAL TRADING RESULTS. THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE MARKETS IN GENERAL OR TO THE IM‐ PLEMENTATION OF ANY SPECIFIC TRADING PROGRAM WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARA‐ TION OF HYPOTHETICALPERFORMANCE RESULTS AND ALL WHICH CAN ADVERSELY AFFECT TRADING RESULTS. THESE PERFORMANCE TABLES AND RESULTS ARE HYPOTHETICAL IN NATURE AND DO NOT REPRESENT TRADING IN ACTUAL ACCOUNTS.

HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BE‐ LOW. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN; IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEENHYPOTHETICAL PER‐ FORMANCE RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR TRADING PRO‐ GRAM. ONE OF THE LIMITATIONS OFHYPOTHETICAL PERFORMANCE RESULTS IS THAT THEY ARE GENERALLY PRE‐ PARED WITH THE BENEFIT OF HINDSIGHT. IN ADDITION, HYPOTHETICAL TRADING DOES NOT INVOLVE FINANCIAL Futures Truth™  ·  Issue #2‐2016  ·  www.FuturesTruth.com 

 

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Visual Energy Analysis

  

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Now, here's the interesting thing. Two consecutive weekly bars would give a line. Its own line. How would the daily react to that line? Bingo. There it was.

By Charles Drummond & JB Wells

Example:

Many students of Charles Drummond have wondered how VEA came to be. Pull up a chair and let me tell you the story… In the 1960's, I compiled data by hand, and drew charts by hand, and magically noted that each day had a high and a low. With a ticker-tape, I could also chart hourly bars, creating a daily high and low. Then, I noted that if I drew 5 daily bars, that this would give a high and low for a week and therefore I could then also create by hand a weekly bar and chart. Then 4 weekly bars for a month bar, or 30 daily bars for a month bar, or 12 monthly bars for a year bar. All bars. Just bars. A yearly bar chart looked like a daily bar chart. I then realized that all that I was looking at were bars; and without labelling a chart with its time frame, they all looked the same. I next examined the concept of looking at two consecutive bars only, and to draw lines through the highs and lows of any two consecutive bars, be it on the daily, weekly, monthly, quarterly, or yearly. Examples:

(The weekly line is placed on the daily chart - Labelled “52”)

(Note the monthly chart. The line through a and b provides point c This was a major breakthrough to my mind. To place a line only through two consecutive bars, to then see how a chart with more bars on it reacted, to that one line. I started to show this to others and they thought I was nuts. Well, actually I am. So be it. That weekly line exists, that monthly line exists, that quarterly line exists, that yearly line exists, whether I am a nut or not. The daily will give you five clues as to what is happening to that one weekly line, as each day passes by. This is not rocket science. It’s quite simple actually. This resulted in such fun that I became addicted to trying things out. Created many more lines using two consecutive bars, realizing that any time period had all those lines. They had to. Two simple consecutive bars, many lines. I then discovered mathematical trend analysis, thereby creating a moving average that did everything it could to stay on a straight line, and this formula created more lines. Experimenting with ideas around lines through two consecutive bars became quite addictive. And, it expressed the most recent activity of buyers and sellers, related to that time period. So, what if I averaged out any two latest lines, to create yet another line etc.? Eventually, I realized that no matter what line that created, it could affect price. Why this is so, I have no idea, unless it is a simple manifestation of energy. When using my Apple2 plus computer, starting in 1982, then IBM, then Tradestation, and Ninjatrader, I created what seemed to be almost thousands of ideas. Very addictive. Then I got bored with it all, and honed everything down to its current stage: Visual Energy Analysis (VEA). Thusly, I went from expanding complexity to simplifying it, from seeing where theory would fall apart, to rebound out of that, to simplicity which held true. I came to understand that one can only push on the string so far. I recall the Apple2 Plus computer, in the 1980's, and given its aspect of programming 'conditions', I was thereby forced to create quite a few patterns, selecting which ones were successful, to then put the best of those into other patterns, thereby creating a library of thousands of patterns, and when that number surpassed 12,000, it all fell apart. Why was this so? I have no idea. It is weird that when one tries to perfect perfection, it falls apart. The only answer seems to be that 'simplicity works'. I would encourage all who use technical analysis to toy with the concept of always tying in the energy from

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VISUAL ENERGY ANALYSIS

  

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another chart, be it time related or not. To my excitement, this concept seems to be taking off in spades. Monitor the yearly technical items, as an example, with the daily items, all having the same items, but show those yearly items on the daily chart. I try to have all charts look the same. What is on the monthly is on the daily, thus the daily has the same analysis as the monthly. However, the daily is monitoring that monthly energy since it has more expressions of the same energy. The one minute with hourly on it, reveals the energy of the hourly, and so forth. Let us now look at two chart frames of energy on one chart using an overlay from a higher chart. This complicated market structure of crowd energy has been simplified into what is now known as Visual Energy Analysis (VEA).

Practicing how to manage oneself with the no pattern provides us an excellent opportunity to exit at break even or trade the no pattern. This is a very different pattern from the yes pattern that we now have a choice to trade from the short side. Notice that the strong trend continuation buy was traded from the right chart’s red up arrow from a power mid termination. (Overlap of the lower green energy band and dotted white mid line) However the trade chart to the right’s solid white line is not popping price higher and with a red brick we are short. The upper pink energy band and upper yellow overlap (envelope top termination on the 8/4 chart) is holding as resistance. Thereafter the crowd will have a very hard time popping up through this upper yellow area circled twice on the focus chart to the left with the down white arrows. Trading has become much easier on the mind and more enjoyable than having to dissect all of the previous lines from way back when, says JB Wells; fellow friend and trader. We are both now working together to help traders appreciate and trade a simplified geometry of the markets with VEA, says Charles Drummond. Here we show an example of how multiple chart frame analysis works on the intraday CL oil futures contract (it could be any instrument). The 4/2 intraday Rjay’s Renko Bar reveals our strong trend continuation yes pattern. There are so many clues that it is time to buy, look to the 4/2 trade chart on the right chart’s red up arrow where there is envelope bottom termination. (Overlap of lower green and lower yellow) This trade entry joins the strong crowd energy from the higher chart (not shown) represented on the focus chart to the left with an overlay of its higher chart’s energy structure (16/8). Notice the solid white mid line on our focus chart to the left, represents the crowd’s energy of this 8/4 chart revealing that it is still bullish by the green bricks staying above the solid white mid line. (The same 8/4 solid white mid line is drawn on the trade chart to the right with a dotted white line) Note the trade chart to the right’s solid white mid line is still popping price higher as well. Eventually this trade reaches a weekly upper energy band (UEB) where the crowd distributes, for us we exit our trade.

About the Authors: J.B. Wells began purchasing trading courses in 1998 and began full time trading in 2001. He also spent time researching and developing his own trading software and ideas. He had success using a method based on volume, trading futures and options simultaneously. In 2003, J.B. found Charles Drummond and has been a student of his ever since. As a student trader of Charles Drummond, J.B. helps with client support & his own trading. Charles has programmed the code for Drummond Energy Bands and allowed J.B. to learn many of his trading strategies and coding styles.

We continue to look for a strong trend continuation pattern (but realize we may be topping out) and the market reveals a no pattern for the buy. Understanding the yes and no pattern is critical to any trading business.

Charles Drummond was born and raised in Ontario, Canada. As a young man he enjoyed studying literature and geometry in school. His market experiences started in a conventional way with various experiments in buying stocks and commodities. He lost money on penny stocks, he lost money on futures contracts, he lost money following broker recommendations. After these losing experiments, he decided that if he was going to lose money, it would be in his own way, and not following the recommendations of others, and began his seri-

Futures Truth™  ·  Issue #2‐2016  ·  www.FuturesTruth.com 

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ous study of the markets. During the 1960’s and early 1970’s, as he was trading in a variety of markets, Drummond experienced very substantial success. During these years he developed the basics of his market theory, and published these findings privately in a series of books, starting in the late 70’s. During the 1990’s he continued to add to his theories and develop new insights and has published a number of significant enhancements. Charlie has simplified all of his original theories in 2015 and has made them only available here on theDrummondEnergyBands.com website. He is no longer affiliated with any other websites on the internet today. Drummond has always had a small group of private students and his theories have been taught by several market technicians.

Dean A Handley, PhD, MBA, JD Founder, Global Trade Titans

He has realized that not everyone may need or even be capable of analyzing and maintaining a trade plan over multiple chart frames; though this is how he began to trade when he was telephone booth trading in the 60’s. All this has led Charlie into developing this new insight, simplifying his life’s work of market structure (i.e. five (5) kinds of trading) into a Visual Energy Analysis (VEA) software called Drummond Energy Bands. VEA reveals how market structure is really just pure organic energy that is not time related. Drummond currently lives in Eastern Canada where he trades and maintains an organic vegetable farm. He produces videos for his students in Drummond Talk and is working on several new books.

Past Performance Does Not Guarantee Future Results. This is a standard decrepit disclaimer that is as well recognized as it is ignored [1]. It is given for legal liability in the event that a consumer of the advice acted on it and the results proved to be less than expected, or even the opposite. In addition to its futility as a warning, it flies in the face of reality: all trading strategies are based on past performance. Past performance is all we have and if not past performance, what better metric would exist to determine what trades to take? Past performance is accurate for the past and is always 100% correct, where in lies its elegant authority: any question we ask it will always yield a truthful answer. So if we ask the right questions of past performance, perhaps it might just illuminate future results. I have been mining past performance to mathematically prognosticate future results for many years, spanning over 200,000 historical trades. The system I use to evaluate historical data is called Phalanx Futures Trading™ (globaltradetitans.com); is the same system used in True North Trading. This paper will cover the critical features of what I have learned and how you can apply this trading system to any room you trade in or to your own trading. Phalanx Data Compiling and Stratification: Futures trade data, extracted from the past or captured in real time, needs to be organized in your spreadsheet so as to permit specific assessments. These are the main types of stratification and shown below and data from various other trade rooms is included for illustration.

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1. Stratify by index. Not all indices are traded equally. With almost all specific trading methods or logics, uniform application to futures trading will reveal differences in average index trade profits. This is true for human trading; somewhat for robot trading. Any individual trade method will show moderate to large differences in profitability among the indices for reasons that are oblique or hidden but present consistently over time. Do not expect average trade profits on indices to be comparable; what is reasonable is that some indices will outperform others. By watching some 20-40 trades in each index, you will observe such average P/L differences, so be prepared to bench the weakest indices for continued sim trading until they can demonstrate sustainable and acceptable profit levels.   Of note: I have seen some rooms where it seems their methods are equally successful to all indices: consider Open Range Trader (Joe Dupont head trader), where exceptional ~$11,000 profits per month; individual weekly profits of $3345 and even $6000/trade profits reveal all indices in full profitability. 2. Stratify Buys vs. Sells: In well over 100 rooms where I have evaluated track records in great detail spanning many Futures Truth™  ·  Issue #2‐2016  ·  www.FuturesTruth.com 

 

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months and thousands of trades, I have seen fairly consistent differences between P/L for buys vs. sells, such that one is superior and the other inferior. This presumably reflects clandestine strategy alignments with index price moves that result in either longs or shorts being favored one over the other. The financial horsepower and trade commitment needed to raise price are different from that needed to lower it. Long/short superiorities can be easily identified by stratifying historical trade results as average trade profit from all long and short trades, as cited below: ● CL shorts; 100 trades; 3 contracts per trade: -$18.90 average P/L. ● CL longs; 100 trades; 3 contracts per trade: $104.55 average P/L. So the first facet of the Phalanx Trade System: look at what indices perform best and then stratify trade results based on longs vs shorts. 3. Stratify by Time: Time is a silent sovereign over profits. We perceive time as linear and constant but the time frame by which a trade is taken can affect its outcome. I stratify trades by time to capture P/L efby James Breen  fects based on the day of the week (diurnal variation) or based on time of day (circadian rhythm). In this manner we may observed what days (or time of day) that achieve maximal trade profit in a manner shown below. I average P/L as a function of day of the week (M-Tu-W-Th-F; normalizing to a uniform number of trades) and very often I consistently see days that are extremely profitable and others that are not. I observe results for 1-2 months to avoid temporal distortions. After evaluation, I avoid days that exhibit an anemic P/L and increase contract sizes on days that are the most profitable. As with all assessments, I keep this data in a running evaluation format so as new data is added, the oldest data is jettisoned. My evolving observations form clear dichotomies in overall performance. An example time stratification was seen in Alpha Wave Traders, where over 6 months I observed an average P/L of 296/3 contract trade on Thursdays and $27/3 contract trade on Fridays (MarketClips 05.06.2013). This is a precise expression of diurnal variation, an observation that was met with severe consternation by that group as they were unprepared to accept much less adapt to such information. It is possible that exceptional trade performance can be impervious to diurnal variation: in Trading Futures in Action (Bob Amico Head Trader) their weekly $2512 weekly average (over last 27 weeks) reveals strong daily performance: Mon: $299; Tue: $338; Wed: $683; Thu: $688; Fri: $622. Furthermore, Trading Futures in Action may in fact minimize diurnal variations through their recognition and responses to changing market conditions, wherein they have changed the indices they traded, adjusted targets/ stops and even began opening the room 1 hour earlier to capture more of the European opportunities.

PHALANX FUTURES TRADING

  

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week are created equal nor are times of the day. Most amazingly, trade strategies will serendipitously have better and worse days of performance as well as better performances in the morning vs. afternoon. Now we know what indices trade the best, whether longs or shorts, the best day(s) of the week and if you trade all day, and (if you trade all day) how do mornings compare to afternoons. That data alone is informative but lacking sufficient dimension to provide an optimal understanding of futures results. What we need to do is to generate much more past performance for any single trade, say 1000% over its current data content. The Nested Bracket Trade technique does this (Futures Truth #1, 2016) as detailed below. 4. Stratify P/L from Nested Bracket Trades: Any one individual trade most often has a single entry and a single exit (target or stop). Mathematically speaking, this is wafer thin data so I developed NBT, where the original entry is examined against as many as 10 target/stop choices, each designed to ask for more profits. My selection of targets is based on frequency histograms of historical price deltas but yours can be based on simply larger and larger profit choices, each having a correspondingly larger stop (i.e. 1:1 risk/reward ratio). By using NBT amplification through 10 different target/stop ratios, we can increase historical data 1000% over the actual single-trade P/L results, forcing the past to yield 10-fold more data than originally occurred. Now the data from one original trade will yield data from 10 trades, each having the same entry but different targets. So at the end of 100 trades, we will have data from 1000 trades. While most of us would normally average the P/L values to get a mean performance, trade data is not normally distributed but instead bimodal, consequently means or averages are corrupt values and will do you a disservice. Rather add up the total net profit of any bracket trade over say 10 trades (i.e. total reward), divide by the stop size times the number of trades taken (i.e. total risk) and if the risk/reward ratio is 0.4 or greater you have a strategy that is fit for use. Next choose the strategy that yields the greatest overall profit and you will have your best strategy. 5. Pullback (PB): Observe, record, apply. Virtually all trades exhibit pullback (heat) after entry but it turns out that the pullback in trades destined to succeed is indistinguishable (except in magnitude) from pullback in trades destined to fail (TraderPlanet 141; 03.24.2015). So how to know the difference? Measure the amount of pullback for all successful trades and find the average. That average will tell you where about 50% of all successful trades will pullback. So after your official entry, ask and answer this question for each modeled trade: If you added an additional contract at the pullback average, how did you do? While PB entries occur less often than the official entry, they afford extra time to execute - a bonus in fast scalping times and perhaps better fill rates in low volume markets. And as they are limited orders, you avoid market entry costs. Putting It All Together: The Phalanx Futures Trading™.

An excellent example of circadian rhythm comes from Strategy Lab, where I observed remarkable differences between P/L in the morning vs. the afternoon in the same index (Market Clips 08.19.2013): TF longs at 3 contracts/trade: am $240 vs. pm $61 ES sells at 3 contracts/trade: am $2 vs. pm $161 These are official entries and exits and results according to official posted P/L value. So remember: not all days of the Futures Truth™  ·  Issue #2‐2016  ·  www.FuturesTruth.com 

 

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Phalanx is a trading system that puts past performance on steroids, then sorts and stratifies that performance output and harnesses the final data to provide trade strategies to choose best to maximize future P/L. Each futures trade is tethered to its detailed historical counterpart, aligned for index traded, trade type (buy vs. sell) and time frame for execution (diurnal variation, circadian rhythm). By modeling each trade with up to 10 different targets using the NBT, it is possible to amplify historical data by 1000% or more. Add to this trade heat signature from pullbacks and this total package of data Futures Truth™  ·  Issue #2‐2016  ·  www.FuturesTruth.com 

 

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yields far greater insight related to optimal profits and best strategies to achieve those profits.

SYSTEM VENDOR INTERVIEW:

Of the several new rooms I am evaluating, Trade for Greatness is a private trade room that employs trade modeling to account for index and type of trade, time and day and other historical assessments relevant to immediate trade selection and strategy. Consistent with Phalanx type of assessments, this room will project expectations and outcomes before trades are executed. Having read my papers, Trade for Greatness is truthful, transparent and profitable and has the potential to be the next Global Trade Titan. The Phalanx Trading System and recent room reviews are located at globaltradetitans.com, as are short video on subjects such as Chat Room vs. Trade Room, Greed is Good, Track Records – Legal or Not, Trade with God and over two dozen rooms reviews as well. These videos are short, factual, to the point – no-nonsense.

CLOCKWORK GROUP

Global Trade Titans are trade rooms that trade truthfully, transparently and profitably. These attributes distinguish them among the 1088 sites/rooms I have evaluated and place them at the 99th percentile of performance.

calls and lastly, the filtering process of all the noise.

How did you get into the futures business?

Author disclosures: All of my publications, videos, room evaluations and Trade Titan recommendations are at my free library: globaltradetitans.com. In addition to futures trading, I offer futures trading consultation on the Titans, any other room, strategies or methods for trading as well as the Phalanx method. I sincerely thank John Murray for his expert editing and editorial revisions to this paper. Reference: http://www.forbes.com/2010/04/16/fund-performance-ads-personal-finance-sec.html

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My dad was a stockbroker, when I was growing up I was fascinated with his ticker tapes, charts, research reports, screens etc. Additionally, an old fraternity friend was in the business and actually mentored under Futures Market Wizard, Michael Marcus. We spent some time studying, researching, testing systems on the TIME axis, not the PRICE axis that most of traders/investors look at. Squaring both price and time, dates, minutes, seconds in highly liquid traded markets, seeing this second dimension most missed, this paved the way for Clockwork, its philosophy and methodologies... A long the way I teamed up with a number of engineers, traders and programmers, we work as a team, group approach and we now boast intellectual capital from the fields of trading, technology, research, meteorology, risk management and engineering - all to solve complex financial problems that have an impact on the worlds futures markets.

Only when I sense all is well and normal for our clients, can I let my guard down. What inspired you to create trading systems? More like who, a former technician & my mentor, it would take up the whole magazine. In a nutshell, I met one of the industry's top traders back in 1994-1995 who pointed out to me that systematic trading would be the wave of the future. He noted that the amount of money under management by capable individuals would swell tenfold and that “NOT” trading “Futures was risky! I then had this notion that developing systems for non correlated asset classes, systems that delved in futures and forex trading would be in high demand by those that speculated or hedged with said market vehicles due to their complexity and specialization. Kinda akin to Atlantic City or Las Vegas sports-books, making lines on exotic prop bets for their high roller clientele, only much, much bigger.

How to do you prepare for your trading day? Understanding that trading is a strenuous dayto-day business, is there any ritual? Absolutely, 1st, the obvious java jolt, followed by the scanning of my monitors, the markets, looking for any large percentage moves, looking for easy entry points in fast moving markets, akin like a Jaguar zeroing in on the small antelopes of the herd. Read 3 newspapers, (The Wall St. Journal, Investors Business Daily, USA Today) check a few international news wires, check the various overnight trade fills, logs, time & sales, a couple phone Futures Truth™  ·  Issue #2‐2016  ·  www.FuturesTruth.com 

 

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Futures Truth™  ·  Issue #2‐2016  ·  www.FuturesTruth.com 

I wanted in… How did you get into systems development? Curiosity, and most likely impossible without a System Writer as I was not a programmer nor software developer at the time. I knew the Cruz Bros.  

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VENDOR INTERVIEW

  

the original founders of TradeStation, f/k/a Omega Research, from high school. System Writer was their 1st and flagship product and we gave that a go, Easy Language, was, well easy and we started tweaking ideas, again, mostly ideas dealing with TIME not price, quant type ideas, ideas that contained many “what ifs”... Then SuperCharts and TradeStation surfaced, the industry kept growing and the appetite for quantitative type of trading systems swelled. Additionally, futures managed accounts were being introduced and touted by the major wire-houses and several of the leading CTA's trading said managed accounts and managed pooled funds required additional cutting edge trading systems, software and other trading technologies to supplement their trading and keep pace with this growth spurt. We found a home and helped fuel the algorithmic trading system industry, the rest is history…

See the above answer relating to money management!

Yes, extremely so for most, then again, as with any business the outliers standout.

Pay close attention to the advice received from veteran traders, brokers & advisers, those with real war stories, those armed with vast experience, the been around the block types, extremely priceless stuff there! Have a mind of your own, question all, why a 200 day Moving Average? and not a 189 MA? or why those 12, 26, 9 MACD #settings? Do your homework, your own research, crunch your own numbers, manually enter your data, memorize key phone numbers, that speed dialer or memory card will not function one day. It keeps you honest and those numbers remain somewhere in the back of your head for a rainy day... This business is like any other professional association such as medicine or law, you must always keep practicing, studying, adapting...

Do you have any special advice for new traders that you wish you’d had when you were getting started? Really study the Money Management aspect of the business... This is a topic on its own and worth every ounce of energy researching, studying and applying... This end of the business separates the boys from the men, weak from the strong, and it is Paramount. In trading, specifically highly leveraged instruments, the rewards better be very sweet because if you have to risk too much money before you finally get to the exit target, perhaps the system is not for you. Due to the wide array of traded futures instruments, the various margin requirements and such, we follow a formula that is consistent, an industry standard on risk so to speak. Industry professionals / peers recommend risking no more than 2.5 – 3.5 % on any single trade, so armed with this number averaging 3%, we work backwards, so on a $100k account that would equate to -$3k max risk per trade. That would also equate to a $30.00 move in gold, a $3.00 move in Crude Oil, or a .07 cent move in Unleaded Gasoline, we then align our money management with our respective systems stop(s) / sizing. In today's marketplace and volatility landscape, a $30 stop in Gold might be too much for one contract, however, trading two contracts with a $15.00 stop or four contracts utilizing a $7.50 stop from entry might be more plausible and /or in line with the respective systems stop loss internal mechanism.

Absolutely. We have seen portfolios successfully trading a basket of low correlated futures systems. The equity curves are consistent and draw-downs are greatly minimized. Where are the best financial opportunities now? Forex, Futures and Bitcoin. Hard to beat the leverage and costs associated with trading Bitcoin, Forex, Futures and / or the Options markets. What do you think are the hot markets this year? Do you have any inflation, or economic disaster, forecasts? Bitcoin, US Dollar Index, US Treasuries, Sugar, Copper, Gold and Platinum. We are forecasting higher interest rates in the USA, we also see a shift in administration, fed policy and continued independence, ie Scotland, Wales, Catalonia, etc. Needless to say the emerging markets will be the first and hardest hit.

 

VENDOR INTERVIEW

Are most new traders’ expectations unreasonable?

The instant gratification seekers are plenty and run rampant in this industry. A very high burnout rate in the industry also exists, however, the traders with real hedging vehicles, non correlated systems and oriented towards adding value, are the most likely to succeed in our opinion.

Do you think it’s possible to use a pure systematic approach without any discretion at all?

Futures Truth™  ·  Issue #2‐2016  ·  www.FuturesTruth.com 

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How? Key word-“consistently”, flipping the code to reverse its losing ways into winning? Sometimes, its that simple! Trading systems fail mostly due to intervention by the human element. Whether by fear, greed, second or third guessing, trying to fix/tweak something that is not broken, once you deviate or override a systems rules, logic or data set, there is no system...

Lastly, we invite all interested interns / students from any academic discipline to participate in our training program. We will provide them with professional trading software, a structured curriculum, trading contests, FINRA Series 3 exam study material, on-line chats, social media forums, workshops and other resources. What are your favorite markets to trade? Energy Futures, Precious Metals, Stock Indices & Currency Futures, in that order... That said, I like volatility and liquidity more than specific markets. Come to think of it, I am looking for a Printer to print me “I Love Volatility” bumper stickers…

“An investor’s worst              enemy is not the                 stock market, but                    his own emo ons.”      ‐ Author Unknown

Do you think a one algorithm approach to all markets is realistic? Yes, in theory, a good algo should work across multiple markets AND multiple time frames, that said, no matter how robust that one algo appears to be performing, diversification, proper risk management and weight allocation is paramount. Do all systems fail eventually?

Is there anything that you would tell to those new to trading commodities or stocks that you wish someone had told you when you were getting started?

Many do, however, I like our algos, in our opinion, as long as 1+1 = 2, and January-December exist, they will continue to shine! BTW, show us a system that is "consistently" losing money, our staff will try to convert it into a Top Ten trading system,

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FOR THE RECORD

FOR THE RECORD Enforcement Press Releases From the CFTC March 2016 CFTC Charges Virginia Resident Tracy Lee Thomas and His Firm, Cayman Islands‐Based Marbury Advisors Inc., with  Fraudulently Solici ng over $1.2 Million in a Commodity Futures Scheme, 7348‐16, 03/25/2016.    CFTC Charges Georgia Resident Hendrik A. Van Beuningen and His Company, DeBrink Trading Fund I, LLC, with Fraud,  Misappropria on, and Registra on Viola ons in Connec on with Their Commodity Pool, 7350‐16 , 03/31/2016.      April 2016   CFTC Announces Whistleblower Award of More Than $10 Million, 7351‐16, 04/04/2016.    Federal Court Orders UAE Residents Heet Khara and Nasim Salim to Pay Combined Civil Monetary Penal es of $2.69  Million for Spoofing in the Gold and Silver Futures Markets, 7353‐16, 04/05/2016.    CFTC Orders Staten Island‐Resident Michael Pucciarelli and his Company, Badge Trading LLC, to Pay a $280,000 Penalty  for Engaging in Unlawful Noncompe ve Exchange for Physical Transac ons, 7355‐16, 04/05/2016.      CFTC Permanently Bans Brian Hinman from Trading and Registering with the CFTC and Imposes over $141,000 in a  Monetary Penalty and Disgorgement for Aiding and Abe ng Commodity Pool Fraud, 7360‐16, 04/12/2016.    CFTC Orders New York Resident Nathan Schleifer and Galileo Trading to Pay Res tu on and Penal es Totaling More  than $1.6 Million for Commodity Futures Fraud , 7361‐16, 04/12/2016.    CFTC Announces Addi onal Names to Its List of Foreign En es that Illegally Solicit U.S. Residents in Forex and Binary  Op ons, 7363‐16, 04/18/2016.      May 2016   CFTC Orders Chicago‐based Cunningham Commodi es, LLC and its Controller Salvatore Carmen Russo Jointly to Pay a  $150,000 Penalty for Failing to Immediately Report a Customer Segregated Account Deficiency, 7366‐16, 05/09/2016.    CFTC Orders Ci bank to Pay $250 Million for A empted Manipula on and False Repor ng of U.S. Dollar ISDAFIX Bench‐ mark Swap Rates, 7371‐16, 05/25/2016.    CFTC Orders Ci bank, N.A. and Japanese Affiliates to Pay $175 Million Penalty for A empted Manipula on of Yen LI‐ BOR and Euroyen TIBOR, and False Repor ng of Euroyen TIBOR and U.S. Dollar LIBOR, 7372‐16, 05/25/2016.  Federal Court Orders California Resident David Bryant to Pay More than $6 Million in Res tu on and Penal es for  Fraud and Misappropria on, 7373‐16, 05/25/2016.   Futures Truth™  ·  Issue #2‐2016  ·  www.FuturesTruth.com 

 

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CFTC Orders Florida Residents Ted L. Romeo, Richard D. Schru , and Their Company Cypress Wealth Management  Group, Inc. to Pay Res tu on and Civil Monetary Penal es Totaling More than $530,000 in Precious Metals Enforce‐ ment Ac on, 7376‐16, 05/26/2016.      June 2016   CFTC Orders Bitcoin Exchange Bi inex to Pay $75,000 for Offering Illegal Off‐Exchange Financed Retail Commodity  Transac ons and Failing to Register as a Futures Commission Merchant, 7380‐16, 06/02/2016.    CFTC Charges Haena Park and Her Companies Phaetra Capital GP LLC, a/k/a/ Argenta Capital GP LLC, Phaetra Capital  Management LP, a/k/a Argenta Capital LLC, and Argenta Group LLC with Misappropria on and Fraud , 7382‐16,  06/03/2016.    Federal Court Orders Florida Resident Rico Omar Cox to Pay Over $940,000 and Imposes Permanent Trading and Regis‐ tra on Bans for Solicita on Fraud and False Statements in Commodity Futures Fraud Ac on Brought by CFTC, 7383‐16,  06/03/2016.    CFTC Charges Three Men and Their Florida‐Based Berkley Companies with $2.7 Million Precious Metals and Rare Dia‐ monds Fraud, 7385‐16, 06/07/2016.    Federal Court Orders Florida Resident Todd Owen Marshall, Harvard Assets LLC, London Assets Inc. & Harvard Interna‐ onal Trading, Inc. to Pay More than $2.4 Mln for Engaging in Illegal, Off‐Exchange Precious Metals Transac ons &  Registra on Viola ons, 7393‐16, 06/20/2016.      CFTC Obtains Default Judgment Orders against Three Magee Family Members of Calgary, Alberta, Canada, for Com‐ modity Pool Fraud, 7394‐16, 06/20/2016.      Federal Court Orders Dante S. Giovanne  and His Companies Emini Experts, LLC and Capital Trading Concepts LLC to  Pay over $2.7 Million in Res tu on and Monetary Penal es for Commodity Pool Fraud and Other Viola ons of the  Commodity Exchange Act, 7395‐16, 06/22/2016.    CFTC Charges Former CBOE Member Alvin Guy Wilkinson and his Connec cut‐based En es with Fraud, Misappropria‐ on, Failing to Register with the CFTC, and Making Misrepresenta ons to the NFA, 7398‐16, 06/28/2016.   

Futures Truth™  ·  Issue #2‐2016  ·  www.FuturesTruth.com 

 

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SYSTEM TRADING for QUALIFIED INVESTORS Full Service Broker Assisted Trading 

We offer managed account type services such as:  System Selec on   Por olio Design   Money Management   Compe

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Call (828) 692‐4230 for details!  Email: [email protected]  Futures Truth™  ·  Issue #2‐2016  ·  www.FuturesTruth.com 

 

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