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Hello and Welcome,
Welcome to the new Trizen Systems newsletter. This will be the new format for discussing our algorithmic trading systems and other information. Weekly updates will include Actual Profits/Losses, Commitment of Traders, Articles and Actual Trading screen shots. Pass this along to anyone that you feel would like to understand more about the financial markets, derivatives, and how to trade them successfully. Year to Date (YTD) Performance vs. the S&P 500:
Return on Initial Capital: 19.46% We are currently above the S&P index by 21.56% |
| Market Action
Weekly Profit (P/L): +$1508 |  A professional rollover week had a lot of short covering late in the week and an expectation that things aren't as bad as Ben Bernanke gave testimony on capital hill. The market rallied from its 1040 floor and in the September contract nearly touched 1090 before settling near 1085. Our algorithms were active but did not enter through most of the uptrend as volume was light and simply ticked higher. Version 3.6 SHORT ONLY performed well this week even in the face of a pretty big move across the board.
For the most part it appeared to be more short covering as the professionals and hedgers move into the September contract. Friday seemed to have little conviction though the markets continued their first weekly gain in nearly a month. Volatility continues to dominate action as professionals move the market from 1040 to 1100 to 1040 and now back again. The game continues...
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| Commitment of Traders
Bulls-n-Bears | | The COT, or Commitment of Traders, represents a government report that collects all the open positions for all traders in the futures market. It breaks it out into Hedgers, Professionals, and Small Traders. Hedgers maintain large portfolio positions and will hedge their positions using the S&P (so they can protect against falling markets). Professionals speculate and tend to be on the right side of the market opposite the hedgers. In most cases the Small trader (Green) is a contrarian indicator.
Analysis: We are reviewing the S&P Pit contract (traded non-electronic and in a pit at the CME Group Exchange). The Hedgers have become extremely long from previous weeks and the professionals continue to be short. The electronic contract shows the complete opposite with hedgers short and professionals long. The combined contract shows Hedgers LONG while professionals short.
We continue to recommend a defensive position as we come up on the 200-day moving average and will likely "bump" into this at 1097. The Stock Trader's Almanac has shown expiration week to be bullish early with a sell-off later in the week. This is setting up to be the case as we test 1100 again and then possibly test 1040 again.
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| Modeling the Past
Saving your Capital |  "Black Monday", "The Flash Crash", All of 2007 through 2009, 1929-1952...it all matters. In designing any model, one must test the theory against the "least likely scenario" to make sure insolvency is avoided.
In 2007-2009 the problem with mortgage models seemed to be that AIG just didn't want to consider the "least likely scenario" and they lost, and then lost, and then lost some more.
Models are general theories about the future, but the future always has uncertainties and these must be tested and modeled. When modeling, you must throw away all "assumptions" that seemed to always be locked into place, i.e. 2% default rate. What happens if a 10% default rate happens, can you survive? What happens if a flood occurs and I lose my house? In modeling the past, the Black Monday crash in 1987 is a great starting example and though it is nearly a quarter century old, models can easily be normalized to this date for a fair comparison. The best model so far has been 2007-2010 which has been incredibly difficult to create strategies against and yet offers everything of the past centruy it seems.
If you tread into the equities world without asking yourself "What will I do if a 50% decline occurs" then you have not modeled your risk. "Can I handle a 10% correction in a 5 minute period?" The real benefit of a model is understanding what you need to do when a market acts similar to its historical extremes. For those items that have potentially unlimited risk, stop losses come into play to save your capital and is easily one of the most used risk management tools and should always be included in your metrics.
In summary, a model is simply this: A plan to manage risk. Making money without risk will return 1% or less (including inflation, etc) and if you want to make 8%, then you need to put your money at risk and a model to manage that risk would then become a prerequisite. |
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Sincerely,
Edward Zaremba
Trizen Systems, Inc.
Commodity Trading Advisor
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| | BladeTrader Version 3.6 | | Version 3.6 and 3.3 have been released. We will have four accounts for each side and version and seperate percentages. |
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U.S. Government Required Disclaimer - Commodity Futures Trading Commission Futures and Options trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the futures and options markets. Don't trade with money you can't afford to lose. This is neither a solicitation nor an offer to Buy/Sell futures, stocks or options on the same. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on this web site. The past performance of any trading system or methodology is not necessarily indicative of future results.
CFTC RULE 4.41 - HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN EXECUTED, THE RESULTS MAY HAVE UNDER-OR-OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN.
NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL, OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE DISCUSSED WITHIN THIS SITE, SUPPORT AND TEXTS. OUR COURSE(S), PRODUCTS AND SERVICES SHOULD BE USED AS LEARNING AIDS ONLY AND SHOULD NOT BE USED TO INVEST REAL MONEY. IF YOU DECIDE TO INVEST REAL MONEY, ALL TRADING DECISIONS SHOULD BE YOUR OWN. |
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