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The Barefoot Trader NASDAQ 100 - 5 pools

Note: The figures provided below are those obtained during back testing and live testing, over a development period of four years. Back test data covers the NASDAQ 100 for 10 years worth of five minute price and volume data. The most recent figures cover live real time data testing for the period 25 March to 30th May 09, please email me, johnj@trading-robotics.com, if you would like a copy of the latest trade figures from the robot.

Overview

A low frequency, fully automated, long only, equity swing trading strategy for the smaller investor with $10,000 capital. With inbuilt diversification and able to deliver a strong average monthly gain of 2.5% to 12% with a high Sharpe's ratio (3.2). No leveraging, shorting or capital gearing requirement is needed to achieve the gain profile. Simply follow the trade signals to achieve diversified gains at low risk. Only pay for winning trades. Wins in strong markets average 7.9%, losses average -3.5% with a win rate of 70 to 80%. In weak or declining markets wins average 5.7% and losses average -4.0% with a trade win rate 60 to 70%.

What can I expect to see in the trading pattern?

When the market surges, gains rise to 25% per trading month � 20 days of trading. As the market pulls back trading slows, a few more losses are taken as the market settles into its new lower state and the gain will decline to 2.5% per month. In a fast pull back a monthly drawdown of -2.5% can take place but the pool diversification helps to keep the frequency of this happening low. It is rare to see all pools making losing trades sufficient to create this scenario, though it can and will happen.

What does The Barefoot Trader do?

The NASDAQ 100 is split into five mutually exclusive pools of stock symbols. Only one stock from each pool can be held at a time, and a stock belongs exclusively to one pool. Every stock in each pool is continuously monitored by the robot and as each becomes active as a long swing possibility over the next one to six days the robot's internal dealing room makes a shadow trade (including costs and taxes if appropriate). It continues to monitor the ongoing shadow trade until a suitable exit point is signaled and the trade closed. A second level further assesses each shadow trade as it is initiated, determining which ones to action as real trades. All trades do not make the grade. These selected actions are sent to you as signals to trade. On average 10 trades are actioned per 20 trade days, of which 3 trades are losers. In a busy month expect to see around 25 trades. In a quiet month (though the market may not be quiet!) there may be as few as four or five trades.

Gains made within a pool are compounded within the pool and all pool gains are averaged across the pools to provide a diversified performance. Only closed trades are used to report performance.

Feature Summary:

Designed for the smaller investor � a $10,000 fund, traded in 5 pools of $2,000.

Fully automated decision making seeks to make a +3.5% median gain in 70% of trades and for the median losses taken to be -2.5%..

Gains are locked in and tracked upwards.

Automated stop losses adjust to maximize gain and minimize losses.

Trade timing is not too critical, typically you have several hours to make a trade. In 60% of opportunities we see the price trend favors a slight lag. Note: around 20% of trades will open and close within 24 hours and these faster moving prices may adversely shave off some gain if you cannot respond quickly.

In built diversification helps limit the negative effect of black swan events, trades that fade away and bad news impact.

If something does go badly wrong the robot will not trade to zero, each pool automatically ceases trading when capital erosion falls below 85% of the initial allocated capital.

Low trading rate, typically 10 trades per month; higher when markets are moving upwards and slower when markets are declining.

Back tests and live tests over four years of development work indicate the approach is stable and predictable across a wide range of market conditions.

Trading slows down or even ceases completely as markets become uncertain, even if there is still high volatility present.

A strategy that is easy for the producers to back test and validate with live testing.