FREQUENTLY ASKED QUESTIONS……
1. Are your signals precise and repeatable…can I replicate your results short of differences due to slippage and commission costs? All manuals fully disclose the entry/exit signals that are completely objective in nature. There is really no room to compromise or be subjective in your decisions if you are going to day-trade the S&P 500. If you had purchased any system manuals several months ago, and you had access to a streaming live bar chart program that allowed you to see the OHLC of each 30 minute price bar, you should have been able to exactly duplicate the prices that I posted on the web site. I follow the entry/exit trading parameters exactly when posting the trades.
2. Can you describe the methodology in general terms? The "methodology" of the system is that the signals are dependent on bar chart patterns, not on any statistical or mathematical formula. The latter do not really work over time - because everyone has used them and the market actually discounts them. It does not suffice that one should follow either a trending system or a counter-trending system alone. The "Turtles" followed a trending system based on Donchian's rules back in the 70's and 80's. Made millions. Then the market behavior changed and probably none of those same traders are using the same trading parameters today. The S&P BANKBOOK TRADING SYSTEMS have utlilized both approaches, while one may be trending and the other takes into consideration the reversals that take place during the day and capitalizes on that fact.
3. What are the size of the stops and what methodology is used for stops? Each trading system has its own particular stop loss procedures. They range from 5 points to 15 points. All stops are usually “at market” orders as you don’t want to miss the trade, as you may do so with limit orders.
4. Do you offer the system through a broker-assist service or on a leased basis and can you suggest a broker? There are many ways to offer a system service - lease by the month, which entails my sending out signals ahead of time, and which I am not set up to do. Besides, the time lag sometimes plays a big part and doesn’t allow you enough time to enter and get filled at the price you may have got if you had the ability to be forewarned at the same time as I am. So, I decided to sell the trading information, and when you read and understand the manual, you will have the same knowledge that I have attained after years of research. Also, as the systems have been purchased by traders all over the world, I decided not to become involved in suggesting who their brokers should be. But, if you are going to trade your own system, it would pay you to decide on a discount broker instead of a full service one. You really don't want anyone else’s advice. After all, they are just order takers and derive their income by making as many trades on your behalf as they can.
5. Are you trading the system for your own account? As far as whether I am trading the system is, when you really look at it, of no account. The reason I say that is that the only difference between actual live trading and hypothetical trading results is the slippage that may occur. Almost all system vendors do not allow for slippage, commission and exchange fee costs. So if you look at their posted profits and then make some allowance for these costs, their final results are nowhere near what they post and are sometimes in the red when they show a profit. Our systems allows $40 per trade per large contract & $15 for emini contracts - for such contingencies. If you have traded in the past you know that some of your trades have returned prices that are the same as your requested price. Others have shown slippage discrepancies, never in your favor it seems. By keeping your commission costs to the minimum (using a discount trading house), hopefully the final outcome will be similar to the profit shown on the web site.
6. Do you have a figure for the maximum drawdown and do you have a minimum account size? The standard interpretation of drawdowns is that they represent the difference between the highs and the lows of your trading accumulated equity balance, and that this figure should be included in your determination of what your starting equity should be. Actually this is quite misleading. Rather, a drawdown should reflect how much your starting equity has been reduced, if at all. It makes sense to know how much your trading has affected your beginning trading account balance, rather than knowing how much or your profits have been affected. While the standard interpretation may represent quite a large amount (as the market may take quite large swings) your starting equity may not be affected at all. It is this approach that should determine how much you start out with, rather than having to also add on the standard drawdown figure. If your starting equity balance is reduced by 50%, you should sit back, not trade, and either make improvements to your trading parameters, shelve the system, or wait till the market shifts and moves in your direction (in other words, paper trade for awhile).
7. Have you back-tested the system on any other index markets than the S&P …in what way is it optimized for S&P trading? I have only back-tested the system on the s&p 500 and ES, the ND, NQ TF and DJ contracts. But the principles should also work with the DAX futures, with some slight modifications. The principle behind the entry parameters relies not on any statistical or mathematical models but depends solely on pattern recognition signals, which are universal in nature. Once you understand the basis of the entry/exit parameters you should be able to adapt them to any of the indexes. As you can understand, all system vendors, and individuals who come up with their own systems, must back-test their signal parameters to determine if they have any chance of being successful in the future. The only way to do this is to determine if they have worked in the past. No one in their right mind would arbitrarily come up with a set of trading rules with no regard as to whether they would have been successful in the past, or not. Since I first posted the web site in March/00, I have continued to investigate improvements that could improve on the systems. As market behavior is constantly changing, so must trading systems be upgraded or improved just to keep up. If we make slight modifications to any of the systems since their inception, all purchasers of the systems have received these changes free of charge.
8. Do you trade during certain hours or watch the market all day? If you are going to day-trade, it is necessary to watch the market most of the time. It is sometimes better to let the market give some indication of direction, before plunging in. Also, the market does not enter any new trades in the last 1/4 of an hour because there is just not enough time left if the market goes against you and you wish for a comeback. Sometimes the first trade takes place in a hurry and at other times it may take hours for your trade to be triggered. Some days there are no trades at all. It varies, but you always have to be on your toes if and when a situation arises whereby you place an order and get entered. After receiving your fill price, you then place your stop-loss and exit trades and usually that is it for that trade. At other times, there may be a stop and reverse signal in which case you have to prepare for that. For short term and swing systems, both daytime and overnight trading times are incorporated. One usually knows ahead of time when a signal is coming up, so there is usually lots of time to prepare for it. All procedures are outlined fully in the manual.
9. I am not disciplined enough to trade….I am not being lazy, I am just pointing out my weakness. What do you think? You are quite right, discipline is the kingpin as to whether you will be successful in short term, swing or day trading, or not. The specific steps are outlined in the manuals as to where to place your entries, and where to place your stop-loss and exit signals. You MUST follow these steps each and every time you place a trade. I don't believe there is such a thing as a good mental stop - it just doesn't work over time. One procrastinates, and you end up losing more for your troubles. You must also be comfortable in your system's choice of signals. If you are, then you MUST take each and every signal that is generated. If you pick and choose, then you run into Murphy's Law - which states that for every trade you decide not to take, it would have been a successful trade. And those trades you decide to take, will be losers. It just seems to work out that way. The longer you can follow these absolute rules, the easier they will be to implement.
10. How long does a typical trade last? Sometimes an order is placed and then is stopped out within the hour. After you place a trade and get your fill price, you place a stop-loss exit - both OCO (Once Cancels Other). You are either stopped out, or you exit the trade at the target exit. The same basic principles apply to short term and swing systems, except that the trade can take place at any time and the term of a trade can last up to several weeks in duration.
11. How hard is it to learn your system? Everyone has a different learning curve. It helps tremendously if you have traded before, even if it’s only stocks. After reading the fully disclosed information in the manuals, and looking at the accompanying charts in those manuals, you should be prepared to paper trade the system(s) almost immediately. You should paper trade for a week just to become familiar with the procedures involved.
12. What do you think of trading the E-MINI vs the S&P 500? You have a better chance of getting better fills with the e-mini because you can place your trades electronically and get almost immediate fills. The big s&p 500 is an open outcry method and it takes longer to be filled, as well as you have floor traders to contend with, and they have a large influence on the outcome of the fills. You can do away with slippage on entry trades by placing limit orders, and you are either filled at your price, or you miss the trade entirely. The systems should work as well overall with the e-mini as with the larger s&p 500. The OHLC's of price bars are not exactly the same, and some trades will be taken by one side and at other times the trades will be taken by the other side. But overall, the results should work out about even. Of course results of the e-mini will be 20% of the larger s&p 500, but also, the risk will be 20% of the larger contract, and the margin will be a lot less - although it will cost the same in commissions etc for both contracts. Strange set of affairs. The broker’s win no matter which side you take. A few years ago, the s&p 500 was $500 per point. Then the powers to be decided they weren’t making enough and cut the value to $250 per point but caused the commissions etc to remain the same. Which meant you could only make 50% on your same costs. All politics and you and I lose both ways.
13. I am curious to know what the “Profit Factor” is. The "Profit Factor" is arrived at by dividing the $ average winning trades by the $ average losing trades times the % of wins or losses. One's plan should aim for a 2 for 1 ratio or better—at least be over 1. This means the profits should be twice what the losses are. Cycles in trading system results occur with every trading program, and ours is no different. Some days or months the results are very good and the profit factor may be quite high. Other days or months when there are drawdowns, the profit factor will decline. It varies depending in which part of the cycle you are in.