Flux Capacitor - by Back to the Future | Trading Reviews and Vendors


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Flux Capacitor - by Back to the Future

  #281 (permalink)

East Bend
 
Trading Experience: Advanced
Platform: NinjaTrader, Tradestation, MetaTrader
Broker/Data: Mirus/Kinetick
Favorite Futures: Futures, Oil, Gold, NQ
 
Posts: 49 since Mar 2010
Thanks: 2 given, 64 received

RE: The $6,000 man

Hello Friend,

It's important to note a few things here - if you would pass them along to your friend.

The software we've engineered isn't a stand along, black-box trading system. Its an analysis tool - on par with a volume indicator, or an order flow analysis tool. A black box trading system, or what is commonly referred to as an "up arrow down arrow" system is historically marketed as a "take every signal get rich" narrative....something we don't participate in because without exception, such ploys are one way roads to account losses.

Historically, the overwhelming number of traders use non-black box analysis tools - like volume or time, as a confirmation indicator to verify a setup they are studying. In the case of a TIME tool, a trader might examine a particular window of time, seeing that historically the market has a recurrence of buying activity in a certain window of time over a period of a few week's look back.

Some traders will also use an analysis tool like volume, OFA, or in our case TIME as a stand alone entry. That's fine, provided 3 boxes are "ticked off" in the process. Something I hope your friend follows procedurally speaking

A. Define a setup. Setup defined as having a mechanical entry with non-discretionary rules. I historically advocate a trend following entry - as in my experience about 60%+ traders that are reporting net profitability are trend trading. Minimally a 2:1 risk reward ratio (or higher) averaging around a 44-46% profitability. I also think a break even component is great to involve, ie not letting a winner turn into a loser. I find that a BE component at 150% of risk is a great place to start.

B. Backtesting the setup prior to using any live money in trading. Generally speaking, we want to see new users with a 100-200 data point backtest which carries a margin of error of +/- 10%. Once the backtest of the setup is complete, a forward test that has no more than a 10% degradation of success in SIM to verify the setup is achievable (good fills, no horrific slippage, etc)

So if your friend was using the standard Warp settings on a YM3M chart, I'd explore a model like this one (if he was attempting a stand alone signal only entry model)

https://www.screencast.com/t/Utidra7hMX

There's a known stop (above the line) with a 2:1 RR at each of the entry points (I draw a FIB with a 0,100, -150, -200 to help me draw it out for stops and targeting quickly). In a scenario like that, we ignore the countrend timing windows and focus on the trend windows (times that align with the prevailing trend, ie 120EMA or whichever trend line a trader is comfortable using).

C. A developed money management plan, on par with what Ryan Jones teaches in his book, "The Trading Game". I advocate an equity curve SMA crossover strategy for new traders to help them identify when to be live, and when to be in SIM. In a trend trading model for example, using any methodology for entry, it's not uncommon for markets to go into a consolidation phase where the model is ineffective. Jone's money management strategy (using the SMA crossover technique) can prevent horrific drawdowns, and create a plateau effect - waiting for the trend conditions which are favorable to the model to come back.

There's a great free tutorial that expands on those concepts of risk management here - if you can pass along to your friend:

https://www.youtube.com/watch?v=xvCh0BqK9fA

Also, important to note as a software engineering company (vs. a CTA or trading room) customers don't share their personal account information with us usually. If I knew who the person was (you can PM me if you want) I'd advise them that they are probably severely undercapitalized at a $6,000 account. A $500 drawdown equates to a nearly 10% account drawdown which historically derails a trader psychologically and causes them to abandon their mechanical rulesets and do the typical things (move stops/targets/average in/deploy discretion randomly/analysis paralysis etc).

A 6K account would almost necessitate these 3 steps outlined be followed religiously IMO to preserve the capital in the account.

If you'd like to meet - the 3 of us (you and your friend) I'd be happy to include you both in the conferences. We can record the sessions...build a strategy together with him - go over the rules, do the backtesting, monitor the forward testing, and then construct the money management protections before he goes live with anything. If we follow that process, he shouldn't be live trading until at least 4-5 weeks from now. Let me know via email if that's something you'd like to do (Michael@backtothefuturetrading.com).

If he doesn't follow those steps, I'd agree with you wholeheartedly - he might as well put it down on Brady as his chances would be better.

-Michael






TheBenefactor View Post
I guess we will find out about this Back to the Future indicator.

Without consulting me, a friend ordered it last week.

He has only traded stock options before so any success he achieves will certainly not be attributed to his expertise.

In 35 years of trading "I have never found some black box guru stand alone software that consistently made money."

But if you guys want I will report on his results.

He will trade one contract on the Dow YM with a $6,000 account.

I said he might have a better chance at taking a $6,000 bet against Tom Brady this weekend but he is adamant.
We will see.
TB


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