Week Feb 19th – 23rd Bounce back and forth continues. 3 wining day, 2 losing days. 18 winning trades, 19 losing trades with 12 full stop losses. No trades in KC, HE, and LE on the holiday. Tried a different entry time and stop loss combination on NQ and it performed better than the original signal call using the pre-RTH entry this week. NAV: +3,363.25 Adherence to outlined trading strategy: 100%.
Retiring the 8 Futures Basket This past week will be the last I trade this 8 Futures Basket. In the initial post I was going to trade this until it cracked, but I have gained enough insight from live trading to have a better feel for its risk of ruin. The past 10 weeks have acted like a walk-forward test, uncovering many things to consider. Although this basket has been net positive during the live trading, I feel there are a couple weaknesses to cause it to be unsustainable long term. I also want to make some changes to allow more flexibility in my futures trading. Weaknesses Undercapitalization. Trading 8 contracts is too large for $50K. I already knew that, but best to move on now to something that could last longer before a massive drawdown hits. Still too much correlation. The CL and HO pair are great when the CL signal is profitable as they are closely correlated. But what happens when the CL signal (and thus HO with it) goes through a horrible stretch? When that happens, this approach will likely set a new draw down extreme. If I trade CL, probably shouldn’t pair it with another oil derivative product. HE and LE opening price issue. Having two instruments with the same core slip issue due to difficulty to capture the opening price consistently also provides a correlation problem. Trading 8 instruments each day doesn’t leave much room for flexibility. And I’m sure many more issues I haven’t figured out yet. There always are. General Improvement Ideas for Next Approach I’ll look to settle on a new approach over the next week. Some things I am considering: Cutting back to 4 or 5 futures instruments to trade daily. Probably still undercapitalized, but a better capital ratio than trading 8. Looking at NQ, CL. GC, NG and maybe LE for a 5 future basket. Changing stop loss levels to be variable based on the instrument’s short term volatility instead of a fixed number. I would like to have some instruments with strategies “on the bench” so I can substitute as conditions warrant. This will give me options to trade HE, KC, CC, SB, ZW, and ZS if I feel the need to rotate something out. I will need to learn how and when to rotate, but I think this will be useful long term. Scaling up winning trades. I have done some studies that add a contract to winning CL and NQ positions. Trading a smaller basket provides margin bandwidth that would allow adding a second contract positions to these trades. Thanks to all how participated in the journal. I definitely learned some things and picked up new ideas to research from other ET posters and other threads the past few months. Hopefully I can apply these to improve my results.