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Chapter 1
What are Algo Trading Systems
It generates BUY - SELL signals based on these strategies and predetermined guidelines that are programmed within the algorithms. Algo Trading Systems take into account anything from technical analysis to very advanced mathematical calculations. Once the Algo Trading System is completed, traders can take a hands-off approach to trading, as the computer takes over the trading decisions. It is attractive to traders because it takes the emotion out of trading, which can frequently impact trading decisions. Algo Trading uses a computer program that follows a defined set of instructions (an algorithm) to generate a BUY or SELL signal. Algo Trading makes trading more systematic by ruling out the impact of human emotions on trading activities. Using complicated instructions, a computer program will automatically monitor the market and signal the BUY or SELL signals when the defined conditions are met. The most common Algo Trading strategies follow stochastics, moving averages, and technical indicators. These are the simplest strategies to implement because these strategies do not involve making any predictions or price forecasts.
One of the main advantages of Algo Trading Systems is the absence of emotion. Removing emotions from trading helps the trader not make irrational decisions and stay true to their trading system. Traders also won't second guess themselves. It enforces discipline at all times, which is especially a key in times of volatility. Algo Trading is widely used by investment banks, pension funds, mutual funds, and hedge funds. However, it is also available to private traders using computers and retail trading systems.
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Chapter 2
Creating the System The ATS Story
In 1979 I had a small store in Toronto. One of my customers was a commodity broker. She lived next door and every evening on her way home, she would come to my store and tell me how much money I would have made had I bought some gold that day. In 1980 I saw gold go from $350 an ounce to $800 an ounce. At the time I knew nothing about commodity trading, except that you could make a lot of money or lose a lot of money. And every time the broker came to the store I counted the money I could have made that day. We all know the feeling. This kept going on for month after month. Towards the end of 1979, I sold my small business and bought a restaurant. I had to wait a couple of months before I took possession of the restaurant, so I decided to go and visit my broker friend and find out what the fuss about gold was all about. When I got to the broker I still remember the excitement. All these people staring at charts, people making trades. I had all the money from the sale of my business, and it did not take me very long to open a trading account to trade gold. I still remember, I had to put up $20,000 just to trade one contract of gold. I cannot remember exactly whether I started to trade right away or had to wait a few days, but what I can remember was that the broker got me into gold on a Friday just before the close. Remember this was now January 1980, when gold peaked at $850 an ounce. I made the proverbial blunder, and was one of the last idiots who bought at the top. Monday morning I was up early to go to the broker and watch the market. Gold started going down and my $20,000 investment down with it. I panicked, made a few trades lost a lot of money, the broker got me into copper, and to make a long story short after a week of hectic trading, and a lot of commissions, I managed to get out with a loss of $5000 only. I still consider myself very lucky at losing just $5000. However during all this commotion I managed to notice something very important. I saw people "day trading". At the time I did not know what day trading was. I remember all these people trying to make a few bucks, say $300 buying or selling one contract of gold. So I said to myself, big deal, I can make more money running my restaurant, and I thought that all these people were crazy, and I was glad to get out of that office. This was January 1980. In 1983 I sold the restaurant, and bought our first computer, it was the Commodore VIC20. It did not take me very long to take to computing like a fish takes to water. I bought every book I could find, taught myself programming, bought our second computer, the Commodore 64, and started to write a professional blackjack program to teach players the basic strategy and the card count. The program was called World Class Backjack, and I managed to sell a few hundred copies. One day while playing with the computer I started to write a program to compound interest rates. For the fun of it, I wanted to find out: if I invested $1000, at say 1% compounded daily, how much money I would end up at the end of one year, 365 days.
Lets face it. How hard can it be to make $50 on $1000. Take retail, it can be done. The trick was how to compound it quickly. Say weekly instead of daily. Therefore theoretically if you could make 5%, and compound it every week for 365 weeks or 7 years, you could make 53 BILLION DOLLARS IN 7 YEARS. INCREDIBLE: enough to fire the imagination and motivate anyone. When my imagination takes over I never let go. I started to figure out how to put this into practice. You needed something simple. An investment that was very liquid, easily bought and sold, with unlimited potential and most important with fast turn around. Then it hit me. I remembered all those guys in 1980 trying to make $300 a day trading gold. We are now in 1985 and the margin on gold is only $3000. $300 on $3000 is 10%. But I only wanted to make 5%, or $150, i.e. only $1.50 per ounce. How hard could it be. It did not take me very long to put enough money together, find a broker and open a trading account. I told the broker exactly what I wanted to do. I wanted to trade gold(because that is the only commodity I knew) and make $100 to $200 a day. The broker understood what I wanted, and advised me that gold was no good these days, because it was not volatile enough, therefore he advised me to trade T-Bonds instead(because they moved). This time however I was not going to make the same mistake I did in 1980. This time I wanted to study the market first, and formulate some kind of trading plan or strategy. I still did not know anything about technical analysis. I had the broker print for me the daily 5 minute bar charts for bonds for the past year, took the charts home and spent several weeks studying them. At the same time I started going to the broker and talk with the other traders who were also trying to make a few bucks day trading. I saw these people trading everything under the sun: sugar, lumber, coffee, bonds, silver you name it. But I was going to be smarter than them. I figured that to be successful you had to specialize, concentrate on one market only and become an expert. I started reading books on technical analysis, reading the trade magazines and learning all I could. One thing became obvious, the professional traders were all saying the same thing. I knew I was on the right track. I still vividly remember the first trade. It was May 1985. I could not wait to get to the broker, so I took a cab. It was in the afternoon. I got to the office looked at the screen, and told everybody around me: "These bonds are going up". I placed an order to "BUY". Got filled very quickly, and placed my sell stop 5 ticks lower. Shortly after the bonds pulled back, stopped me out by just one tick, and proceeded to go up over the next several months $30,000. I will never forget that first trade. No big deal. Trading is risky. I had to learn more and be patient. I spent the next several weeks just watching the market, plotting manually my charts and talking to other traders. I soon started to notice certain set ups. When they occurred there was a very good chance of making a profitable trade with limited risk. My big chance came one Thursday. We were waiting for some government report, I saw the setup on the screen, and my reaction was automatic. I SOLD the bonds and one hour later I got out with a profit of about $650. I could not contain myself with excitement. Called my wife to tell her, and settled in to watch the rest of the day. And even though I saw the second setup in the afternoon, after the 50% correction, I did not want to get greedy and resisted making a second trade. The next day Friday I could not wait to get to the broker, because I knew what to expect. I watched the bonds open up and trade for about an hour or so, then form another setup. I told my broker to place a SELL order just under the days low, to be filled on a breakout on the downside. He turned on me and said "Are you sure you know what you are doing", he even advised me against it. I said I know perfectly well what I'm doing. The bonds broke down, and 20 minutes later I closed my short trade with another profit of about $350. I had made $1000 in just 2 days, using the knowledge I had patiently gained watching and studying the market. My broker and the people around me could not believe it. They could not figure out how I could be so confident and so accurate about my 2 trades. So I explained to them that whilst they were chasing every market on the screen, I was only concentrating on the bonds, and that I got to know the market and the setups. Day trading in those early days was very expensive. We did not have the Internet and all the tools traders have these days. I spent the next 2 years day trading with various degrees of success. I made money on my trading, but lost on the commissions. Sometimes it would cost me over $500 a day in commissions, jumping in and out. I also kept losing sight of the big picture. I would make $1000 one week, only to give it back the following week trading against the major trend. I was not going to give up however. The possibility of becoming a BILLIONAIRE in 7 years or less was irresistible. I kept studying and learning, and one thing kept coming up. All the successful traders were advising us to think LONG TERM. One day I manually converted my daily data into weekly data, and passed it through a simple stochastic program that I had written to see how it would perform. The difference was astonishing. The data was smoother, the indicator became better, my average trade increased dramatically and false signals could be filtered out more efficiently. It took several years later before I started to develop the ATS-3200. In the meantime I used all kinds of strategies. I even traded a very promising option system. I kept journals of all my trades, recorded my mistakes. I wrote down all my observations and all my rules, but it became very difficult to remember everything under the emotional stress of trading.
In 1992 I started to write the ATS-3200. 
In the beginning the system was very simple. Weekly data to reduce noise, a long term indicator and a simple filter. The average profits per trade, although they were decent, were not very impressive. The big break came when one day I observed that during the big trade of September 1985 to April 1986(over $30,000), from January 10, 1986 to February 7, 1986 the market kept going higher and higher, but my stochastic indicator during those 5 weeks turned negative and my system got out of a very good trade. Therefore I reasoned: why get out of the trade just because the stochastic turned negative, if the market is still moving higher. So I started to develop the adaptive filtering algorithms(the V-Filters) that keep the system in a good trade with the major trend. The improvement in the performance was amazing to say the least. The next big break came when I reasoned out that there had to be a better way to enter into a new trade, than wait for a cross over in the stochastic indicator, which lagged the market, and give up so much of the profits. At this time I read 2 articles on Futures Magazine one on Neural Networks and one on Genetic Algorithms. Immediately a light went up in my head. I knew what had to be done. Over the next several months I developed the "X" and "L" genetic algorithms, that literally have performed miracles by going short at the very top and long at the very bottom, practically every year since 1993, when the system was first completed.
In fact the very first trade was signaled right at the top by one of the "X" algorithms. 
During the first six months of trading with the ATS-3200,
These results can be verified by my
Over the years I kept improving the system and the ATS-3200 has proven itself again and again.
Over the years it has been consistently in Futures Truth Top Ten Tables, and it is one of the top |
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Chapter 3
Developing an ALGO | |||||
To be a successful Trader, you have to be able to Trade without the | |||||
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What is a trading system? A trading system is not the "Holy Grail". Most traders expect too much from a tradingsystem. If a system makes a few losing trades they usually give up just when the market is about to turn in their favor. A good trading system is nothing more than a tool to turn the odds in your favor by employing a proven consistent trading methodology. To be successful, a trader must overcome hope, fear and greed and learn to be patient. The market is always right. A trader needs to pay close attention to the market. He must be able to analyze and interpret the information in the charts correctly and objectively without any emotion. Risk is a part of trading, and it cannot be avoided or eliminated. The successful trader knows this and accepts risk as part of the business of trading. However, he also has the knowledge and confidence that risk can be controlled. To trade a system profitably, one must have the discipline to execute the signals generated. Discipline comes from confidence, and confidence comes from knowledge. Therefore, it is very important to understand how your system works. Confidence and discipline also comes from experience, and therefore a trader must have the patience to observe a trading system in real time to see for himself how and where signals are generated. Every trader knows that in trading TIMING CAN BE EVERYTHING. If you can time your trades perfectly, you will never have to worry about a drawdown. But, as everyone knows, it is not as simple as this. No matter how good you are at technical analysis, most of the time the market is confusing: Is it going: Up, Down, or Sideways. Most traders, especially day traders, look at the market too closely. If you look at the market on a day-to-day basis, you will lose sight of the big picture. In other words, you will get confused about the long-term trend.
We all know the saying:
There is also another saying: As a Trader, your only "FRIEND" is the "TREND" As long as you trade with the Major Trend, you should not be too concerned about timing. The "TREND" will always come to your rescue. As long as you stay with it, and as long as you trade in the direction of the major trend.
The key components of a Profitable Trading System are:
1.Choosing the right market. A long-term trading system, if it is going to be profitable, needs a market that has a tendency to trend for long periods of time. The trend must be evident on daily and weekly charts. Examples are the T-Bonds and T-Notes markets, as well as Currencies. These markets are driven by interest rates, which in turn are driven by the state of the economy. These forces do not turn on a dime. They build momentum and move in the same direction for months or years at a time. 2.Choosing the right price data to Reduce Noise. The data you feed into the system is very important. Daily price data usually has a lot of noise, which in turn can produce a lot of false reversals that can generate false trading signals, which are very hard to filter. On the other hand, weekly data is smoother and makes the major trend more evident. Weekly data will have less noise in it and is much easier to analyse. 3.Choosing a Long-Term indicator to find the Major Trend. Indicators are a mathematical way to measure the state and stength of the market. I have been developing and creating indicators for my systems for the last 30 years. During this time, I have found out that simple works better. For this reason I prefer a long term stochastic. Stochastics work the same way as moving averages, with one big advantage. A stochastic will show the trend of the market and can also indicate when a market has become over bought or over sold.
This is better than taking the signal from sign changes in the stochastic alone, which usually lags the market and will miss up to $3000 or more from the market turning point. | |||||
| Building the ATS-ZB32 | |||||
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1: Start - Applying only the stochastic to weekly data. 
Trade summary.
Total No of trades: 260
No of winning trades: 109
No of losing trades: 151
Average Trade: $362
Average Profit: $4084
Average Loss: $2323-
Total Profits: $94,359
Ave. Profit: $2395/year
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2: Applying a stochastic with a simple filter. 
Trade summary.
Total No of trades: 212
No of winning trades: 94
No of losing trades: 118
Average Trade: $443
Average Profit: $4346
Average Loss: $2682-
Total Profits: $94,109
Ave. Profit: $2389/year
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The performance of a trading system can be vastly improved by applying filtering algorithms to the long term indicator. For example, the stochastic may go from from negative to positive while the system is in a short trade. In this case, this will be a signal that the trend has changed. However, the market may have moved lower. Therefore, even though there was a sign change in the stochastic from "-" to "+", the market actually moved lower. Filtering algorithms can be designed and incorporated into a trading system to improve its performance. | |||||
Trade summary.
Total No of trades: 82
No of winning trades: 33
No of losing trades: 49
Average Trade: $1860
Average Profit: $9786
Average Loss: $3477-
Total Profits: $152,562
Ave. Profit: $3872/year
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Incorporating Genetic Algorithms A long-term trading system usually gets the signal for the trend from either a moving average or a stochastic. These indicators always lag the market, and unless the market keeps the trend for very long periods of time and there is a substantial price difference between the top of the market and the bottom of the market, it is very difficult for a system to produce good profits. This is because a slow moving average or a long term stochastic normally misses up to $3000 from the top and up to $3000 from the bottom, i.e. $6000 in all. For a system to be truly profitable, it must be able to signal when a market is just going to turn around. Therefore, the system must be able to go short at or near the TOP, and be able to go long at or near the Bottom. This is made possible by creating algorithms that track several indicators at the same time to signal an extremely over bought or an extremely over sold market. Then taking the signal to go SHORT or LONG from several of these indicators at the same time. Since commodity markets cannot go up or down forever, they inevitably become over bought or over sold and turn around. A good algorithm will track a main indicator, but will only generate the buy or sell signal after a signal has been verified by several other built in indicators to produce more reliable and accurate results. Both the "ATS" systems have 15 of these genetic algorithms. These are called the "X" algorithms and the "L" algorithms. There are six "X" algorithms, these generate the "SELL" signals, and there are nine "L" algorithms, these generate the "BUY" signals. | |||||
Trade summary:
Total No of trades: 93
No of winning trades: 75
No of losing trades: 18
Average Trade: $7528
Average Profit: $10281
Average Loss: $3939-
Total Profits: $700,171
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5: Using functions to control risk.
Using functions to keep drawdowns to a minimum, reduce risk,
A good system must have functions to manage a trade after it is started.
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Chapter 4
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You only have to spend 5 mins/weekafter the market closes to run the system and get the Weekly Trading Signal.
 4-Steps to get the Weekly Trading Signal
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Chapter 5
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In Trading Timing can be Everything
The "L" algorithms go LONG at the Bottom
A Good Trading System must
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The BUY / SELL Algorithms
The "L" Algorithms go Long at or near the Bottom  The "X" Algorithms go Short at or near the Top 
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Chapter 6
The Function TREND makes the |
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Note: TREND was added to the ATS-ZB32 after this article was written. The function TREND was designed to monitor the system while it is trading. If a trade starts to loose money, TREND checks the direction of the market. If the market is not moving in the direction of the trade, TREND takes the system out of the market with a small loss, preventing the system from getting in a deep loss, and thus reducing the drawdown. The ATS-ZB32 takes its signal to go SHORT or LONG from the stochastic. If the stochastice goes above 80% the system goes Short. If the stochastic goes below 20% it goes LONG. However the stochastic can go above 80% and the market can still keep going up. Similarly the stochastic can go below 20% and the market can stll keep going down. In each of these cases, the system will keep going SHORT or LONG, because the stochastic is over bought or over sold, and the trade will start to lose money, sometimes a lot of money. This is where TREND kicks in. If a trade starts to lose money, TREND checks the direction of the market. If the system is LONG, but the direction of the market is going lower and lower, and the trade is losing money, TREND gets the system out of the market, before the trade becomes a big loser. The same applies if the system is SHORT, but the direction of the market is going higher and higher. These are the results from the TREND function.
TREND TRADES | TREND TRADES TOTALS
# WEEK-OF SYSTEM EXIT REVERSE TOTAL | SYSTEM EXIT REVERSE
--------------------------------------------+-----------------------------
1 23NOV84 7343 9281 1937 11218 | 7343 9281 1937
2 07JUL89 12343 11343 1000- 10343 | 19686 20624 937
3 01APR94 7812 12562 4750 17312 | 27498 33186 5687
4 08JUL94 3125- 31 3156 3187 | 24373 33217 8843
5 12JUN98 3218- 4562- 1343- 5906- | 21154 28654 7499
6 19APR02 2531 2687 156 2843 | 23685 31341 7655
7 15AUG03 718- 10187 9906 20093 | 22966 41528 17561
8 05MAY06 11906 11687 218- 11468 | 34872 53215 17342
9 05JUN09 24937 24640 296- 24343 | 59809 77855 17045
10 06AUG10 20203 17921 2281- 15640 | 80012 95776 14763
11 08OCT10 6156- 4468- 1687 2781- | 73855 91307 16450
12 16MAR12 937 4812 3875 8687 | 74792 96119 20325
13 06SEP13 18750 14250 4500- 9750 | 93542 110369 15825
14 08JUL16 35281 39468 4187 43656 | 128823 149837 20012
15 05OCT18 4906- 1687 6593 8281 | 123916 151524 26605
16 20MAR20 13125 18062 2000- 16062 | 137041 169586 24605
17 05JUN20 937- 4281 6125 10406 | 136103 173867 30730
18 08OCT21 4281- 562- 3718 3156 | 131821 173304 34448
19 25MAR22 6500- 2875- 6906 4031 | 125321 170429 41354
20 17JUN22 14468- 3906- 7500 3593 | 110852 166522 48854
21 28OCT22 12875- 6562 19437 26000 | 97977 173084 68291
22 17MAR23 343- 3531 3968 7500 | 97633 176615 72259
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The TREND Function turned the Profit of $97,633 from the system |
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Chapter 7 The ATS-ZB32 Profit Report . | |
No WEEK-OF SELL BUY S DMAX DCLS PROFIT TREND TOTALS TREND FXLV-NEURO-SWITCHES
1 10DEC10 121-28 125-07 L STOP-LOSS 3343- 1437 3343- 1437 STAY-OUT
2 27MAY11 124-19 118-19 L 4.11 3.18 6000 4937 2656 6374 X020000000100000000
3 01JUL11 124-19 122-22 X 2.08 2.00 1906 4562 8280 L000000000020000000
4 19AUG11 140-07 122-22 L 17531 22093 25811 X020400000020000000
5 23SEP11 139-00 145-30 X STOP-LOSS 6937- 1093 15156 26904 X020000700000000000
6 16MAR12 143-03 136-14 X 1.28 0.24 6656 21812 33560 L000000000000006000
7 01JUN12 152-03 135-27 L 1.03 16250 38062 49810 X000000000003000000
8 06SEP13 147-25 129-01 X 0.31 18750 15000 56812 64810 L000000009000000000
9 30JAN15 151-09 122-13 L 0.07 28875 85687 93685 X020000000000000000
10 26JUN15 164-18 147-18 X 0.17 17000 102687 110685 L000000000000006000
11 08JUL16 176-30 141-21 L 35281 43656 137968 154341 X000000700100000000
12 18NOV16 175-15 153-05 X 0.13 22312 160281 176654 L000000700000000000
13 23JUN17 156-20 149-07 L 4.22 4.03 7406 3656 167687 180310 X020000000000000000
14 02FEB18 154-10 144-25 X 2.29 1.29 9531 177218 189841 L000000000020006000
15 05OCT18 137-09 142-06 L 3.20 2.19 4906- 1218 172312 191059 GET-OUT
16 13SEP19 160-02 136-29 L STOPPED-> 23156 195468 214215 << BUY
17 20MAR20 169-01 155-29 L STOPPED-> 13125 16062 208593 230277 << BUY
18 05JUN20 175-01 175-31 L STOP-LOSS 937- 10406 207656 240683 << BUY
19 14AUG20 178-05 174-04 L STOPPED-> 4031 211687 244715 << SELL
20 12FEB21 177-11 166-05 X 4.05 1.24 11187 222875 255902 L020000000000000000
21 08OCT21 157-24 161-15 L 1.13 0.17 3718- 3718 219156 259620 GET-OUT
22 07JAN22 157-26 161-10 L STOP-LOSS 3500- 215656 256120 L000000000020000000
23 25MAR22 150-11 156-27 L STOP-LOSS 6500- 4031 209156 260151 L000000000020000000
24 17JUN22 131-19 146-02 L STOP-LOSS 14468- 3593 194687 263744 << BUY
25 16SEP22 131-05 134-04 L 3.20 1.06 2968- 16093 191718 279837 GET-OUT
26 16DEC22 131-05 126-09 L 8.26 7.09 4875 16687- 196593 263150 X000050000000000000
27 17MAR23 132-09 132-20 X STOP-LOSS 343- 6437 196250 269587 << SELL
28 29SEP23 133-07 113-25 X 1.23 0.11 19437 215687 289025 L000000000000400000
29 29DEC23 124-30 113-26 L 6.21 5.10 11125 6375 226812 295400 X000000000000400000
30 26APR24 124-31 113-31 X 11000 237812 306400 L000000000000400000
31 13SEP24 126-23 114-10 L 0.09 12406 250218 318806 X000000700000000000
32 10JAN25 126-28 111-07 X 0.19 15656 16968 265875 335774 L120000000000000000
33 23MAY25 111-11 111-04 O 1.03 218 266093 335993 Open long trade.
System Averages___________________________ System Averages with TREND______________
AVERAGE PROFIT/Year............ $17,834 AVERAGE PROFIT/Year/TREND.... $22,519
AVERAGE TRADE.................. 8063 AVERAGE TRADE-TREND.......... 10181
AVERAGE PROFIT................. 13639 AVERAGE PROFIT-TREND......... 10609
AVERAGE LOSS................... 4762- AVERAGE LOSS-TREND........... 3500-
_______________ SYSTEM ________________ ______________ TREND ________________
WINS LOSSES P/L W/L.......... WINS LOSSES P/L W/L
23 10 2.86 2.30 32 1 3.03 32.00
Notes:
Ratio P/L = Profit/Loss
Ratio W/L = Wins/Losses
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Chapter 8
Trading in Sideways Markets
However sooner or later the market will start Trending again. It is only a matter of time. The ATS-ZB32 performs very well in sideways markets.
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Chapter 9
There are 2-Groups of Traders | ||
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Group-1 Traders who Lose all Their Money ||||||
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Group-2 Traders who make all The Money, the Traders in Group-1 Lose
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| I want to Be in Group-2 |
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Chapter 10
10 reasons why Traders Lose Money |
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and some tips to help you get back to basics.
Lack of knowledge
Poor risk management
Emotional decision-making
Lack of discipline
Over-trading
Lack of a trading plan
Not keeping up with important data and information
Not cutting losses quickly
Not maximizing winners
Not Adapting Overall, the majority of traders make losses because they fail to prepare for the challenges of the market. By educating themselves, developing a solid trading plan, and planning out decisions beforehand, traders can improve their chances of success and avoid common pitfalls. Get a Good Trading System |
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Chapter 11
Trading U.S. Commodities |
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an Art and most certainly an Experience.
element in trading any market. Do not overlook the value of doing your own work and your own analysis. In addition a capable adviser will also be a great asset to your trading effort. A capable adviser is one who will educate and assist you when you're new to commodities. These's a lot to know and in the early stages you'll find that the appropriate adviser for you will make you feel comfortable in building your knowledge base quickly. There are many good brokers and if you realise just how important your broker can be then you will increase your chances of success and also hopefully enjoy trading. By the way, a good broker does not necessarily mean that they have to have been in the market for more than 10 years - it's more about providing TOP QUALITY SERVICE. Don't look for an advisor to 'tip' you off on 9 out of 10 winning trades. What you are really looking for as a client is a differentiated level of service and your broker should have a well known reputation for accuracy, top quality execution, succinct technical and fundamental research in addition to regular trading seminars for existing and prospective clients. More than likely the person you'll speak to most will be your adviser during the day. Markets and strategies can be discussed with your adviser, however, as a trader, you're better off combining this with your own analysis rather than asking for specific comments on future market direction. Having done your analysis, decide on your level of entry, your stop loss level and your stop profit level and then maintain complete discipline throughout. The mistake that most make is becoming greedy. It's a well worn statement but it's so true in futures markets, the emotions of FEAR & GREED lose you money and lose you potential profits. Translated, fear really means the lack of confidence in sticking to your analysis with greed pertaining to poor money management. If your analysis suggests that you should be out either with a profit or a loss at a designated price then don't start crossing your fingers and hoping. Close the position and reassess the market for the next good entry level, or alternatively seek opportunities in other markets where the picture may be clearer. The orders for offshore commodities will normally be given to your adviser when the US markets are closed. Of course, you can also place orders directly with the night traders. Occasionally a night trader will have time to comment on the markets although more often that is not when you're flying around in a chair at 2.00am watching over 100 markets, time is limited so being clear and concise when placing orders at night is vital. Be aware of any orders you have placed, that is, that are 'working' in the market. If you want to change an order or cancel one ensure that your new order is the only one being 'worked'. It's incredibly important that you are aware of your position and what's working at any point in time and that's where your own trading documentation is particularly important. This sounds obvious but you'd be surprised at how many traders neglect to do this. Set up a trading diary or preferable a spreadsheet that calculates the necessary figures for you. Have columns showing date, trade entry, number of lots traded, trade exit, profit, loss, brokerage, etc. I advise my clients to have regularly write down why you got into the trade, out of the trade, how your own psychology was at the time of entry and exit and what you learned from the trade. This detailed analysis serves to reduce the chance of making the same mistake over and over again - and if there's 100 different mistakes that will cost you money in trading, you don't want to constantly make the same mistakes time and time again! Even if you're mostly oriented towards technical analysis in trading it's still prudent to know when various USDA crop reports are scheduled to be released. Other elements to be familiar with are the seasonal tendencies of particular commodities. There is no guarantee that the seasonal trade will adhere to the historical trend of success in the current year however these 'windows of opportunity' are well worth being aware of. Also watch the wheather which can play havoc with commodity prices, sometimes in your favour, sometimes not - again, just ensure you are trading on an informed basis. I'm not advising any trader to execute a trade solely based on the prevailing wheather report or to buy heating oil just because it's winter in the U.S. If you stick to your charts these fundamentally inspired price movements will provide you with buy and sell signals on a technical basis rather than having to put the next move on your 'wish list'! Your adviser can provide you with all the contract specifications for offshore commodities markets plus all the seasonals, cycles, main production areas and those other pieces of information that may assist your trading decisions and expand your knowledge base. Finally, the most important aspect of trading involves the subject of your own psychology and your ability to be 100% disciplined, 100% of the time. The emotions you will experience may be rather confronting initially but it's those clients who place the most importance on this aspect of trading who tend to succeed the most in trading futures. DO NOT overlook the area of trading psychology! |
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Appendix 1
About the Developer: Charles Tanti
I try not to get bored, because then I will become boring and that will be the end of it. I cannot remember a time in my life when I really wanted something and did not get it. I like to be alone most of the time. Sometimes I declare that I'm going to do the impossible. Then I have to do it to prove that I can. I have a passion for Philosophy and my main hobby is Painting. I love the sea and sailing. I had a small yacht StarSong when I lived in Malta. I love German Shepherds - I grew up with them. My father had 6 at our home in Malta. When I take a break I go for a drive with my Red Corvette, or go Salsa Dancing. I admire successful people and always try to learn something from their achievements.
I first started trading the Bonds in May of 1985. I realised very early that if I was to succeed, I had to learn and study the market. My first introduction to technical analysis was to start plotting daily and weekly price charts manually. I also started keeping a journal of all my trades, and recorded all my observations about the market. By studying the charts I could see how certain patterns kept repeating themselves. It was as if the Bonds traded with some mathematical order. Many times I was able to project a turning point to within a few ticks. After years of trading I formulated a set of complex rules for trading the Bonds. I also acquired an uncanny feel for the market from plotting manually my charts for many years. However even though I had all this, success in trading still eluded me. I lacked the objectivity needed to win consistently. I traded from 1985 to 1992 with limited success. The problem was too much emotion during trading, afraid to pull the trigger, forgetting important rules, or making the wrong interpretation of the market. Finally in 1992 I started writing the ATS-3200 Trading System. I turned all my trading rules into indicators. By turning everything into numbers, I could then write computer programmes to find patterns in the indicators that consistently signalled either an over bought market condition or an over sold market condition. These rules then became the adaptive genetic algorithms.
All the System does is shift the odds in your favor.
Charles J. Tanti: I was born in Malta and studied Mechanical Engineering at the University of Malta. My favorite subject was pure mathematics, because I liked solving very difficult problems. When I lived in Malta, one of my favorite pastimes was to go to the Dragonara Casino and play blackjack. I figured (no computers then) that as the cards were dealt from the deck the odds changed, and if you could keep track you had a better chance of winning. When I discovered computers in 1983 the first thing I did was to write a Professional Blackjack program to teach players the card count and basic strategy. I proved to myself that if blackjack was played correctly, it was impossible to lose. In 1980 I discovered commodity trading, through one of my customers who was a broker. I started by trading some gold and after losing $5000 in one week, I went back to my normal business. In 1985 I had more time and this time I went back to trading, but this time I took time to study the markets. I needed something that was volatile, so my broker suggested I trade T-Bonds. I decided then and there to specialize in just one market, and since 1985 I have only traded T-Bonds. At first I was a day trader, trying to make $500 to $1000 per week. I soon found out that it was not easy. No matter how much studying I would do, the market always managed to spook me, and I would lose all the money I made, a few days later. I studied technical books and read the trade magazines, and one thing kept emerging: the professionals were all advising traders to think Long Term. if they wanted to be successful traders. Then one day I switched from daily charts to weekly charts and never looked back. As soon as I did this everything worked better, my indicators, the trend was more evident, the data had less noise, and the average profit per trade on my primitive system then, jumped from $250 per trade to over $1200 per trade. Trading much less, saving on commissions and bigger profits, what else can a trader ask for. In 1992 I started writing the ATS-3200. I had the first version of the system ready to be traded in June of 1993. The system was long, but I decided to wait for the next "SELL" signal to make my first trade. It came on September 3rd, at 119-31, an all time high for the bonds. I did not have the guts to go short on that first signal, but when I saw the bonds go down $2000 in the next 2 weeks, I was amazed. The market rallied again and the system again went short at the very top at 121-30 on October 15th. Note: The chart is adjusted by the roll over amount to keep the data stationary.
On October 28th I made my first trade with the system and
During my first 6 months of trading I knew then that finally my dream had come true.
I had created a trading system that had the ability
My dream was finally completely realized when in October of 2003,
The perfect system has never been created.
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Appendix 2
About the ATS Systems The first system was the ATS-3200 in 1992.
I started trading the ATS-3200 in 1993. When the performance increased by more than 100%, I decided to make the ATS-3200 into a separate new system, and called it the ATS-ZB32. I also started working on a function(which I had in mind since 1994) to monitor the system while it is trading to make sure the system was always trading in the direction of the market. The TREND Function checks the direction of the market during trading. If a trade starts losing money and the market is moving in the wrong direction TREND takes the system out of the market with a small loss and reverses the position.
The REVERSE Function of TREND turns Losing Trades into Profitable Trades. Developer: Charles J. Tanti B.Sc.(Eng)
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Appendix 3
Testimonials about the ATS-ZB32
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Appendix 4
The ATS-ZB32 in the Top-Ten
The ATS-3200 and the ATS-6400
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Appendix 5
Trading during the first 6 months in 1993
Total profits: $8347 on a I made 30 Trades.
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Appendix 6
Contact: Charles Tanti |
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Appendix 7
Download a Free Trial |
