Futures Trading & Trading Strategies

InvestorEducation / Learn to Trade Jul 16, 2009 - 01:31 AM GMT

In regard to futures trading as well as the trading strategies that can assist you in trying to get to your goals,mechanical trend following approaches are what we use in my daily trading of our commodity pool. Hopefully you have read my other posts, there is no holy grail. This is hard work every day or you can invest with a commodity trading advisor in which you understand how he trades.

Regardless what I have seen that has worked in the past and stands the potential to continue to succeed in futures trading are the trading strategies mentioned below. The irony as many traders think they are absolutes, they are not. They all seem to have draw downs together as well as the rare large profits together. The reason being is they are all trend following with differences. The only difference is the strategy of counter trend in which I am not the greatest fan ( only to be used in longer term trading strategies with the goal to reduce some of the draw downs).

Trend Following Trading Strategies for Futures Trading
ATR Channel
ADX System
Bollinger Breakout
Donchian
Dual Moving Average
Triple Moving Average ( like two was not enough.. trying to find the holy grail)
Turtle as well as Bollinger Counter trend

The point I want to make is that there is really very little difference between these systems. They all will have draw downs as well as great years like last year. It all depends on the markets you trade or your commodity trading advisor trades. It all depends on the amount of money in your account or how much you allocate to your commodity trading advisor.

The biggest difference between success and failure is the risk and money management. Any of these approaches can be low volatile or a massive roller coaster. This means all depends on your risk per trade. What percentage of your account do you trade on any signal. Some cowboys trade in excess of 2 percent. Others have no concept of risk per trade. I go with the stomach concept that they know the future. We try to risk less than 1% on any trade. This has kept us in the game. Next we look at correlations between the markets. We do not risk more than 5% per sector.. ie grains.. meats.. index..currencies..etc. The reason being is one morning while all these trades are working…you will wake up and see they are going in the opposite direction and you are losing money..Lastly the next issue is open trade equity. This is were your draw downs will come from.. We limit our open trade equity to the mid teens to the low 20% range.

Bottom line… there are no magic trading strategies in futures trading. The only magic is the risk that is applied to very simple systems that are based on price.

Andrew Abraham
www.myinvestorsplace.com

Andrew Abraham has been in the financial arena since 1990. He is a commodity trading ddvisor and co manager of a Commodity Pool. Since 1993 Andrew has been a proponent of quantitative mechanical trading programs. Andrew's major concern is not only total return on investment but rather the amount of risk that one would have to tolerate in order to achieve returns He focuses on developing quant models that encompass strict risk adherence and correlation. He has been a speaker at conferences as well as an author of numerous articles. Andrew has spent years researching ideas that have the potential to outperform indices as well as maintain fewer draw downs.

Visit Angus Jackson Partners (http://www.angusjacksonpartners.com) Contact: A.Abraham@AngusJackson.com (mailto:A.Abraham@AngusJackson.com)

© 2009 Copyright Andrew Abraham - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Comments

Thomas Adair
20 Oct 09, 08:50

absolute alfa

The Holy Grail to Investing.

The ultimate business solution. The ability to cut the cost of any business expense, or just plain invest.

Developed multiple arbitrages for the financial markets. Arbitrages that produce just a few percent a year, to arbitrages that produce over 30 percent a year.

In 2001 i started developing, as of now, a dozen arbitrages. I lock in an X percentage, and Y time later, i close out the arbitrage. Over 30%/yr.

Risk-Free Investing is not only possible, but in abundance. Just that people are told and taught that it is impossible. No risk has been in front of all, but not seen.

The market is unlimited.

Thomas Adair

352-283-3326

HolyGrailToInvesting@hotmail.com

Only logged in users are allowed to post comments. Register/ Log in

The Market Oracle is a FREE Financial Markets Forecasting & Analysis web-site.
(c) 2005-2024 MarketOracle.co.uk (Market Oracle Ltd) - Market Oracle Ltd asserts copyright on all articles authored by our editorial team and all comments posted. Any and all information provided within the web-site, is for general information purposes only and Market Oracle Ltd do not warrant the accuracy, timeliness or suitability of any information provided on this site. nor is or shall be deemed to constitute, financial or any other advice or recommendation by us. and are also not meant to be investment advice or solicitation or recommendation to establish market positions. We do not give investment advice and our comments are an expression of opinion only and should not be construed in any manner whatsoever as recommendations to enter into a market position either stock, option, futures contract, bonds, commodity or any other financial instrument at any time. We recommend that independent professional advice is obtained before you make any investment or trading decisions. By using this site you agree to this sites Terms of Use. From time to time we promote or endorse certain products / services that we believe are worthy of your time and attention. In return for that endorsement and only in the cases where you purchase directly though us may we be compensated by the producers of those products.