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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: +17.69% We are currently above the S&P index by 21.02% |
| Market Action
Weekly Profit (P/L): -$(1700) | | The best gain in over a year hurt our short strategies considerably though hedging reduced the losses, but not until the market moved 4% against our short position.
When we mentioned that the market would test 1040, the unexpected move above this mark to over 1070 was quite impressive. Bullish sentiment about beating estimates sent the market 3% past the 1040 market, much more than anticipated, but the system implemented its hedge afterwards to limit losses.
The system will have to be manually intervened on the week before earnings as a "short" position has hurt our profits (even in modeling) every time. A model for this period seems pointless since it involved the combination of a holiday and extreme optimism about earnings (which can't be modeled). 
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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: The small (green) investor appears to have won this week's rally. The COT is in a slightly bullish pattern while the pit contract (not shown) is in a strong bearish pattern; however, electronic patterns have been dominating actual performance for some time now (and would be consistent with electronic algorithmic trading). The conviction in the market appears to have waned for the professionals but since this is a lagging indicator and the market rallied strong this week, we may see some bullish tendencies through the first part of the week. Though earnings season looms ahead, estimates have been slashed considerably and all eyes and ears will be on guidance rather than performance.
Our analysis on the current environment would continue to see a short term rally into the 50-day moving average, possibly 200-day moving average and a "buy the rumor sell the fact" as professionals sell into the rally and/or move into companies that can survive a U.S. slowdown. Internationals should do well. As is normal from an historic perspective (per the stock trader's almanac) weak earnings typically will have a strong rally BEFORE actual earnings and a sell off after initial earnings. Selling into a rally in the 1080 area should bring benefit later in July.
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| Live by the Sword
Taking your lumps with algorithms |  Per CNBC, hedge funds are barely above the S&P but one might think they are always beating the market with their high powered systems. For most, the high powered systems are concentrated on market making and not necessarily "buy side" (the typical investor is a buyer of the market and therefore on the "buy side" where a broker may be on the "sell side" wanting to sell inventory of a stock).
These system, even our own, are not infallible and cannot "win" every week. When we take losses we need to review it as "is this loss less than the move in the index?" If it is, then it managed its risk well and is a "win" for risk management. This week started off quite well for us and then an aggressive sell into the low on Tuesday got absolutely hammered the next day taking all the profits and then some. So, is the system broken? Actually, after the hedge was put on the system began taking some of the losses back--you must stick with the system. We expect to have at some point during the run to take stop losses and sometimes we will take them twice in a row. Take for instance the performance on Tuesday where the market rallied above 1040 then sold off to 1020 (making an easy 1% gain for the system), the following day the same occurred but the rally continued well into the end of the week. Could this activity be "modeled?" Of course, but our current model does not take this into consideration, we would have to build another model to handle this and so the game goes. If you want to win everyday, you need to build several models for each instrument. There are thousands of instruments we can apply our models to, but right now we are focusing on the one that provides the most liquidity and scaling capabilities (ability to trade thousands of contracts without moving the market). Since we actually started the system running March 1 of this year we have done quite well and our goal has always been to make money during the rally and save as much as possible in the sell-off. However, there is a known element that will hinder performance: a transition from a "short only" to "long only" and vice-versa. This is where we take some hits, as seen on Wednesday and goes with our previous article on putting money "at risk." Though this rally took a 4% hit against a nearly 8% range move (whereas last time through this we barely lost 1%) the system performed as expected, limiting damage and has confirmed that only one model is simply not enough. We need to have more models running in conjunction with our current model but that will take time as we raise capital by actively trading our existing model. Our current system is in a "hedging" mode with a primary "short" and a long hedge. |
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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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