World Cup University. Trade Successfully with Trend Following. By Kevin J. Davey

Transcription

1 World Cup University Trade Successfully with Trend Following By Kevin J. Davey

2 Today s Agenda Who Am I? What is Trend Following? Does Trend Following Work? Different Methods of Trend Following Trend Following in a System Resources for Trend Following Questions and Answers

3 Who Am I? Futures Trader for 17 years World Cup Advisor since World Cup 2 nd Place (148%) 2006 World Cup 1 st Place (107%) 2007 World Cup 2 nd Place (112%)

4 My Trading History During the first 10 years of trading, I spent a lot of tuition on trading schemes/ideas that did not work Cowboy Trader method >> LOST $ Simple Moving Avg Cross >> LOST $$ You Can t Lose Method >> LOST $$ Averaging Down Method >> LOST $$$

5 My Trading History But, those early losses forced me to research the best traders and ideas Market Wizards books Other Classic Investing Books (visit my website!) Van Tharp s Trading Psychology Courses Turtle Trading Method Combining what winning traders did with my own personality/psychology led me to where I am today

6 Disclaimer The performance data in this presentation is based on live trading in funded accounts. Some results are shown as net of commissions and subscription fees, and some are shown as gross results. All frames are appropriately labeled. Please remember that trading futures and forex involves substantial risk of loss and is not suitable for everyone. Past performance is not necessarily indicative of future results.

7 How I ve Done Recently % Rate of Return Futures - "Trend Catcher" Stock Indices - "MiniPower Catcher" Forex = "FX Catcher Combo" Year Actual results, after commissions, net of any subscription fees. Forex return is annualized return based on 13.6% return during October 2006.

8 How I ve Done Recently % Rate of Return nd Place Finish in World Cup of Futures Trading Championship 1 st Place in World Cup as of 11/06 Futures - "Trend Catcher" Stock Indices - "MiniPower Catcher" Forex = "FX Catcher Combo" Year Actual results, after commissions, net of any subscription fees. Forex return is annualized return based on 13.6% return during October 2006.

9 My Trading Philosophy/Rules All fundamental information is priced into market Trade only what you can test historically Don t average down Don t trade off the news Take trader emotion out of picture trade automatically when possible A system type approach works best KISS keep it simple, stupid!

10 My Trading Philosophy 5 Steps Have a Plan Find a Strategy Check and Double Check Execute Strategy Monitor and Adjust Whether you are developing your own system or following an advisor, these steps are critical!

11 My Trading Philosophy Visit for FREE article on the 5 steps Visit for FREE webinar on the 5 steps

12 How I Trade Futures Entries After trying thousands of different entry types, I found that a simple x day breakout, with an oscillator confirmation, worked best at getting the trade moving in right direction

13 How I Trade Futures Entries - Examples Upside breakout - BUY Downside breakout - SELL

14 How I Trade Futures Exits After trying thousands of different exit techniques, I determined 3 keys to a good exit Initial Stop initial amount of loss Moving Stop as profits achieved, very slowly move stop Accelerated Stop when certain profit is achieved, tighten stop

15 How I Trade Futures Exits - Examples Exit moves with profit Max Loss Hit = Exit

16 How I Trade Futures Markets A robust strategy will work well on different, uncorrelated markets A basket of futures will help even out the equity curve Pick big volume contracts in each sector (ags, energy, financials, currencies, softs)

17 How I Trade Futures Put it All Together Breakout Entry Exit with 3 unique exit points Basket of Different Futures + = Trend Catcher Futures System

18 Futures How Has It Done? $60,000 $50,000 Closed Trade P/L not including commissions or subscription fees. Data from worldcupadvisor.com Futures - "Trend Catcher" P/L $40,000 $30,000 $20,000 $10,000 $0 01/03/05 02/03/05 03/03/05 04/03/05 05/03/05 06/03/05 07/03/05 08/03/05 09/03/05 10/03/05 11/03/05 12/03/05 01/03/06 02/03/06 03/03/06 04/03/06 05/03/06 06/03/06 07/03/06 08/03/06 09/03/06 10/03/06 Gross Profit/Loss -$10,000 -$20,000 Date

19 How I Trade Futures Drawbacks Doesn t trade very often Missing 1 or 2 trades might mean difference between overall system profit or loss Significant drawdowns since system lets profits run Roughly 50% of trades are losers

20 How I Trade Stock Indices Entries Standard Trend Following doesn t work Typical entry methods don t work well But a simple, but unusual, single moving average crossover does work well!

21 How I Trade Stock Indices Entries - Examples SELL ES Entry BUY NQ Entry

22 How I Trade Stock Indices Exits Same types of exits that work well in Futures also work well in Stock Indices Initial Stop initial amount of loss Moving Stop as profits achieved, very slowly move stop Accelerated Stop when certain profit is achieved, tighten stop

23 How I Trade Stock Indices Exits - Examples

24 How I Trade Stock Indices Markets Want most liquid indices Want to trade electronically Want reasonable margin size (~$5K margin) Mini S&P (symbol ES) & mini NASDAQ (symbol NQ) were chosen

25 How I Trade Stock Indices Put it All Together Unique MA Entry Exit with 3 unique exit points Mini S&P, mini NASDAQ + = MiniPower Catcher Stock Index System

26 Stock Indices How Has It Done? Stock Indices - "MiniPower Catcher" P/L $16,000 $14,000 $12,000 Closed Trade P/L not including commissions or subscription fees. Data from worldcupadvisor.com $10,000 $8,000 $6,000 $4,000 $2,000 $0 11/29/05 12/13/05 12/27/05 01/10/06 01/24/06 02/07/06 02/21/06 03/07/06 03/21/06 04/04/06 04/18/06 05/02/06 05/16/06 05/30/06 06/13/06 06/27/06 07/11/06 07/25/06 08/08/06 08/22/06 09/05/06 09/19/06 10/03/06 10/17/06 10/31/06 Gross Profit/Loss -$2,000 -$4,000 Date

27 How I Trade Stock Indices Drawbacks Does not hit home runs like Trend Catcher does Has flat periods of few months duration (11/05-2/05, 8/06-10/06) Loses 37% of the time (before commission)

28 How I Trade FOREX Entries Standard Trend Following works, given the correct short term timeframe Exact same strategy as Trend Catcher works very well, with parameter adjustments for shorter timeframe

29 How I Trade Forex Entries Examples

30 How I Trade Forex Exits Same type of 3 tier exits that work well in Futures and Stock Indices

31 How I Trade Forex Exits Examples

32 How I Trade Forex Currency Pairs Want most liquid pairs Want the lowest spreads Minimum correlation between pairs FX Catcher 1 - USD/CHF, EUR/JPY, GBP/USD FX Catcher 2 AUD/USD, EUR/USD, USD/JPY, USD/CAD FX Catcher Combo All 7 of the above

33 How I Trade Forex Put it All Together Proven Trend Logic Exit with 3 unique exit points 7 Forex pairs + = FX Catcher Combo Forex System

34 Forex How Has It Done? $6,000 Forex - "FX Catcher Combo" P/L $5,000 Closed Trade P/L not including commissions or subscription fees. Data from worldcupadvisor.com $4,000 $3,000 $2,000 $1,000 Gross Profit/Loss $0 10/02/06 10/03/06 10/04/06 10/05/06 10/06/06 10/07/06 10/08/06 10/09/06 10/10/06 10/11/06 10/12/06 10/13/06 10/14/06 10/15/06 10/16/06 10/17/06 10/18/06 10/19/06 10/20/06 10/21/06 10/22/06 10/23/06 10/24/06 10/25/06 10/26/06 10/27/06 10/28/06 10/29/06 10/30/06 10/31/06 11/01/06 11/02/06 11/03/06 -$1,000 -$2,000 Date

35 How I Trade Forex Drawbacks Has only 1 month real time trading track record May experience significant drawdowns

36 Summary How I Enter Trades Futures medium term trend following Stock Indices short/medium term trend and counter trend following Forex short term trend following, same entry logic as Futures

37 Summary How I Exit Trades Same Basic Logic for futures, stock indices and Forex Initial stop to limit loss Moving stop to lock in profit as trade becomes positive Accelerated stop as high profit level reached

38 For More Information FREE Trade history results General information on trader, systems FREE Webinars FREE Videos on all systems Trading blog FREE Articles, recommended reading lists

39 Questions and Answers World Cup Advisor: Kevin Davey at:

40 Thank You For Attending! Thanks for Joining Us Today! May All Your Trades Be Profitable, and All Your Systems Be Winners!