Cobra Trading System
The Cobra trading system is a trend following day-trade strategy that trades Stock Index futures, Euro Currency, Crude Oil, Bonds, DAX, Soybeans, and Gold. This original strategy was designed at the end of 2005 for stock index futures using market internals. A modified version (that does not use market internals such as $ADV and $DECL) trades Bonds, Euro Currency, Crude Oil, Gold, Soybeans, and the SPY ETF.
Cobra is our flagship trading system based on the fact that it works well over a broad range of markets with very little change in the trading system for the different market sectors. It trades the following markets: E-mini S&P, E-mini Russell, E-mini Midcap, DAX, Euro Currency futures and forex, Crude Oil, Gold, 30 Year T-bonds, Soybeans, Gold, and the SPY ETF.
How does Cobra work?
The details of the strategy are proprietary, but the general approach is to combine a pattern based entry technique as well as a trend indicator. If the long pattern setup is signaled (the Cobra pattern) and the trend is up, based on an indicator, then we take long trades on a small pull-back. If the short pattern setup is signaled (the same Cobra pattern for shorts) and the trend is down, based on an indicator, then we take short trades on a small rally. The goal is to trade the trend and get in before the trend accelerates but to also ensure that we have the trend correct and are not "picking a bottom". We are not looking to call tops and bottoms but could be described as a “middle trend finder” and capture parts of the trend somewhere in the middle. It is a day trade strategy.
What is the history? When was it designed?
The Cobra trading system was originally designed in 2005 (originally called Viper) for the stock indexes with the creation of Cobra I stock indexes. In 2008, we decided to reduce the daily risk for traders looking to quantify daily risk within a system by limiting the system to one trade. We added an additional modification of limiting it to one trade in Cobra II and also added a profit target. Cobra and Cobra II have the same entry criteria.
In 2009, we added Cobra III which has a more selective entry criteria than Cobra I and Cobra II but like Cobra II, in that it has one entry per day and a profit target.
In 2008 and 2009 we also added other markets such as Crude Oil, Euro Currency futures and forex, and 30 Year Bonds.
The trend indicator stock index futures use New York Stock Exchange market internals such as $TICK, $ADV, $DECL, as part of the trend finder while other commodity and financial futures markets that are not correlated with the stock market use simple indicators to verify the trend of the Cobra pattern.