Please provide your opinion on Subscribe this Strategy “A Strategy for YM”.
Good Active trader , has a better records, on big negative or positive market move, he makes money, when in sideways market…is more questionable?.
For sure , there is risk and reward.
maybe sure you are ok with the leverage and adding on to losing positions. lots of volatility but its a strategy that proof it self over time.
Thanks, are you trading this strategy?
** Jey C**
no im not. if you are, put a contract limit on it.
I’ve been in this strategy and its brother strategy 3 FOLD for a while now and I’m currently evaluating how they’ve done. I’m wondering whether this strategy has any real edge versus just buying and holding an equivalent number of futures contracts in the same/a similar equity index.
The strategy is a trend following strategy on the Dow e-mini, and it’s been almost 100% long since inception on C2. It is always in the market. Since April last year, it’s made about $76k in profit, starting on a base of $20k. The average position size per trade (my estimate) over that time has been about ~3.5 contracts.
Taking a quick glance at the S&P over the same period, a constant long position of 3.5 contracts would have yielded somewhere around $70k in profit, but without any fees involved.
These are very rough, back of the envelope calculations, but it almost looks like the performance of the strategy and the performance of going long only a similar amount of futures contracts would be about the same. It makes me wonder if the performance of this strategy is due almost completely due to leverage, rather than a true edge.
Another way to look at it…trading this strategy on an unlevered basis at 100% scaling, one would need about ~$930k of capital (avg Dow price from April 17 to Jun 18 * $5 * max position size of 8 contracts). The ~$76k gain so far is about a 8.1% return over 15 months, and remember, during that time the strategy has been long almost 100% of the time, and it’s always in the market.
The return on being long the S&P index from April 30 2017 to today is about 15%, or almost twice the unlevered return of this strategy. Again, on an apples-to-apples basis, it looks like strategy doesn’t outperform just holding a long position in the futures as long as you think the trend is up.
Thoughts? Any other ways to look at this? I’m looking for feedback and constructive discussion. Any experienced strategy-evaluators who want to weigh in?
This is the type of thing I was pointing to in this thread Adjusting Futures Returns for Margin
When you said:
“Adjusting futures returns for margin as a way of comparing strategies is a pointless exercise because it completely misses the most important point, which is how much gain you’re getting per unit of risk.”
I can understand your previous point being all about risk. However, now it seems you are trying to do something similar to what I was saying. I think your current question is very valid and I think it is important to analyze each strategy to see “if the performance of this strategy is due almost completely due to leverage, rather than a true edge.”
I still think risk-adjusted return is more important. Edge and leverage are two different things to me. Edge is how much return you get on average every time you take some risk. Leverage is how much money you explicitly or implicitly borrow to operate that edge.
The reason why leverage matters for A Strategy for YM though, is that the way the leader has run the strategy since it started is very, very similar to being long the stock market.
So, his risk-adjusted return might look good over the past 15 months, and that’s fine, but if buying and holding a similar number of e-mini Dow contracts produces almost the same PnL then the strategy’s good performance is not a reflection of the leader’s skill but a reflection of the performance of the broader stock market. That’s the point I’m trying to make.
Stated another way: if I can recreate the strategy’s performance by buying and holding a few index futures any time we’re not in a bull or sideways market, then why am I paying the strategy leader $200/mo to do the same thing?
I remember reading a post by someone on these forums making this same point in one or two sentences and I think it was in reference to 3 FOLD/A Strategy for YM too. Unfortunately I can’t find this post now, but I’d love to get his opinion.
The strategy leader has a long-term backtest on his website that I’d like to apply a similar analysis to but it’s not easy to read.
Again I don’t disagree with anything you just said. I am just glad you are now using my “worthless exercise” as part of your overall analysis.
Cutting to the chase…
Given what I’ve pointed out above about A Strategy for YM vs. just being passively long index futures, would you invest/not invest in this strategy? Agree/disagree?
This is one of the more popular strategies on C2 so I think it has relevance to a broader audience.
First, massive respect for strategy, because of 500 % TOS.
I would not invest in this strategy. For 2 reasons.
Because it is long only, and market has changed.
By this I mean VIX is higher; trade war is looming, there is always some Trump Twitter factor here, that can send market 1-2 % down in a day.
Personally, I think that strategy should be able to profit from both down and up markets.
Or be flat if doing only long trades, and not exposed all the time.
Since it is leveraged, and if you look closely into trades that had DD above 10 %; you can see adding to losing position at time, and holding it all the way until positive.
Looking at trade from May 22 to June 8, it took more than 600 YM pts for developer to cut loss on some contracts.
From my POV; it would take roughly 40 K per YM contract to follow this strategy. Since it can go to holding (guessing) 6 or 7 contracts at time, 300 K and to be safe with this.
This is by no way telling people not to invest in this. I really have huge respect for being 500 % TOS. And comparing results with others, this is good strategy, but at this time in serious downtrend. It is just way I see those trades.
Personally no I would not. Stops or no stops it just doesn’t seem to pass the reality check. It just seems too good to be true. Consistently earning 260% annually is unrealistic imo. I too have a lot of respect that it is TOS, but not willing to follow.
To your first point, this strategy can go short but it hasn’t tried to do so in any meaningful way the past 15 months. If you look at the trade history there might be 1 or 2 very brief short trades.
I also don’t like that it’s permanently exposed to the market, always has a position on.
On your 2nd point: he often averages down as the market falls, but if it falls too far then he basically stops out when he has 6 to 8 contracts on and reduces size to the minimum of 1 or 2 contracts, at the worst point. If the market starts rallying, he then puts a position of 3 or 4 contracts back on. This is fine when there is a trend but in choppy up-and-down markets this kind of trading will eat you alive because you’ll always be selling on a stop out of a big position, then getting back into your normal position once the market has already moved up.
His usual max position is 6 contracts, but sometimes he goes to 7 or 8 in certain circumstances. $300-$320k capital would be realistic to keep the drawdowns under 15% or so.
edit: another thing to note…the leader was on vacation the weeks of Jan 22 to Feb 4 and exited all positions during that time. As a result, the strategy fortunately missed a 500 point slide over those two weeks, where it otherwise would have been long. Unfortunately the long position was reinstated on the night of Feb 4, just in time to catch Feb 5 disaster.
If you simply long Dow futures at that leverage since April last year, your account would be wiped out at Feb crash, or any much smaller crash.
No trader would dare to do that.
Comparing a strategy’s performance with simply longing an index futures all time, is too ignorant.
Why is it “too ignorant”?
Stock pickers compare their performance against buy and hold index investing all the time.
You need some kind of benchmark in the investing world.
Given that this trade leader uses futures to trend-follow, without fixed stops, and he’s been nothing but long for well over a year, I think it’s relevant to compare it to being long Dow futures with 3 or 4 contracts (his average position size). Being passively long would have lost you $35k-$45k over the couple of weeks after the Feb 5 crash, and this is in fact how A Strategy for YM performed as well during that time period. It was survivable, but not very encouraging to see.
With this bearish tone to the market this ‘long’ only strategy is going to feel alot of heat this week. We have a sea of red in the markets today so far.
Going to be interesting to see how these ‘long’ only strategies like this one survive.
oops…forgot my emoji…lol…
a strategy for YM and a tragedy for subscribers
Matthew, I have a question regarding the capital that shows in C2 and also eligibility how many contacts the developer can use in his systems.
This model is using almost 100% through IB and he is using 500% TOS, thats awesome.
According to IB website, for overnight initial each contract require $8,009.28
At the current status. YM at 24,418. The model has 12 long contracts and the total capital is around less than $72k.
When a subscriber is using 100% and has the same capital that shows at current C2 right now, IB will never allow the subscriber is using 12 contracts because 12@ $8,009.28 = $96,111.36 which is the subscriber short $24,000.
In conclusion, the developer must have more capital than what it shows at C2 and the subscriber is in difficult situation. Screw the subscriber.
If the YM will retest tomorrow October lows, well, good luck with 12 contracts short and managing this strategy with limited capital. Before anyone screw a subscriber, the subscriber will screw itself first. Any lesson learned from leverage used in this strategy and drawdown from the end of October?
It is always the first time, from many times.