Commodity
Trading: Contents
of the Seasonal Stratagem Service
| INTRODUCTION
TO SEASONAL STRATAGEMS | CONTENTS OF
SEASONAL STRATAGEMS | READING
SEASONAL CHARTS | SEASONAL FAQ | USING
SEASONAL STRATAGEMS |
Each Seasonal
stratagem is broken down into three components:
The Seasonal Rule, Seasonal Logic of the Trade and Historical
Breakdown. A seasonal trade
is only mentioned in the Stratagems if it meets the following criteria on
a historical basis: 12 out of
the last 15 hypothetical trades have been profitable, the average winning
trade is larger than the average loosing trade, the average profit is
greater than $300.00, and the seasonal trading strategy has produced a
profit during the last 15-year period.
The
Seasonal Rule section is the first section of each stratagem.
This section gives an easy to follow rule for entering the market,
a suggestion on where to place your stop loss order, and the date on which
to exit the trade. An example
of a Seasonal Rule is as follows:
Buy
1 contract of this commodity contract on Xth trading day, holding the
position until the Xth trading day of the month.
The recommended stop loss is y points ($XXX.XX
before commissions and fees).
This is an easy to
follow system that does not require a computer or any complex mathematics.
Just enter the trade on one date and exit the trade on another
date. We even have a
suggested stop loss order, based on the most a winning trade has ever
hypothetically gone away from the position before coming back to a
profitable trade.
The
Seasonal Logic section
follows the Seasonal Rule. This
section explains the factors that Great Pacific believes are the driving
force behind the particular trade. Your
Great Pacific Broker will be able to update you more precisely on the
factors that may affect the trade as the trade date approaches.
Each logic section is written in clear English and follows a broad
logic of what theoretically should be affecting the market during this
particular phase of the supply/demand cycle.
The
Historical Breakdown is two
tables which show you precisely what the trade has done in the past.
It has complete historic entry dates, exit dates and prices. Also highlighted in the tables is the largest draw down (Max
Draw is adverse price movement against the trade, or worst price), and
the maximum profit and loss during the life of the trade.
We also provide you with the average trade performance (Average
P&L), average winning trade profit (Average win P&L), average trade loss (Average Loss P&L), as well as several statistics highlighting
the risk involved in the trade (Average
Draw, Maximum Draw, and Maximum
Draw on a Winning Trade). The number of winning trades and losing
trades, as well the hypothetical profit and loss, is provided for the
15-year period being analyzed.
Seasonal
Stratagems Computations
The following is a
complete breakdown of how each figure used in the following studies was
arrived at, and how they can be recreated.
Please review each of the following computations so that you have a
thorough understanding of how the data was computed and also to properly
assess the risks and benefits of using seasonality in your trade selection
process.
Historical
Breakdown Table
Column
1:
Entry Date
The Entry Date is
the historic assumed Entry Date. This
date will match the seasonal entry rule, if one were to count back on a
calendar, since each entry date is a specific number of trading days from
the beginning or end of the month.
Column
2:
Entry Price
The Entry Price is
the historic settlement price of the Entry Date.
Entry Price is used as the assumed entry point for the hypothetical
profit and loss analysis.
Column
3:
Exit Date
The Exit Date
column contains the assumed historical Exit Date.
The Exit Date used is the same as the Seasonal Rule Exit, based on
the number of trading days from either the beginning or end of the month.
Column
4:
Exit Price
The Exit Price
column contains the settlement, or closing value, on the Exit Date.
This figure is used in conjunction with the Entry Price in all
assumed Profit and Loss calculations (Closed P&L).
Column
5:
Closed P&L
This column
contains the hypothetical closed profit and losses for the Seasonal bias
being analyzed. This figure does not take into
account commissions, fees and slippage, which will negatively affect this
performance measure.
This field is calculated as the Exit Price minus the Entry Price
for long trades, or Entry Price minus the Exit Price for short trades.
This figure is presented in trading units, or points.
Column
6:
Closed P&L ($)
This column
contains the hypothetical Closed Profit and Losses for the Seasonal bias
being analyzed.
This figure does not take
into account commissions, fees and slippage, which will negatively affect
this performance measure. This
field is calculated as the Exit Price minus the Entry Price for long
trades, or Entry Price minus the Exit Price for short trades.
This figure is presented in actual dollars, before commissions,
fees and slippage.
Column
7:
High Price
This is the Highest
price achieved during a hypothetical long /short trade. This is an inter-day extreme price achieved during the period
being analyzed. This figure
is used in conjunction with the Entry Price to calculate the Maximum
P&L figure (long trade), or Maximum Draw-down (short trade).
Column
8:
High Date
This is the date of
the highest price achieved during a hypothetical long/short trade.
This is an inter-day extreme price achieved during the period being
analyzed. This figure is used
in conjunction with the Entry Date to calculate the days to high figure.
Column
9:
# of Days to High
This is the number
of working days between the Entry Date and the High Date.
Column
10:
High P&L
This column
contains the P&L (Profit and/or Loss) achieved between the Entry Date
and the Exit Date, to the highest price.
If the assumed trade is a long trade (buying on entry), then this
field is calculated as High Price minus the Entry Price.
If the seasonal bias is towards the short side (selling on entry),
then this field is calculated as the Entry Price minus the High Price, and
is a loss or Draw-down. This
figure is presented in trading units, or points.
This figure does not account
for commissions, fees or slippage, which will have a negative effect on
performance.
Column
11:
High P&L ($)
This column
contains the P&L (Profit and/or Loss) achieved between the Entry Date
and the Exit Date, to the highest price.
If the assumed trade is a long trade (buying on entry), then this
field is calculated as High Price minus the Entry Price.
If the seasonal bias is towards the short side (selling on entry),
then this field is calculated as the Entry Price minus the High Price, and
is a loss or Draw-down. This
figure is presented in actual dollars, ignoring the effects of
commissions, fees and slippage, which will adversely affect performance.
Column
12:
Low Price
This is the lowest
price achieved during a hypothetical long/short trade. This is an inter-day extreme price achieved during the period
being analyzed. This figure
is used in conjunction with the Entry Price to calculate the Low P&L
field.
Column
13:
Low Date
This is the date of
the lowest price achieved during a hypothetical long/short trade.
This is an inter-day extreme price achieved during the period being
analyzed. This figure is used
in conjunction with the Entry Date to calculate the # of Days to Low
field.
Column
14:
# of Days to Low
This is the number
of working days between the Entry Date and the Low Date
Column
15:
Low Price P&L
This column
contains the P&L (Profit and/or Loss) achieved between the Entry Date
and the Exit Date, to the lowest price.
If the assumed trade is a long trade (buying on entry), then this
field is calculated as Low Price minus the Entry Price, giving you the
Draw-down (note: Draw-down is the Futures Industry term for unrealized
loss). If the seasonal bias
is towards the short side (selling on entry), then this field is
calculated as the Entry Price minus the Low Price, and is best profit or
loss achieved during the trade. This
figure is presented in trading units, or points.
This figure does not account
for commissions, fees or slippage, which will have a negative effect on
performance.
Column
16:
Low Price P&L ($)
This column
contains the P&L (Profit and/or Loss) achieved between the Entry Date
and the Exit Date, to the lowest price.
If the assumed trade is a long trade (buying on entry), then this
field is calculated as Low Price minus the Entry Price, giving you the
Draw-down (note: Draw-down is the Futures Industry term for unrealized
loss). If the seasonal bias
is towards the short side (selling on entry), then this field is
calculated as the Entry Price minus the Low Price, and is best profit or
loss achieved during the trade. This
figure is presented in dollars or points multiplied by contract size.
This figure does not account for commissions, fees or slippage, which
will have a negative effect on performance.
Performance
Summary Statistics
#
of Trades:
This is the total
number of years analyzed in this particular study.
This should correspond to the number of years tested, and equal the
number of rows in the Hypothetical Breakdown table.
#
of Winning Trades:
This measure is the
number of hypothetical trades that went in favor of the assumed direction
of the trade. Long trades
have X number instances where the Exit Price is greater than the Entry
Price. Short trades have X
number of instances where the Exit Price is less than the Entry Price. Please note that this calculation does not take into account
commissions, fees or slippage, which will adversely affect the results
being presented.
#
of Losing Trades:
This figure is the
number of hypothetical trades that went in the opposite direction of the
assumed trade. For
hypothetical long trades, this is the number of times the Exit Price was
less than or equal to the Entry Price.
For hypothetical short trades, this is the number of times that the
Exit Price was greater than or equal to the Entry Price.
%
Accurate:
This is the ratio
of winning trades to losing trades (# of Wins/# of Trades), expressed as a
percentage.
All of the
following statistics are presented in terms of trading units, or points,
and dollars. The following
statistics do not take into account the adverse effect that commissions,
fees and slippage would have on hypothetical trading regiment being
analyzed. No representation
is being made that any account will, or has, achieved results similar to
those being presented.
Total
P&L:
This figure is the
sum of the profit and loss figures presented in the Historical Breakdown
Table, Column 5. This
figure does not take into account the adverse effect that both commissions
and slippage would have on hypothetical trading regiment being analyzed.
No representation is being made that any account will, or has,
achieved results similar to those being presented .
Average
P&L:
This figure is the
sum of all hypothetical Closed P&L figures, divided by the number of
occurrences of Closed P&L figures, or the number of trades (Closed
P&L figures are presented in Column 5 of the Historic Breakdown
Table). This
figure does not take into account the adverse effect that commissions,
fees and slippage would have on the hypothetical trading regiment being
analyzed. No representation is being made that any account will, or
has, achieved results similar to those being presented .
Average
Win P&L:
This figure is the
sum of all hypothetical Closed P&L figures that are greater than zero,
divided by the number of occurrences of Closed P&L figures that are
greater than zero (Closed P&L figures are presented in Column 5 of the
Historic Breakdown Table). This figure does not take into
account the adverse effect that commissions, fees and slippage would have
on hypothetical trading regiment being analyzed. No representation is being made that any account will, or has,
achieved results similar to those being presented .
Average
Loss P&L:
This figure is the
sum of all hypothetical Closed P&L figures that are less than or equal
to zero, divided by the number of occurrences of Closed P&L figures
that are less than or equal to zero (Closed P&L figures are presented
in Column 5 of the Historic Breakdown
Table). This figure does not take into
account the adverse effect that commissions, fees and slippage would have
on the hypothetical trading regiment being analyzed.
No representation is being made that any account will, or has,
achieved results similar to those being presented.
Average
Draw:
Draw is the futures
industry term for an open position loss, as opposed to a loss which is a
closed trade. The Average
Draw figure presented here is the sum of the Maximum Draw fields (Column
10 in the Historical Breakdown Table for trades with an assumed
"short" bias, or Column 15 in the Historical Breakdown Table for
trades with an assumed "long" bias ) divided by the total number
of occurrences being analyzed (typically 15 occurrences unless otherwise
stated). This figure does not take into account the adverse effect that
commissions, fees and slippage would have on the hypothetical trading
regiment being analyzed. No
representation is being made that any account will, or has, achieved
results similar to those being presented.
Maximum
Draw:
This is the largest
inter-day amount that price has moved against the hypothetical position
being analyzed during the time period being analyzed. This figure is the most negative number (largest inter-day
loss) presented in the Maximum Draw column of the Historic Break-Down
table. No representation is
being made that losses are limited to this amount.
Maximum
Draw on a Winning Trade:
This is the most
negative draw on a hypothetical trade that occurred when the position
produced a theoretical profit, ignoring the negative effect of commission,
fees and slippage would have on the theoretical profit (theoretical profit
is measured by the Closed P&L figure presented in Column 5 of the
Historical Breakdown Table). No representation is being made that losses are limited to this
amount.
Before looking at
any form of hypothetical analysis, please read the following statement.
Though this is a required disclaimer, it does a very good job of
presenting the pitfalls of this type of analysis.
Disclosure
of Risk: The risk of loss in trading futures and options can be
substantial; therefore, only genuine risk funds should be used. Futures
and options ARE not suitable investments for all individuals, and
individuals should carefully consider their financial condition in
deciding whether to trade. Option traders should be aware that the
exercise of a long option would result in a futures position.
SEASONAL TENDENCIES
ARE A COMPOSITE OF SOME OF THE MOST CONSISTENT COMMODITY FUTURES SEASONALS
THAT HAVE OCCURRED IN THE PAST 15 YEARS.
THERE ARE USUALLY UNDERLYING, FUNDAMENTAL CIRCUMSTANCES THAT OCCUR
ANNUALLY THAT TEND TO CAUSE THE FUTURES MARKETS TO REACT IN SIMILAR
DIRECTIONAL MANNER DURING A CERTAIN CALENDAR YEAR.
EVEN IF A SEASONAL TENDENCY OCCURS IN THE FUTURE, IT MAY NOT RESULT
IN A PROFITABLE TRANSACTION AS FEES AND THE TIMING OF THE ENTRY AND
LIQUIDATION MAY IMPACT ON THE RESULTS.
NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT HAS IN THE PAST,
OR WILL IN THE FUTURE, ACHIEVE PROFITS USING THESE RECOMMENDATIONS.
NO REPRESENTATION IS BEING MADE THAT PRICE PATTERNS WILL RECUR IN
THE FUTURE.
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 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.
Scott Barrie,
Commodity Futures and Equity Analytics, LLC. and Great Pacific Trading
Company believe that Seasonal Analysis is a useful tool in analyzing the
markets, but they should not be followed blindly.
These tendencies have been historically reliable.
However, there is no guarantee that the forces which have caused
these phenomena will be present this year, nor is there any guarantee that
they will repeat in the following year.
Basically, seasonal analysis rests upon the assumption of a normal
year, which may or may not be true of this year. As
such, traders, investors, and speculators should use common sense and good
money management when using any method of analysis, even seasonal.
Futures trading
involves great risk; and, therefore only risk funds should be used for
such trading. This book is
not intended to be a solicitation of any order to buy or sell, but merely
a current market bulletin provided by Commodity Futures and Equity
Analytics, LLC. for Great Pacific Trading Company.
Any statement of facts herein contained is derived from sources
believed to be reliable, but are not guaranteed as to accuracy, nor do
they purport to be complete. No
responsibility is assumed with respect to any such statement, nor with
respect to any expression of opinion herein contained.
These opinions can be a valuable addition to speculative goals of
its readers, but readers should always keep in mind the inherent risks
associated with trading futures or options contracts.
| INTRODUCTION
TO SEASONAL STRATAGEMS | CONTENTS OF
SEASONAL STRATAGEMS | READING
SEASONAL CHARTS | SEASONAL FAQ | USING
SEASONAL STRATAGEMS |
|
www.CommoditySeasonals.com
