CISCO Futures
1-303-306-1521 1-800 800 7227 Fax 1-303-368-9449
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Email dljones@cisco-futures.com
Results of Paper Trading Bond Breakouts in 1996
Breakout Trade
The bottom line net profit is $10107 for 78 trades or $130 per trade.
Allowing $100 per trade for commission and slip, leaves $30 per trade
or $2340 net profit. Since the margin on a single US Bond contract is
of the order of $2000 the gain was about 100%.
There were 36 losing trades out of 78. The maximum drawdown was $1398
over 5 successive trades. Adding losses due to slip and commisions the
biggest drawdown is $1398+$500=$1898. So you would need $2000 for margin
and $2000 in the bank for big drawdowns, $4000 in total.
We use today's 5 day overlays in the Visual Graphic to determine if the
Bonds are in balance today. If the 5 day overlay is bracketting today,
then we bet that the Bonds are in balance. So tommorrow, if price moves
outside today's bracket, we bet that a trend has started and price has
broken out. Tomorrow, if the price then returns to well within the today's
bracket we bet that the trend was false and the market is continuing to
bracket.
The strategy for ENTRY is: Tommorrow if price moves 1 price point
above/below the upper/lower today's bracket limit then ENTER a breakout
trade long/short.
The strategy for EXIT is: If you enter the breakout trade tomorrow then
you will stay in the trade at most until the CLOSE of trading. But if
before the close, the price moves back into today's bracket at least two
octants from the bracket limit, then EXIT the trade (STOP out the trade).
The success of this strategy depends on how successful the Visual Graphic
is in determining a bracketing market and its bracket limits and also on
how big the market price noise is relative to the bracket octant.
---- Long Trade ------- ------Short Trade------
Date Deliv Entry Price Stop Close Entry Price Stop Close Sum W L
======== ===== =========== ==== ===== =========== ==== ===== === === ===
01/04/96 U203 L 12202 -8 S 12021 1 -7 1
01/05/96 U203 S 12024 16 9 1
01/17/96 U203 L 12013 24 33 2
01/25/96 U203 S 12001 15 48 3
01/26/96 U203 S 11917 -16 32 2
01/31/96 U203 L 12031 0 32 3
02/07/96 U203 S 11915 -7 25 4
02/08/96 U203 S 11913 -10 15 5
02/09/96 U203 L 12003 -8 7 6
02/12/96 U203 L 12004 16 23 4
02/15/96 U203 S 11907 2 25 5
02/16/96 U203 S 11905 24 49 6
02/28/96 U203 S 11423 -1 48 7
03/01/96 U206 L 11515 1 49 8
03/15/96 U206 S 11021 1 50 9
03/21/96 U206 L 11205 0 50 8
03/25/96 U206 L 11211 5 55 10
03/27/96 U206 L 11229 -12 S 11111 4 47 11 9
04/05/96 U206 S 11028 46 93 12
04/12/96 U206 L 10919 9 102 13
04/22/96 U206 L 11017 -2 100 10
04/24/96 U206 L 11013 -8 92 11
04/26/96 U206 L 11013 -3 89 12
05/02/96 U206 S 10822 41 130 14
05/10/96 U206 L 10802 21 151 15
05/20/96 U206 L 10926 -2 149 13
05/23/96 U206 L 11004 -10 139 14
05/28/96 U206 L 11009 -8 131 15
05/29/96 U206 S 10907 15 146 16
06/07/96 U209 L 10818 9 155 17
06/17/96 U209 L 10705 7 162 18
06/25/96 U209 L 10719 1 163 19
07/12/96 U209 L 10807 3 166 20
07/15/96 U209 L 10821 -6 160 16
07/18/96 U209 L 10823 30 190 21
07/24/96 U209 S 10806 -1 189 17
07/29/96 U209 S 10803 8 197 22
07/31/96 U209 L 10906 -6 191 18
08/09/96 U209 L 11204 -3 188 19
08/12/96 U209 L 11207 -5 183 20
08/13/96 U209 L 11207 -8 S 11105 9 184 23 21
08/15/96 U209 S 11023 2 186 24
08/21/96 U209 S 11017 -4 182 22
08/22/96 U209 S 11015 -4 178 23
08/23/96 U209 S 11009 23 201 25
09/06/96 U212 S 10603 -14 187 24
09/10/96 U212 L 10703 -10 177 25
09/12/96 U212 L 10714 -7 170 26
09/13/96 U212 L 10714 40 210 26
09/24/96 U212 L 10813 8 218 27
09/25/96 U212 L 10822 17 235 28
10/02/96 U212 L 11007 4 239 29
10/03/96 U212 L 11015 -4 235 27
10/04/96 U212 L 11021 34 269 30
10/16/96 U212 S 10927 -12 257 28
10/23/96 U212 S 11013 -8 249 29
10/24/96 U212 S 11012 -6 243 30
10/29/96 U212 L 11105 47 290 31
11/05/96 U212 L 11319 7 297 32
11/06/96 U212 L 11330 -9 288 31
11/12/96 U212 L 11411 17 305 33
11/14/96 U212 L 11431 8 315 34
11/15/96 U212 L 11511 -12 303 32
11/20/96 U212 L 11515 7 310 35
11/26/96 U212 L 11529 -8 302 33
11/29/96 U212 L 11530 10 312 36
12/03/96 U203 L 11530 3 315 37
12/05/96 U203 S 11424 21 336 38
12/12/96 U203 S 11225 10 346 39
12/13/96 U203 S 11215 -16 330 34
12/19/96 U203 S 11129 -12 318 35
12/20/96 U203 L 11315 -4 314 36
12/23/96 U203 L 11318 -3 311 37
12/26/96 U203 L 11320 -8 303 38
12/27/96 U203 L 11321 8 311 40
The example above illustrates the old adage "keep your losses small but let your profits
run". Rarely did the model risk more than 8 points ($250). There were a number of cases
in the $1000 gain range (32 points).
Over the test period of a year there were as many losers as winners. In the real world
of trading you will likely find that you will have as many losers as winners. That is
to be expected because of noise and other uncertainties. The key to winning is really
in limiting losses.
Another key is in trading markets that are moving, where opportunity exists. The Bonds
in 1996 went from 12200 to 10700 to 11200 to 10600 to 11400. A lot of movemant, a lot
of trading opportunities. Not every year is so active. In a flat year, a strictly
Bond trader will find it difficult to to make money. What to do? One answer is to
follow several markets. The Trader Control Package Bracket Screen makes it easy to
trade a portfolio.
Trader Control Package(TCP)
This example is of a "simple" breakout method. You can have better information and
make yourself a much more comprehensive trading scheme.
Trading Model Development
Since the example for 1996 was developed the market has seen many changes, mostly to
the benefit of the public trader. Today, early 2003, many more T-bonds are traded on the
computer than on the floor. Clearing is faster, slip is less and commissions are
substantially reduced. The example shows an average of $30 net per trade. That
number today would be better estimated at $80 per trade.
For more information contact CISCO Futures at:
WEB address: www.cisco-futures.com
Postal Address: 14571 E. Mississippi Ave., #202, Aurora, CO 80012 USA
Telephone: 303-306-1521 or 1-800-800-7227
Fax: 303-368-9449
Email: dljones@cisco-futures.com