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Strategy #1 – "JET"
Bond Intraday
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Strategy #2 "JET" Euro Currency Intraday
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Strategy #3 "SIB
Bond" Daily
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Strategy #4 Trend & Cycle
S&P 500 Daily

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“JET” Bond Intraday

The following is a sample of a mechanical rule based trading strategy and a discussion of its design characteristics and performance.

About the “JET” trading strategy

“JET” effectively translates repetitive characteristics in the bond market into a set of buy and sell rules, designed to take the emotion out of trading. The Jet Trading Strategy, based on the lengthy history of the US 30-year Bond, is a 100% mechanical trading system. It was developed specifically for the US 30-year T-Bond day session only trading – though positions are held overnight without trading. Because it uses intraday data for all trade signals, it requires a real-time data feed. The release date for the Trading Strategy was April 2005, and its parameters have remained unchanged since then.

JET basic strategy principles

The first principle of the Jet Trading Strategy is to determine which pre-conditions are currently present in the market. These conditions include factors such as trend strength, trend direction, the position of the market in relation to its recent range, and volatility.

The Jet Trading Strategy enters trades by following the direction of a proprietary market momentum model. The key to the system is how market momentum is measured. While momentum is measured exactly the same way for all trade signals, all trade signals will not exhibit equal momentum. And, equal momentum will not always result in the same trading signal.    

Exits are straight-forward. There is a worst case dollar stop loss of ½ a full point in the T-Bond. There is a best case dollar profit objective, swing objectives, and several ways of following the trade with a trailing stop.

There are very few moving parts in the Jet system, so there are fewer things to go wrong. The Trading Strategy therefore, has a higher probability of continued success in the future. Jet uses exactly the same trading rules and rule parameters for the entire period from 1978 through to the end of June 2007, the date of this publication’s most recent update.

Overview of JET historical trading results

The character of the bond market usually requires some patience. Historically, Jet has held a position in the market 47% of the time. The average winning trade lasts about 7 days. The average losing trade is exited in less then 2 days.

Jet produces winning trades just shy of 44% of the time in historical testing. That win percentage can be improved substantially, but doing so lowers the average trade size in dollars. By varying the exit level variables of the Trading Strategy, win/loss implications are easily seen. 

The Trading Strategy is well suited to trading multiple lots, each with a somewhat different emphasis in terms of the trade-off between the winning percentage and the average trade size or other factors. The program can easily be tailored using multiple lots. 

The average trade size, which includes both winning and losing trades, is $388 per contract. The average winning trade size is +$1,400 and the average losing trade is -$(385). The average winning trade is 3.64 times as large as the average losing trade. This ratio suggests there is a considerable opportunity for profit even during periods when results are well below the mean.

The drawdown is $4,000 in historical simulated trading over 28 years and 900 plus simulated trades. This is considered to be very low drawdown and a testament, we believe, to the solid Trading Strategy logic. The $4K drawdown represents the worst-case stop being hit eight consecutive times. Eight consecutive losing trades is also the largest number of losers in a row over the test period. The risk adjusted rate of return is very favorable. 

JET historical testing assumptions

Every effort is made to make the Trading Strategy assumptions as realistic as possible in a simulated trading environment. The goal is to achieve near zero Trading Strategy performance decline after release.

In simulated trading, limit order exit trade signals are required to trade beyond the limit price level before a limit order trade is considered filled. All entry signals are market orders and the trader will know in advance the exact time a potential order may be triggered. However, an entry signal cannot occur within 20 minutes of either 7:30 am Chicago time, or 9:00 am Chicago time. These are the times of major economic reports.

On the stop exit side, no allowance for slippage has been included in the performance figures. This has been done for two reasons. It is easier for the client to determine an appropriate factor for slippage and deduct it from the raw figure. And, from a proprietary trading perspective, raw figures may more closely reflect the value of the Trading Strategy to a firm’s Proprietary Trader.  

Performance charts and graphs

The following table illustrates the basic Jet Trading Strategy historical simulated performance based on one contract traded since T-Bond trading inception in 1978  We would be pleased to answer any questions and/ or requests at 905 278 4048 or JoeDuffy@Keypointtrading.com.

Summary – All Trades Report

Name: 60 minute Jet Bonds
Symbol: TQ-067

Position selection All trades, From date 04/14/1978, To date 06/25/2007, Chart By Date, Ignore trades <= -999,999,999, Ignore trades >= 999,999,999, Ignore big wins 0, Ignore big losses 0, Profit is >= 0.00, Show cents No, Show Max Intra No, MA Type Simple, MA Periods 1

PLEASE READ THE FOLLOWING:
THERE IS A SIGNIFICANT RISK OF LOSS IN FUTURES TRADING.
HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN INHERENT LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. IN ADDITION, SINCE SOME OR ALL TRADES HAVE NOT ACTUALLY BEEN EXECUTED, THE RESULTS MAY HAVE UNDER-OR-OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS FAST MARKET CONDITIONS OR LACK OF LIQUIDITY AMONG THEM.

No representation is being made that any account will or is likely to achieve profits or losses similar to those shown. Only risk capital should be used for futures trading due to the high risk of loss.
Simulated trading programs in general are designed with the benefit of hindsight. In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk in actual trading. For example, the ability to withstand losses (and incur account draw downs) or to adhere to a particular trading program in spite of trading loses are important issues which can also adversely affect actual trading results. There are numerous other factors related to the markets in general or to the implementation of any specific trading program, method, strategy, or system, which cannot be completely taken into consideration with hypothetical performance results and will affect trading results and Customer’s Profit or loss.