When to start or stop an investment is one of the hardest decisions around. Some people just jump in and get started right away; many wait for a more opportune time – which may mean when the investment has lost some money (those contrarians who look to get a bit of ‘value’), or when the investment is making a lot of money (it feels good to go with a winner).
Similar questions on what to do with investments often arise around differing events, with some investors looking to put their investment on hold before a Fed announcement, big earnings news, or our favorite – “until the Middle East calms down”. Some investors have surely made money – or saved it – by following such gut instincts, but many more have likely had terrible timing by trying to time the market and move to the sidelines. This begs the question of whether you should eve be “on the sidelines”.
Skipping any upcoming drawdowns is obviously a fantastic idea, but without a crystal ball – the only way to do that is by not trading. If you’re not in the game, so to speak, sure you won’t lose – but you also can’t win. The crux of the problem is that you never know what tomorrow will bring. The next trade, or string of trades could be the best the system has ever seen. They could also be the worst, but the most likely scenario is somewhere between those two extremes.
We’ve all seen the various examples in the stock world. But in the real world of trading and automated trading systems – people aren’t really trying to miss singular ‘bad days’ by timing their starts and stops. They go to the sidelines or remain there to miss bad periods spanning many days or weeks or months. So let’s get into the data and see what happens when you try to time an automated system. Are you any better off if you do well and miss the worst 5 or 10 day period. What happens if you’ve got bad timing and mist the best 5 or 10 day period?
So what’s likely to happen when you decide to try to time a system… Well, somewhere between the Best and Worst. You likely aren’t going to be all-knowing and miss the worst periods, but you likely won’t be the unluckiest person in the world either and miss the best periods. In the best Clint Eastwood accent, “You gotta ask yourself one question… Do I feel lucky?” The most likely scenario is that you’ll miss the average periods, which in this case means you’ll be hurting yourself by trying to time the investment.
So be careful trying to time a system. In the terminology of America’s baseball pastime, trading systems hit “Home Runs”, not “Base Hits”. So they are constantly trying to survive the less than perfect conditions while waiting for that one big trade. You don’t want to miss that home run trying to avoid the lowly strike out.
IMPORTANT RISK DISCLOSURE
You should fully understand the risks associated with trading futures, options on futures, commodity trading systems and retail off-exchange foreign currency transactions (“Forex”) before making any trades. Trading futures, options on futures, Forex and commodity trading systems involves substantial risk of loss and is not suitable for all investors. The ability to withstand losses and to adhere to a particular trading program in spite of trading losses are material points which can adversely affect investor returns. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more than your initial investment. Opinions, market data, and recommendations are subject to change without notice. Past performance is not necessarily indicative of future results.
The returns for trading systems listed throughout this website are hypothetical in that they represent returns in a model account. The model account rises or falls by the average single contract profit and loss achieved by clients trading actual money pursuant to the listed system’s trading signals on the appropriate dates (client fills), or if no actual client profit or loss available – by the hypothetical single contract profit and loss of trades generated by the system’s trading signals on that day in real time (real-time) less slippage, or if no real time profit or loss available – by the hypothetical single contract profit and loss of trades generated by running the system logic backwards on backadjusted data (backadjusted).
The hypothetical model account begins with the initial capital level listed, and is reset to that amount each month. The percentage returns reflect inclusion of commissions, fees, slippage, and the cost of the system. The monthly cost of the system is subtracted from the net profit/loss prior to calculating the percentage return.
If and when a trading system has an open trade, the returns are marked to market on a daily basis, using the backadjusted data available on the day the computer backtest was performed for backtested trades, and the closing price of the then front month contract for real time and client fill trades. For a trade which spans months, therefore, the gain or loss for the month ending with an open trade is the marked to market gain or loss (the month end price minus the entry price, and vice versa for short trades).
The actual percentage gains/losses experienced by investors will vary depending on many factors, including, but not limited to: starting account balances, market behavior, the duration and extent of investor’s participation (whether or not all signals are taken) in the specified system and money management techniques. Because of this, actual percentage gains/losses experienced by investors may be materially different than the percentage gains/losses as presented on this website.
Please read carefully the CFTC required disclaimer regarding hypothetical results below. 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 OF 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 WHICH CAN ADVERSELY AFFECT TRADING RESULTS.
The information contained in the reports within this site is provided with the objective of “standarizing” trading systems account performance and is intended for informational purposes only. It should not be viewed as a solicitation for the referenced system or vendor. While the information and statistics within this website are believed to be complete and accurate, we cannot guarantee their completeness or accuracy. As past performance does not guarantee future results, these results may have no bearing on, and may not be indicative of, any individual returns realized through participation in this or any other investment.