|
PureBytes Links
Trading Reference Links
|
Ray, Roy, Cliff, and Thomas,
Will try to answer several questions/observations in one post. Let me
clarify that I do not use price crossing the EMA as a signal. I use the
slope of the 21 day EMA as an indication of trend, then trade a breakout of
a retracement in the direction of the trend for both futures and spreads.
The irony of my success this past year while Moore's monthly picks lost
money has not escaped me. I have data on Moore's performance since 93 and
this is the first calendar year that they have lost money, very large
drawdowns have been common however. My whole premise for the system was
that the seasonal picks would provide an edge over the long haul as they
had in the past. I will be keeping a close eye on their track record. From
Jan to May they had a drawdown of $41000 and are down about $6000 for the
whole year. They have never recommended trading their monthly seasonal
picks as a stand alone system. I should test my system on a basket of
commodities without any seasonal bias but dont have the software to
automate it or the time to do it manually. I think that Elder in Trading
for a Living has great ideas on money management. I guess that my
"conservative" money management plan is only conservative compared to the
way I used to trade and lose. I started trading the system Dec 96 with a
$12000 account and using $600 or 5% stops. Other rules were to quit trading
for the month after a 15% loss of monthly starting account equity and to
quit and reaccess my system after a 40% total loss. I quit trading part of
one month (15%rule limited my drawdown) last year and my worst drawdown was
28%. I realize if I had started trading in March last year I would have
been blown out, so will only increase position size when I can limit risk
to 2% per trade. The $600 stop was an eyeball pick from manually
backtesting the system, I'll stick with it for now. Another important
factor in money management is selection of markets to trade. Twice early in
96 I lost $1800 over night in inter-currency spreads. A small account can
not stand that no matter how attractive the potential gains look. From Aug
95 to Apr 96 I was trying to trade the seasonals without a good plan or
good money management and it was a disaster. I seem to learn everything
the hard way in trading. After reading Joe Ross's
book on trading seasonals it took me 8 months to reacquire courage and
capital.
Rod Smith
|