Top 10 Trading Systems for 2012
Over the past two weeks we have been working hard to take a look at the results from 2011 by going through all of our trading system results. There are quite a few trading systems that we track on a daily basis and even more that we have researched in the past and have not looked at in a while. After extensive review and research we have found the 10 strategies below to be our favorite trading systems going into 2012.
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1.) Cobra III E-mini S&P
This is our best day trade system, trading the stock indexes. We mainly trade this on the highly liquid E-mini S&P. The performance below shows results from 12/27/2011 back to 11/1/1997 (the beginning of the E-mini S&P). There was a two year sideways channel for the equity curve but the second half of 2011 has been highly profitable for this strategy. This strategy is available only in the Tradestation Platform currently as we are still working on the NinjaScript conversion for the NinjaTrader platform and hope to have it out in 2012.
This strategy takes only one trade per day max, with a $300 stop loss and works on the other stock index futures as well as the DAX and SPY ETF.
2.) Gold Spike
This has been one of our most profitable strategies in 2011 and we have recently added the ADX filter version. This strategy captured some big trades in the volatile Gold futures market. This strategy is available only in the Tradestation Platform currently as we are still working on the NinjaScript conversion for the NinjaTrader platform and hope to have it out in January 2012.
Gold Spike can take 3 trades by default on any given day with a stop loss of $800 per trade. The best return for this strategy is to actually limit the system to one trade per day.
3.) EVP-2 Euro Currency 5m and 15m
EVP-2 Euro Currency is our overall favorite trading system. Movements in the Euro Currency futures and forex can be very fast and definitive. This trading systems trades on both the 5 minute and 15 minute bars as two different versions with correlated but different results. The strategy takes trades between 8:45 am and 11:00 am EST and will exit any open trades by 2:00 pm EST. We wait after the economic news events that take place at 8:30 am before trading this strategy. Those news releases can be the catalyst for some great trades. This strategy uses a $300 stop loss and does not trade very frequently.
EVP-2 Euro Currency works in both Tradestation and NinjaTrader.
4.) Soybeans Daytrader II
Soybeans Daytrader II is a day trade system for Soybean futures. This trading system also works on Wheat and Corn. This strategy enters any trades for the day within the first few minutes and uses a $650 stop loss and a $950 profit target. In the last half of the year we have generated very few trades with our most recent trade on 12/27/2011, hitting its profit target. With grain prices at high levels, the potential for some nice trends and larger ranges for 2012 is what we anticipate and why this trading system is one of our favorites.
Tradestation Soybeans Daytrader II
NinjaTrader Soybeans Daytrader II
5.) Corn Swing
This is the only swing trading system in the list, taking all entries and exits during the day session. We don’t place stops or profit targets at night. This strategy is one of those that we haven’t looked at in almost 5 years and has had amazing walk forward results in the last 5 years.
Here is the article that we released that shows why Corn Swing is a great strategy to use going into 2012.
What do Corn Trading and Wine Have in Common?
This strategy is only available in Tradestation but we are just a few days away from having the NinjaTrader version available.
6.) Cobra CT II E-mini Russell
Cobra CT II E-mini Russell is a counter trend trading system that takes advantage of small countertrends. The strategy can end up trading in the direction of the daily trend. A $350 stop loss is used and can trade multiple times per day.
Tradestation Cobra II E-mini Russell
NinjaTrader Cobra II E-mini Russell
7.) Cobra II Bonds
This is one of the most profitable strategies in the first part of 2011 with a steep drawdown during October and November, losing $7700. We removed it from the portfolio in mid November. It has been on a big winning streak since the beginning of December. In December it is up $5,375 on 19 trades. Cobra II Bonds can be a great strategy, but may include steep drawdowns during choppy trading. We will look for a way to catch this strategy on the upswing in 2012 and potentially add it back to the portfolios.
8.) Euro Surge
This is one of our favorite strategies but trades at night. This is ideal for those up at 2am EST and want to trade. This strategy trades from 2am – 12 noon EST. Many trends in the Euro Currency occur before the US session opens. There can be periods of time when the trends in this market all occur at night (based on the US) and trend very little during the day. EVP-2 takes advantage of trends early in the US Session. Overall, the Euro Currency becomes less active as the US session moves into the afternoon trade. Most of the focus becomes the stock market in the afternoon.
9.) DAX NightTrader
This strategy trades from 2am – 3am EST and takes advantage of the hour that the DAX futures are open before the German stock market begins trading. The CAC-40 also begins trading at 3am. There can be some nice trends during this one hour period as this market has been closed for 10 hours (since the previous days close is 4pm EST).
The E-mini S&P and US Stock index futures virtually stay open 24 hours a day during the business week, starting at 6pm EST on Sunday night and close at 4:15 pm EST on Friday afternoon. The DAX futures are closed 10 hours a day during the week. DAX NightTrader only trades for one hour and is ideal for European traders or those who are up at this hour. There is a 1500 Euro Stop Loss.
10.) DAX Cobra CT III
DAX Cobra CT III trades from 1pm-4pm EST. It is a long only strategy that uses a 1000 Euro Stop Loss and buys dips during the afternoon of the US Session. DAX Cobra CT III can be combined with DAX NightTrader to trade as one system with the margin of one system instead of two since they both trade at distinctly different times.
Portfolio Updates
The current portfolios are still being analyzed and we may have an adjustment at the beginning of January. There will be no major changes anticipated yet. Cobra CT II E-mini Russell and Corn Swing could be added to the portfolios. Cobra II Bonds could also be added after a small losing streak. Cobra II Euro might be removed after a nice December but 5 months prior of small losses. Euro Surge and DAX NightTrader will probably not be added to the portfolios since they trade at night.
We have been testing the EVP’s and have some positive results on trading Crude Oil, Ten Year Notes, Gold, and Soybean Meal with EVP-1 and EVP-2. Further testing may show these strategies as potential strategies for our portfolios. We will also take a look at systems from the past that have been put on the shelf, such as Sting and Diablo.
Gap Fill Rank E-mini S&P from our book, “Seven Trading Systems for the S&P Futures” also made an equity peak in December. This strategy is very low frequency, taking only 36 trades for a net profit of only $737.50 before slippage and commission in 2012.
Perspective
Last year, some of our biggest gains were in January as the beginning of the year can generate many new trends with many large fund allocations across the stock and commodity markets. December has been good to us as well so far and as of December 28th.
Regardless of how good the walk forward results, either hypothetically or in real time, the markets can always change and some systems may under-perform and even go into worse case drawdowns while other trading systems have the potential to out-perform their past and make new equity peaks.
We don’t predict the market or the future but take trades with calculated risk and anticipate changing market conditions. With changes in the market there are also new opportunities. We are looking forward to 2012 and will start with these strategies in our portfolios with specific and discretionary rules for potential adjustments. As 2012 develops, there may be strategies that we remove from our “top” list while there are others that we may add that become more suitable for trading the current market conditions.
Trading for the new year begins on January 3. Happy New Year and Good Trading in 2012!