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The decision to add futures trading systems to an investment portfolio is an easy one. The more difficult decision is how to achieve success in doing so. At Worldwide Futures Systems, we strongly recommend using a futures trading system to achieve the return and risk level you desire. Futures trading software and systems allow investors to keep fear and greed, two dangerous emotions that can prevent investors from making intelligent trading decisions, out of the trading process. Automated trading systems software helps ensure discipline and consistency while trading. This software also requires a fraction of the time to implement and manage, compared to pouring over endless charts and articles.
The selection of a great futures trading system is critical to the success of your portfolio. Choosing the “right” system does not necessarily mean choosing the most profitable, as the most profitable futures trading system often carries the highest risk as well. Both sides of the risk/reward equation must be matched with the client’s individual goals and risk tolerance in order to be successful. If you’re looking for the “Holy Grail” – that perfect system that generates constant profits with little drawdown – it doesn’t exist. This is because the randomness of markets makes it impossible. The best advice is to seek a robust futures trading system that makes money in most markets. Our system’s parameters are not curve fit to catch historical spikes in the market.
Many brokerage firms offer dozens or even hundreds of systems to choose from. These firms advertise their systems using highly optimized parameters and unrealistic slippage estimates that are virtually unattainable in real-time trading. In reality, most of these systems are over optimized, have little or no real-time history and will not be successful going forward in time.
At Worldwide Futures Systems, we use sophisticated, in-house trading software to “step test” each of the parameters of the systems that we trade to ensure they are robust. We also run the Monte Carlo Simulation, a process that can help measure the “survivability” of a trading system by randomizing past results. These tests help ensure that you are trading a robust system which has been responsibly designed and is likely to have a post-release equity curve which is similar to its pre-release equity curve. If your futures trading broker is not doing this for you, beware!
One primary consideration in the evaluation of any futures trading system is risk. Many futures trading system vendors cite very misleading figures, sometimes stating that the largest drawdown for a certain system is the “month end closed out drawdown.” This is, in fact, almost worthless in determining “true risk.” In order to determine the “true risk” of the trading systems we offer, we evaluate the “open trade equity peak-to-valley largest drawdown.” This figure is, of course, going to be much higher, but it more accurately portrays the actual drawdowns experienced. If your system assist broker doesn’t have real answers about real risks – don’t trade! Accurate and honest drawdown figures are a critical part of determining “true risk.” Since risk tolerance is different for all people, the team at Worldwide Futures Systems performs an in-depth personal consultation with every client to ensure the client is completely comfortable with the “true risks” of all the systems we offer.
The selection of the markets that your system trades may well be the deciding factor in the success or failure of your futures trading portfolio. Most futures brokers consider this a static decision based on the best past hypothetical returns generated by the automated trading system. Choosing the best markets according to hindsight can make any system look good for the short run. However, choosing markets based on past results is not effective when trying to decide which systems will make money on different futures markets in real-time trading. For example, look at systems that show metal contracts in their portfolio a couple years ago. Likely you would find none in 2004. The metals markets have not made money for 20 years and weren’t included in most portfolios until 2005 or later. Judging market success from past performance makes it easier for a broker to sell system software, but it does not make us money real-time.
At Worldwide Futures Systems, we offer diversified automated trading systems that are robust across all markets. We also constantly monitor the selection of commodities, which is critical when controlling risk. The correlation between commodities can change dramatically over a short period. Two commodities that historically had a low correlation may suddenly begin trading in tandem; what originally may have added diversification and lowered risk to your portfolio may now create greater exposure to risk. Also, because volatility can soar in individual futures contracts over a short period of time, the make up of your portfolio will never remain constant. It is imperative that your futures trading broker continually monitors volatility and correlation. Otherwise, your account may be at far greater risk than you think.
Contact Worldwide Futures Systems at 888-989-WWFS for more information on our automated futures trading systems.
