Return on Investment Not Dependent on the Economy

Return on Investment
that is Not Dependent
on the Economy

A Presentation by:
Gary Hart

Trendfinder Trading Systems
Your Trading System Solution SM

www.trendfindertrading.com


Would you like to invest in something that
can provide positive returns no matter what
the stock market or economy is doing?

Something that can be compounded easily?

Something that is liquid?

Copyright © 2012 Trendfinder Trading Systems LLC


Risk Disclosures
ALL CONTENT IN THIS PRESENTATION IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY. IT IS NOT A
RECOMMENDATION OR ADVICE TO BUY OR SELL ANY SECURITIES. WE MAY HOLD POSITIONS FOR
OURSELVES OR CLIENTS IN THE MARKETS MENTIONED HERE. THERE IS A VERY HIGH DEGREE OF RISK
INVOLVED IN TRADING FUTURES. YOUR USE OF ANY INFORMATION IN THIS PRESENTATION IS ENTIRELY
AT YOUR OWN RISK.

CFTC RULE 4.41 - HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN LIMITATIONS.
UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL
TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN EXECUTED, THE RESULTS MAY HAVE UNDER-OR-
OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF
LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY
ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY
ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN.

GOVERNMENT REGULATIONS REQUIRE DISCLOSURE OF THE FACT THAT WHILE THESE METHODS MAY
HAVE WORKED IN THE PAST, PAST RESULTS ARE NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
WHILE THERE IS A POTENTIAL FOR PROFITS THERE IS ALSO A RISK OF LOSS. A LOSS INCURRED IN
CONNECTION WITH TRADING FUTURES CONTRACTS CAN BE SIGNIFICANT. YOU SHOULD THEREFORE
CAREFULLY CONSIDER WHETHER SUCH TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR FINANCIAL
CONDITION SINCE ALL SPECULATIVE TRADING IS INHERENTLY RISKY AND SHOULD ONLY BE
UNDERTAKEN BY INDIVIDUALS WITH ADEQUATE RISK CAPITAL.



Gary Hart
• Owner/President of Trendfinder
Trading Systems LLC
• NFA (National Futures Association)
member and Series 3 licensed
• Owner/Principal of a registered
CTA (Commodity Trading Advisor)
• Former career as a Structural
Engineer with Bachelors in
Architectural Engineering and
Masters in Structural Engineering



Background – why Futures trading?
• Structural Engineer – construction industry cyclical
• In mid 1990’s started looking for somewhere to invest
that would support my income during downturns
– Wanted something that could make money no matter what the
economy was doing
– Wanted something that could be compounded easily
– Wanted something that was liquid
– Stock investing didn’t fit criteria because it was dependent
on economy just like construction industry
• Futures trading met all criteria plus has other benefits
• Trading futures since 1998, with systems since 2001



Hypothetical Results $100k Investment - 2004 to 2011
$1,400,000

$1,200,000
Non-Compounded Equity Balance

$1,000,000

$800,000 Trendfinder (All 16 Systems)
S&P 500
$600,000 S&P 500 Total Return
Case-Shiller Home Price Index
USAA Precious Metals & Minerals Fund
$400,000

$200,000

$0
May…

May…

May…

May…

May…

May…

May…

May…
Sep…

Sep…

Sep…

Sep…

Sep…

Sep…

Sep…

Sep…
Jan-04

Jan-05

Jan-06

Jan-07

Jan-08

Jan-09

Jan-10

Jan-11

Past performance is not necessarily indicative of future results.


(Lack of) Correlation

Trendfinder's Correlation 2004-2011

Market Correlation

S&P 500 0.05

S&P 500 Total Return 0.03

Case-Shiller Home Price Index -0.33

USAA Precious Metals & Minerals Fund -0.03



What are Futures?
• From Wikipedia:
– A futures contract is a standardized contract between two parties to
exchange a specified asset of standardized quantity and quality for a
price agreed today (the futures price) with delivery occurring at a
specified future date, the delivery date. The contracts are traded on a
futures exchange.
• First created for commodities (wheat, corn, etc.)
• Leveraged way to hedge the underlying market
• Trendfinder’s trading systems trade Stock Index futures
– S&P 500, S&P MidCap 400 and Russell 2000



Benefits of Futures
• Highly regulated
• Leveraged
• Liquid & Transparent
• Great risk control
• 60/40 tax treatment



Risks of Futures
• Leveraged – can have significant losses
• Possible limit moves
• Exchange/broker electronic system failure
• Full disclosure of risks in account opening paperwork



What is a Trading System?
• Predefined set of rules for making trading decisions
– Simple Examples:
• Buy if price crosses above 200 day moving average and sell if
opposite occurs
• “Golden Cross” – Buy if 50 day moving average crosses 200 day
moving average
• Can be executed manually by a person or automated by
a computer
• All of Trendfinder’s systems are computer automated



Why use Trading Systems
• Disciplined trading
• Automated
• Risk control
• Quickly test and substantiate if there is an edge



Trendfinder’s Trading Methodology
• Exploit an edge
• Trend-Following and Mean-Reversion
• Keep it simple (for increased robustness)
• Disciplined/automated trading
• Always use stops for risk control
• Short term trading strategies that put a relatively small
amount of capital at risk and are in the market only when
perceived opportunity is the greatest



Trendfinder’s Trading Systems
• Day Trading Systems – Russell 2000
– Exploits trend-following edge
– Small caps trend the best
– Largest “daily dollar range”
• Swing Trading Systems – Stock Indexes
– Swing trades average about a week
– Exploits mean-reversion edge
– Indexes have mean-reverting nature
• Consistently highly ranked in Futures Truth Magazine
– 3rd party, objective, tracking systems since 1985



Current Futures Truth Rankings
(#4-2011 released January 2012)



Trade Examples – Day Trade System (Tiger)



Newest System – FedSwing
• Swing trading strategy (holds overnight)
• “Don’t fight the Fed”
• When Fed is buying won’t go short
• When Fed is selling won’t go long
• Simple rules
• Very low correlation to other systems so nice fit in
Portfolios



Trade Examples – Swing Trade System (FedSwing RL)



Trading Systems Performance
• Full reports/graphs on website
• Costs for commission and slippage included!

• All of the following hypothetical performance results are
based on 1 contract per strategy, include $50 round-trip
commission and slippage per trade and are non-
compounded results (profits are not reinvested). The
lease price is not included in these results. Past
performance is not necessarily indicative of future
results.


FedSwing RL Hypothetical 5 Year System Performance

Monthly Returns




Based on a $25,000 account size



How to System Trade Successfully
• Control emotions – Fear and Greed
• Overleveraging – Don’t!
• Have an exit plan (and stick to it)
– Specify when to stop trading system
– Helps withstand drawdowns and stay in system
• Looking forward mentality
– Be long-sighted not short-sighted
• Be patient!




Looks great!
I’m ready to start
trading tomorrow.

Lion II Hypothetical Performance 11/1/05 – 10/31/10



Okay…I’ve traded this
thing 6 months and lost
money. Should I quit?




Whew, I sure am glad I
stayed disciplined and
didn’t quit.




To achieve the long-term
results you must survive
the short-term setbacks



System Portfolios
• Diversification
• Smoothes equity curve
• Profit / Drawdown ratio increases
– Overall profit = sum of profit for each system
– Overall drawdown <> sum of drawdown for each system
because max drawdowns don’t happen at exactly the same time
(unless systems highly correlated)



System Portfolios
• Wildcat Portfolios
– Day trading systems only
– Less diversification than Index Trader Portfolios
– No overnight risk

• Index Trader Portfolios
– Combine day trading and swing trading systems
– Best diversification = smoother equity curve
– Have overnight risk



System Portfolio Performance
• Full reports/graphs on website
• Costs for commission and slippage included!

• All of the following hypothetical performance results are based
on 1 contract per strategy. Intraday system results include $50
round-trip commission and slippage per trade, and Swing
system results include $20 round-trip commission and 1 tick
slippage per side. Results are not compounded (profits are
not reinvested). The lease price is not included in these
results. Past performance is not necessarily indicative of
future results.


Wildcat V Portfolio Hypothetical 5 Year Performance
Based on $90,000 account size



Wildcat V Portfolio Hypothetical 5 Year Performance



Index Trader V Portfolio Hypothetical 5 Year Performance
Based on $90,000 account size



Index Trader V Portfolio Hypothetical 5 Year Performance



Compounding Results
• Futures trading can be compounded easily
• Need to reduce contracts as well as add them

• All of the following hypothetical performance results are
based on 1 contract per strategy, include $50 round-trip
commission and slippage per trade. The lease price is
not included in these results. Past performance is not
necessarily indicative of future results.



Lion II Hypothetical 5 Year Performance Compounded
Based on 1 contract per $15,000 in account



Why use Trendfinder’s Systems?
• Not correlated to other investments
• Top rankings in Futures Truth
• Never released to public
• Transparent & Reputable
– Nothing hidden – post good, bad & ugly in blog
– Realistic performance results
• Trades executed by broker with 20+ years experience
– Uses independently owned FCM established in 1923



How it works

Trendfinder
Subscribe to Open and fund
connects you with
System or Portfolio futures account
partner broker that
on Leasing page with partner broker
trades systems

Optional: You receive daily Broker auto-
Review/compare and monthly executes Systems’
your results with statements from trades in your
Trendfinder's Blog your broker account



• Would you like to invest in something that can provide
positive returns no matter what the stock market or
economy is doing?
• Something that can be compounded easily?
• Something that is liquid?

Contact Gary: (480) 269-9605
gary@TrendfinderTrading.com

Sign up now on leasing page:
www.trendfindertrading.com/leasing.html


Return on Investment Not Dependent on the Economy

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Editor's Notes