2018 - 8 Future Basket Trading Journal

Discussion in 'Journals' started by MidwesternTrader, Jan 6, 2018.

  1. Introduction
    Everyone is a future millionaire with their best paper trading or back tested trading strategy until it blows up. So I’ll trade mine live and post weekly results until it Hindenburgs in a glorious fireball and you can hear me screaming “Oh the humanity!”.

    Maybe people will find some useful info from the posts or tidbits I learn from it. Like all “golden” back tested strategies, results never come close to reality. Let’s see where this one falls short. Guesses on the cause of its eventual destruction are welcome.

    My Background
    44-year-old residing in the Midwestern USA. Bachelor’s degree in Business Administration – Entrepreneurship. Main source of income the past 12 years as an independent Management Consultant assisting information technology and professional services companies capture government contracts by creating strategic business plans and writing bid proposals. Before starting my home-based business, I had a career as an information technology project manager for a Fortune 100 company (5 years) and then as an independent contractor (5 years) working for Fortune 100 companies under 6-month contracts.

    My Trading Background
    3 previous periods of day trading stocks or futures in between independent contractor assignments many years ago. Those runs are best described as learning stints losing a few thousand dollars each time. Began researching some new approaches to trade futures in late 2016. Decided to go live again in July 2017 trading CL, NQ, and GC learning and trying new things while basically breaking even after 6 months. Then began trading a 7-future basket Dec. 18th, 2017. Went to the 8-future basket Jan 2nd, 2018.

    Broker – Interactive Brokers

    Starting Account Size - $50,000

    1. Develop a profitable “No Screen Watching” futures trading approach that does not require live monitoring with automated trade exits leaving my account flat at the end of the day. I still need to work a my real job to pay the bills.
    2. Develop a second stream of income.

    Current Trading Approach
    Trading an 8 futures basket every day using price action analysis to determine whether daily trades in each contract will be long or short. Entries are made at the same time each day in pre-market hours for all futures except HE and LE which are entered near the 8:30 CST market open. Exits are setup up with a paired stop loss and a “close upon regular market close order” when the stop loss is not triggered. I take about 45 minutes each night to review the completed trades, perform price action analysis, and determine the trades for the next day.

    Futures Basket Traded Each Day
    · CL – 1 contract with $1,000 daily stop loss
    · NQ – 1 contract with $500 daily stop loss
    · GC – 1 contract with $500 daily stop loss
    · NG – 1 contract with $500 daily stop loss
    · HO – 1 contract with $500 daily stop loss
    · KC – 1 contract with $500 daily stop loss
    · HE (LH) – 2 contracts with $560 total position daily stop loss
    · LE – 2 contracts with $560 total position daily stop loss

    2016 and 2017 Back Test Results
    Back test included commissions and 1 tick of slippage for each contract round turn trade (get one fill on the time/bar print, get one fill off the time/bar print by 1 tick).

    2016: +$234,460 per basket with -$7,680 maximum drawback

    2017: +$155,160 per basket with -$9,200 maximum drawback

    A typical too good to be true back tested strategy! The prop firm offers for my services will be coming in fast and furious for sure!

    Weekly Updates
    I started trading this basket on Dec. 18th, so I’ll include the last 2 weeks of 2017 to start. I’ll post a short weekly summary, noteworthy lessons, interesting tidbits, and NAV results including a screen shot of my realized gains/losses report for each week. If it blows up, I’ll stop trading it and stop posting.
    Last edited: Jan 6, 2018
  2. Week Dec. 18th – Dec. 22nd

    Sucky starts are always awesome for confidence! This week didn’t include LE yet.

    1 winning day, 4 losing days. 12 winning trades, 23 losing trades.

    Lesson 1: Every time you begin trading a new approach it always begins with a draw
    down. Every time. It must be some unwritten law of the Trading Gods.

    NAV: -$3,501.27

    Adherence to documented trading strategy – Perfect 100%.

    DEC 18 - 22.jpg
    aldrums likes this.
  3. Week Dec. 26th – Dec. 29th
    Rebound with a vengeance. This week didn’t include LE yet.

    4 winning days, 0 losing days. 23 winning trades, 5 losing trades.

    Lesson 2: If you have something that is mathematically presupposed to trade positive over time, don’t get scared after one crappy week. Keeping trading it until it truly craps out on you.

    NAV: +$12,428.24

    Adherence to outlined trading strategy: Perfect 100%.
    DEC 26 - 29.jpg
    aldrums likes this.
  4. Week Jan 2nd – Jan 5th
    Continuing positive, but one costly mistake. Being on the right side of limit downs is cool, being on the wrong side of a mini-flash crash is not cool. Brought in the LE this week to officially begin the 8-future basket.

    4 winning days, 0 losing days. 22 winning trades, 10 losing trades.

    Lesson 3: Every time you deviate from your strategy for any reason, it will hurt you. If your win-loss ratio is 60 – 40 and you mistakenly reverse your trade entries 10 times in a year, it will hurt you 9 times out of 10. Another unwritten law of the Trading Gods.

    Lesson 4: Market mini-flash crashes suck when you’re on the wrong side of a thinly traded contract.

    NAV: +$6,226.05

    Adherence to outlined trading strategy: 97%. Misplaced one LH trade that impacted NAV by -$1,510. Turned a $950 winner into a $560 stop out loser by misreading my LH signal and trading it backwards. On the fun side, one LE short trade hit max limit down. Hitting max limits in your direction is so, so satisfying!

    Completely the opposite of satisfying, one day when long the KC contract, some tool decided to sell at market between 500 – 1000 contracts sending price careening lower 2.5% in 10 seconds instantly vaporizing any stops within reach. I mean who bombs effing Coffee? Starbucks, Scooter’s maybe?? The price rebounded about 70% of the down move in the next 10 minutes. My -$500 stop loss got filled at a -$1065 loss. Thanks prop firm manipulators, may I please have another???

    JAN 2 - 5.jpg
    aldrums likes this.
  5. southall


    Did you make $12,428 between xmas and new years trading just 1 lot on each signal?
    Last edited: Jan 6, 2018
  6. fan27


    This is a very interesting approach. How far did you go back in time did go for your back-test? Would be interested to know how your strategy performed during the market meltdown of 2008/2009.
  7. Basically yes, except that I trade 2 lots each of LE and LH. But that week I had't included LE yet.

    Another lesson may be when trading systematic type strategies is you never know which days / weeks will be great and which will be poor. Gotta take every trade, let the probabilities work for you, and the chips fall where they want. Add everything together at the end of each month and judge its effectiveness then.
    Bobbybax, HobbyTrading and themickey like this.
  8. Robert Morse

    Robert Morse Sponsor


    Welcome to ET. I like your process and wish you well. If I can help in anyway, let me know.

  9. Basically only have back tested the last two years. Obviously brings the thought it is tuned to a lower volatility market. But I think I'm OK with that because until proven otherwise that is the market we have. I hear a lot of chatter from vets saying it can't continue, but who really knows? If the big institutions and governments of the world like what has happened the past two years, why wouldn't they attempt to keep the same ecosystem rolling for 5 more years?

    I think one mistake people make is they try to develop strategies that work across all types of markets, silver bullet type stuff. I don't think that is possible. Have one approach for high volatility times and one approach for low volatility times seems more plausible to me. The trick is knowing when to flip the switch and change gears.

    Along with the $500 stop loss trade, I do track a $1,000 stop loss and $250 stop loss trade for each instrument. That should maybe give me a tip off if volatility creeps back in to any instrument and the wider stop loss begins outperforming the smaller stop loss. Should also probably try studying tying the stop loss amount to a % factor of a weekly Average True Range (ATR) so the system can auto adjust the stop loss as markets change.
    SimpleMeLike likes this.
  10. I'm totally oblivious to futures; all I know are options.

    But what % return are you making, on average, per day/week/month? ...I want to see if mine is bigger. o_O because Size~ matters at this ET Extraterrestrial Trading Academy.
    High-Five`, Xela
    Last edited: Jan 7, 2018
    #10     Jan 7, 2018
    light12 likes this.