Futures Micro and Mini Portfolios Weekly Update
100% systematic (mechanical) trading is designed to take your emotions out of trading decisions at all times. Often, this can mean having to weather uncomfortable periods where you see your equity decline from a prior higher point. In trading parlance, this is called a drawdown and all traders are in drawdown about 99.9% of the time.
I provide the red regression (trend) lines on the charts because it shows us the true mean growth of each Model Portfolio. What happens with a profitable or robust system is that our equity will go above and below the regression line depending upon a number of factors. The important thing to take away from this is that the higher above the regression line we are, the greater the probability we will experience a drawdown and that drawdown will likely be large at some point in the future.
Right now, we are experiencing market conditions where various commodity groups are not trending but are what I call “reacting” which means they are contra-trend at the moment. This happens all the time and is just how it works. If enough groups are reacting simultaneously, this creates a drawdown.
Let’s look at the 72k chart and regression line for a moment. We experienced a huge increase in equity starting in late October and early November of last year that continued until Friday 3/20. We warned you that we were setup for a drawdown and this is precisely what we got. Now, we are setup for another run to the upside because we are below the regression line as we were in December 2018 and November 2019. So rather than this being some kind of negative, it is exactly the opposite- we have great opportunity.
We can press our positions if we have sufficient equity, and I suggest you do that if you are well capitalized as I recommend. If you are in a financial position to press your investment at the right time, you will produce large gains in your account equity based on historic realities.
**This week we continued in a drawdown across the board with the exception of the 70K AG Model Portfolio that had a large gain due to the collapse in hogs and cattle. Again, opportunity is knocking once more for large gains, but patience and discipline are always required.
We make big money by being long term position trend traders- nothing more-nothing less. You need to be 100% disciplined to replicate the Model Portfolios and the more you deviate from full discipline, the worse your performance.
***New Trade Alert***
Reverse July Lt. Crude from short to long (16k/28k) Reverse
Trades can be entered during the electronic night session or in the morning. There is some flexibility in terms of when you enter a new trade and this is because our profits are not marginal. Trade prices shown on the Model Portfolio spreadsheet are what I get for my own trades. Yours can be better or worse.