Commodity Futures Trading Strategy

The Commodity Futures Trading Strategy offers investors an entrance into market sectors and trading strategies that are normally only available to institutions and high net worth individuals. Our trading strategy allows the investor to have their investment run like a business. The concepts behind the strategy are consistent with most successful wealth building approaches.

The Commodity Futures Trading Strategy is a fully diversified, turn key trading strategy that trades seven non-correlated market sectors: Energies, Financials, Currencies, Metals, Meats, Grains and Softs. The strategy trades 67 worldwide liquid markets.

The strategy exploits price trends in the markets traded by waiting for low risk opportunities to occur. Advanced money and risk management tactics then protect not only the initial capital risked on each trade, but any open equity profits. Dynamic portfolio selection, different time frames, filtering and aggressive exits further increase the strategy’s edge.

Because we do not in any way think we have quantified the future, the main focus of the strategy is to manage risk and exposure.

The strategy is made up of four core components. These unique, highly-advanced components are what give the strategy an enormous trading edge over other trading strategies and systems. They are:

• Fundamental driven inputs
• Dynamic portfolio selection
• Directional biased signals
• Superior money management controls

Fundamentally Driven Inputs

The strategy begins with the proprietary valuation determination algorithm. This 100% systematic filter determines when a market is under or over valued. The program also takes advantage of common sense, real-world trading inputs to filter out trades that do not make sense in the real world.

These fundamental inputs are then passed on to the next two components of the strategy.

Dynamic Portfolio Selection

The Commodity Futures Trading Strategy does not trade a static portfolio like most other trading strategies and systems. The program dynamically ranks each market using a proprietary ranking metric. The markets are ranked daily and trading signals are only generated in the highest ranked markets.

Directionally Biased Signals

Market sectors traded do not necessarily trade long and short. This component of the strategy keys off of the fundamental inputs and establishes a trade direction for the market sector. They are long only, short only, or long and short.

Superior Money Management Controls

Trading systems are incomplete. They do not have a money management component. For new trades, the Commodity Trading Strategy manages exposure on three levels.

All signals generated must pass through the risk and money management filters. The strategy can then examine risk prior to selecting the trades for the account. Each trade has to meet certain criteria to ensure that no one trade can adversely impact your account.

The Commodity Trading Strategy also monitors the amount of risk that it will accept in each market group to protect against too much exposure in any one sector. The markets that make up each sector are usually highly correlated.

Finally, the Commodity Futures Trading Strategy manages the total risk of your account by monitoring the amount of exposure in all the open positions. This protects your capital against a random event.

Open trades are managed by a set of exits that lock in open profits.

Our money management page elaborates more in depth about money and risk management.

Real Time Results

The Commodity Trading Strategy just returned 32.03% in its first full month of trading!

If you would like to receive real-time performance for the Commodity Futures Trading Strategy by email, subscribe to our monthly performance updates.

Proof of Concept

Below is the hypothetical backtest or what we like to refer to as the proof of concept of the Commodity Futures Trading Strategy. The test is from 1 Jan 1990 to 25 April 2008 or just over 18 ˝ years.

The test was run with an initial investment of $65,000.

All tests were run with the Mechanica Portfolio Engineering software combined with an Excel macro to test 1 lot trading metrics.

Slippage and commission was $75 on each new trade and $37.50 on each roll.

See our real time performance on the Commodity Index Strategy page to see that our slippage and commission assumptions are actually higher than our real world costs.

Equity Curve
The account equity is on the left hand scale and the account drawdown is on the right hand scale. The duration of the draw downs can be viewed by the red shaded valleys on the green curve. The depth of the draw downs can be viewed in the lower red shaded plot. The performance of the strategy can be seen by the green shaded plot. The strategy averaged 38.18% per year or $25,495.39 per year.

Trailing 12 Month Returns
It represents the 12 month return or decline from each day in the test. The majority of the time the chart is positive. This means your chances to make money the first year trading the Commodity Futures Trading Strategy are very much in your favor.

Annual Return in USD
The return or decline at the end of each year. There is only one losing year. The average return for all years is $25,495.39.

A Broker's Nightmare
Overtrading is the number one reason why traders lose money. This chart is the number of trades per year. The Commodity Futures Trading Strategy trades an average of only 52 times per year.

Summary Table
The metrics that we feel have the most value going forward are the standard deviation of daily returns and the average trade. The above standard deviation of daily return means that the daily change in your account value will be within $1161.53 approximately two thirds of the time. The average trade is $486.26. This provides us with a good cushion for a rough period or higher costs from slippage or commission.

The Commodity Futures Trading Strategy is offered exclusively through an annual subscription that's traded by our preferred brokers.

We recommend, especially if you are a newer trader, you take advantage of our preferred broker, Angus Jackson Inc. They have been in business for over twenty years. Their execution services are superb and they provide a seamless implementation of our strategies.

We recommend trading the Commodity Futures Trading Strategy with between 60–80k USD, depending on your level of risk. For larger account sizes, trade 1 lot for each 80–100k USD.

The Commodity Trading Strategy is available through the low-cost annual subscription rate of only $1,197.

Not ready to be a client yet? Subscribe to our monthly real-time performance updates.

CFTC REQUIRED RISK DISCLOSURE
Hypothetical performance results have many inherent limitations, some of which are described below. No representation is being made that any account will or is likely to achieve profits or losses similar to those being shown. In fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program. One of the limitations of hypothetical performance results is that they are generally prepared with the benefit of hindsight. In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk in actual trading. For example, the ability to withstand losses or to adhere to a particular trading program in spite of trading losses are material points which can also adversely affect actual trading results. There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results and all of which can adversely affect actual trading results.