2. Results Section
3. Component Identification
4. Actual vs. Hypothetical results
5. Net Dollar Profit or Loss by month
6. System Total
10. Account Size
11. Automatic Reinvestment of Profits and Losses
12. Reporting using Simple Percentages, Compounded ROR, and VAMI
13. Mini Contracts
The main starting points for accessing data and navigating to other pages are the "Home" page, and the "Results" page.
The "Home" page (and many other pages) contains a drop-down menu bar across the top, and a number of specific links in a column on the left. The drop-down menu bar has the headings "Trading Systems", "Help", etc. When you move the cursor over one of these headings, a drop-down menu should be displayed. With some browsers, you may have to click on the heading. And with some user's computers the drop-down menus may not work at all, in which case the pages can be accessed from the Site Map.
The specific links, independent of the drop-down menus, provide access to the Home, Login/Register, and Site Map pages.
Full navigation capability is provided by most pages. However, no navigation capability is provided on the Results page and pages launched from it. These pages have a streamlined format which provides more space for results, but the Results page itself provides a link back to the "Home" page.
Both Actual and Hypothetical results are reported on Futures Examiner. Actuals are based on actual trades that were executed in the market, while Hypotheticals are based on computer simulation of trades in an "ideal" world. Even Actual results are hypothetical, however, because they assume continuous single-contract participation in the trading system for the duration of the results, and this may not have happened in actual trading. The source of our data is given on each Component Information page, along with the nature of the data.
Actual results that we report may originate from:
Hypothetical results that we report may originate from:
We report net dollar profit or loss by month (see the next section), but all costs may not be included in the above sources of raw data. When looking at any set of results, the following should be kept in mind:
Results are reported as net dollar profit or loss for each month, including allowances for slippage, commission and fees, and the cost of the system. We try to present results that are representative of the actual net profit or loss that might be achieved in the real world. Slippage (for hypothetical results) and commission may vary from the amounts that we use, and we try to err on the side of showing slightly smaller profits than some traders might achieve.
Net profit-or-loss (PL) is usually calculated on a one-contract basis, without regard for current account size. This is the convention usually followed for reporting results for trading systems for a single commodity. For a system that trades multiple contracts of the same commodity, PL is reported for the number of contracts the system is designed to trade. For example, BounceMDRL-2miniMD is designed to trade two miniMD contracts (but will hold only one overnight), so results for this system are reported on a 2-contract basis with no compounding.
Commissions vary from broker to broker. Fees are typically a few dollars per trade. For Actual results, we usually use the highest commission charged by the broker who provides the results, and the fees are included. For a mini, this may range from $15 to $34 per trade (round turn), and for a big SP it may range from $25 to $50 per trade.
Cost of the system is based on either the monthly lease fee, or the purchase cost for the system. The minimum lease fee may allow the client to trade only one contract, a stated number of contracts, or any number of contracts. We use the smallest fee appropriate for the contract, and spread this fee over two minis (for a day-trader, when appropriate), one mini (for a swing or position trader), or one big contract. When a system is purchased rather than leased, we usually allow 1/12 of the purchase cost per month. For multi-commodity systems, we may spread the cost over a number of commodities (typically 3), since a trader will often trade more than one commodity with such a system. Note that the allowance may be greater or smaller than what a given client's actual cost would be, when the number of commodities and contracts are taken into account, along with the number of months that a client trades the system. However, the cost of a system can have a significant impact on profitability, so we felt it was important to make some kind of allowance for this cost.
Please note that the results on some system developer's websites may not include realistic allowances for slippage, commission, or the cost of the system. Such results may appear at first glance to be excellent, but please make suitable allowances before comparing them with results on Futures Examiner.
We provide a "System Total" for multi-commodity systems. This component contains the sum of the individual components for a given system. For example, the Frequent Trader system trades both the mini-MD and the mini-RL contracts. The "FreqTrdr-x2-Actual_Total" component contains the sum of the results for the FreqTrdr-miniMD-Actual and the FreqTrdr-miniRL-Actual components. The sum is calculated on a month-by-month basis, by adding together the dollar profit/loss values for each component.
For clarity, System Totals are displayed on a beige background. This applies to the Results Summary, Monthly, and Statistics pages.
A "basket" contains a number of components which can be viewed as a group by using the basket name. The predefined basket "*All_Current_Act_&Hyp" contains all the current components that we track, both Actual and Hypothetical. The *All_Current_Actuals basket contains only the current Actual components. These two baskets provide a convenient way to access results. Several additional baskets are also pre-defined, including Out-Of-Date baskets which provide access to components for which current results are not available. Please use the OutOfDate results with caution: the charts will still be valid, but the statistics will not.
You can also create your own personal baskets. These can be used to follow a particular group of systems, or to create a diversified portfolio. A weight can be assigned to each component, and the weighted total, called the "basket total" is automatically calculated.
When you are creating a diversified portfolio, you will probably want to find a combination of systems that results in a high percentage gain along with a smooth equity curve. You can experiment by adding and removing different system components, and by changing the weighting of each component. When you "show" one of your portfolio baskets, you can examine the Summary Results page, and in particular the basket total row. You can also display a multi-chart that contains the basket total along with many of the individual components. The smoother the basket total chart, the better.
A basket can include other basket totals, but these will not contribute towards the outer basket's total (i.e. they always have a weight of zero). This allows the results for an included basket total to be compared with results for the other components in the basket, without affecting the outer basket's total.
Drawdown is a measure of how much money a system has lost after an equity high before it reaches a new equity high. An "equity high" refers to the highest cumulative profit achieved by a system in a given time frame. We report the maximum end-of-month drawdown, which is determined by looking at the results for all available months. We also report the current end-of-month drawdown. The greater the number of months of data, the higher the maximum drawdown is likely to be. We also report the maximum annual end-of-month drawdown, on the Statistics page, for each of the previous 12-month periods for which there is data.
Note that the maximum intra-day peak to valley drawdown and the maximum closed-trade drawdown, which we do not report, will be greater than or equal to the maximum end-of-month drawdown. The difference can be quite significant. Theoretical back-test data can be helpful here, because TradeStation reports include the maximum intra-day and closed-trade drawdowns, and often 6 or more years of results are available, which may reveal a much higher potential drawdown than has yet been encountered in actual trading.
To be on the safe side, many traders anticipate that the greatest drawdown lies ahead.
Trading systems are unusual in that there is usually no fixed account size required to trade them. The basic requirement is that the account balance must never go below the margin requirement. Thus a system could theoretically be traded using only 1 * margin. However, if the first trade was a loser, then the system could not be traded again until more money was added to the account. (This description is over-simplified because it does not distinguish between initial and maintenance margin.)
One way to determine a suitable account size is to consider drawdown, and make the account large enough that the maximum anticipated drawdown would be tolerable, e.g. no more than 30% of account size. You can get a feeling for the maximum historical drawdown for some of the trading systems that we track by looking at the Summary Results page for the *All_Current_Act_&Hyp basket. Here, the maximum historical drawdown is often around two times the margin requirement (i.e. around 40% of our 5*margin conservative account size); sometimes it may be only 1 * margin (or even less), and sometimes it may be 3 * margin (or even more)! Many investors would stop trading a system if it lost 30% or 40% of their money. Think about this! Thus an account size of 3 * maximum drawdown might be a useful guideline. This would correspond with a maximum drawdown of 33% of account size.
One concern about using a given system's drawdown data to determine its account size, is that previous drawdown information may not be sufficiently adequate or meaningful, and thus may not provide a valid estimate of likely future drawdowns. This is particularly true when results are available for only a few years, and when the number of trades is small. And the greatest drawdown may well lie ahead. It may be tempting to compare several systems using account sizes based on drawdown information for each system. Indeed, this may provide a more meaningful comparison than using margin-based account sizes as we do on Futures Examiner. However, since this approach may be more valid for some systems than for others, we prefer to stick with the current margin-based approach.
Three account sizes are used on this website. The Vendor account size, which is often only 3* margin, is considered to be too small by many investors. The Conservative account size which we define, usually 5* margin, is more in keeping with what might be tolerable (during drawdowns) for conservative investors. Finally, the User account size, which is defined only for basket totals, can be assigned by the user, but must be at least 0.5 * the weighted Vendor account size, and no more than 2* the weighted Conservative account size.
For other investments, profits and losses are not automatically re-invested. They contribute to the account balance, of course, but they do not affect the level of investment or trading. Most of the trading systems reported on this website would fall into this category. For most single-commodity trading systems, including many managed futures products offered by CTAs, the investor chooses the level of trading (i.e. the number of contracts to trade). For example, an investor with a $20,000 account might select a miniSP daytrading system and begin trading at the 2-contract level. If the system does well and the account equity reaches $30,000 then the investor might arrange to increase the level of trading to 3 contracts.
When monthly profit/loss is reported as a percentage it is expressed as a percentage of some reference value, usually either the initial account size or the account size at the beginning of each month.
The initial account size is usually used for reporting monthly percentage results for single-commodity futures trading systems. This might be called the "simple" percentage return, analagous to simple interest. That is how results on this website are reported, using the conservative account size as the initial account value. Simple percentage returns can be added together to obtain the simple percentage return for a longer period.
Please note that results on many websites and magazines are based on account size = 3* margin, which produces significantly higher percentage gains and losses than we report. Such results may appear at first glance to be excellent, but please consider the maximum percentage drawdown that the system experienced (or may experience in the future) when comparing them with results on Futures Examiner.
ROR (Rate of Return) is defined as the net profit or loss in a given period, divided by the asset value at the beginning of the period. When CTAs or CPOs report their results, they often use ROR for each month and also for year-to-date. Example value: 7%. ROR values can be compounded to obtain the ROR for a longer period. This is done by multiplying together the ROR values (plus 1). For example, if the RORs for 3 consecutive months were 7%, -8%, and 5% then the compounded ROR for the 3-month period would be (1.07 * 0.92 * 1.05) - 1 = 0.034 or 3.4%. Annual ROR can be obtained using this method.
A CTA may offer a Managed Futures product that consists of a proprietary trading system, with the customer choosing the number of contracts to trade. Each customer's account size would vary from month to month according to their monthly profit-or-loss, but the number of contracts being traded would be changed only when the customer so requests. Results for such a product would be based on the composite results of all the clients trading the program, and are often reported using compounded ROR and assuming a constant trading level of one contract. (We feel that this is misleading since ROR implies compounding, but profit/loss is not automatically reinvested.) In these calculations, the cumulative equity may be reset to its initial value at the beginning of each year (as shown in Table 2 below). In such cases, we calculate the dollar profit/loss for each month and report this; when percentages are presented they are simple percentages based on these dollar values.
VAMI (Value Added Monthly Index) is a way to show the cumulative equity of an investment. VAMI is defined as the value, at the end of each month, of an initial $1000 investment. If profits and losses are automatically compounded, the monthly profit/loss data would reflect this. Successive monthly values of VAMI can be calculated from monthly dollar profit/loss data using addition, or from monthly ROR data using multiplication.
Please refer to Table 1 below for a summary of Reinvestment and Reporting for various types of investments. Table 2 illustrates several ways of reporting results for a single-contract trading system.
|Table 1: Reinvestment and Reporting for Various Investments|
|Type of Investment being Reported||Is Profit /Loss automatically reinvested?||How is Profit /Loss reported (in addition to dollars)?||Comment|
|Trading system: results for one commodity||No||Usually as simple percentages||This applies to results on Futures Examiner.|
|Trading system: combined results for multiple commodities||Sometimes, particularly if trades are sized according to account size||If PL is reinvested, probably ROR. Otherwise, probably simple percentages.||None are reported yet on Futures Examiner|
|Mutual fund||Yes||Probably ROR (?)|
|CTA Managed Futures (PL not automatically reinvested)||No||The CTA will probably report using ROR, but Futures Examiner uses simple percentages|
|CTA Managed Futures (PL automatically reinvested)||Yes||The CTA will probably report using ROR.||None are reported yet on Futures Examiner|
|Commodity Pool||Yes||The CPO will probably report using ROR.|
|PL = Profit or Loss. Helpful information on calculating ROR and VAMI is given in Disclosure Documents: a Guide for CPOs and CTAs. Information in this table reflects the author's understanding on how these things likely work.|
|Table 2: Results for a Single-contract Trading System, Reported Several Ways|
|Result trading 1 contract||How reported by Futures Examiner||How reported by a CTA|
|Month||Net $PL||Cumulative Equity (1)||Monthly PL (Simple Percentage)||Sliding Year6 % (most recent 12 months) (2)||Cumulative Equity for computing ROR (may not be reported)||Monthly ROR||Year-to-Date ROR||VAMI (1)|
|Starting equity for 2004||20,000||20,000||1,000|
|2004-Mar||1000||21,000||5 %||5 %||21,000||5.0 %||5.0 %||1,050|
|2004-Apr||1000||22,000||5 %||10 %||22,000||4.8 %||10.0 %||1,100|
|2004-May||-1000||21,000||-5 %||5 %||21,000||-4.5 %||5.0 %||1,050|
|2004-Jun||-1000||20,000||-5 %||0 %||20,000||-4.8 %||0.0 %||1,000|
|2004-Jul||-1000||19,000||-5 %||-5 %||19,000||-5.0 %||-5.0 %||950|
|2004-Aug||-1000||18,000||-5 %||-10 %||18,000||-5.3 %||-10.0 %||900|
|2004-Sep||1000||19,000||5 %||-5 %||19,000||5.6 %||-5.0 %||950|
|2004-Oct||1000||20,000||5 %||0 %||20,000||5.3 %||0.0 %||1,000|
|2004-Nov||1000||21,000||5 %||5 %||21,000||5.0 %||5.0 %||1,050|
|2004-Dec||1000||22,000||5 %||10 %||22,000||4.8 %||10.0 %||1,100|
|Starting equity for 2005||22,000||20,000 (3)||1,100|
|2005-Jan||1000||23,000||5 %||15 %||21,000||5.0 %||5.0 %||1,150|
|2005-Feb||1000||24,000||5 %||20 %||22,000||4.8 %||10.0 %||1,200|
|2005-Mar||1000||25,000||5 %||20 %||23,000||4.5 %||15.0 %||1,250|
|2005-Apr||1000||26,000||5 %||20 %||24,000||4.3 %||20.0 %||1,300|
|2005-May||1000||27,000||5 %||30 %||25,000||4.2 %||25.0 %||1,350|
|2005-Jun||1000||28,000||5 %||40 %||26,000||4.0 %||30.0 %||1,400|
|Notes: (1) A plot of the Futures Examiner Cumulative Equity would have the same shape as for VAMI. Charts on Futures Examiner are plotted using cumulative profit/loss, which has the same shape as cumulative equity and VAMI, but begins at zero. (2) Sliding Year6 percentage is the sum of the simple percentages for the most recent 12 months. (3) For calculating ROR, Cumulative Equity is reset to initial value at beginning of each calendar year.|
For the S&P futures index, both big contracts (SP) and mini contracts (miniSP) can be traded. A big contract has the same value as 5 minis. Some data sources report results for trading both sizes of contract. If data is reported for only the big contract, then sometimes we provide a component with contract = "cMiniSP". These components provide an estimate of expected profit for a mini, based on actual or hypothetical results for a big contract. Note that all computed-mini results are Hypothetical, even when based on actual results. This calculation uses estimates for slippage and commission which are believed to be appropriate when minis are traded. Similarly for the Nasdaq and mini-Nasdaq, a computed mini may be available. The datatype part of the component name indicates the type of raw data used in the calculation, e.g. "System-cMiniSP-cfActual" means computed from Actual results, and "System-cMiniSP-cfHyp" means computed from Hypothetical results.
Last updated 2006-Apr-02