Commodity trading bears a high degree of risk. People can and do lose money. Past performance does not guarantee future results. Hypothetical results have many inherent limitations. Please read the disclosures & disclaimers page.
*For the purposes of this site, "real-time" means trades and results that are out-of-sample, i.e. they occurred after the rules for the system were established. "Real-time" does not necessarily refer to actual trades taken.
TradingVisions Systems, Inc. Spokane WA 99217-7737 509-466-8435
Spectrumis a completely mechanical day trading and position trading system designed to trade four index futures contracts: e-mini S&P 500, e-mini S&P 400 Midcap, e-mini Nasdaq, e-mini Russell 2000, and Dow Jones. Spectrum may be purchased ($995), or it may be leased for $50/month/contract. If leased, it is traded for clients through selected brokers.
HOW WAS IT DEVELOPED?
Spectrum is based upon market observations of cycles and extremes in volatility and range. These extremes are determined by two important emotions of trading, fear and complacency. In the typical equities market the dominant mentality is to be long. Any threat to the downside induces fear, and the more pronounced the selloff, the stronger the fear (and vice versa). Typically this leads to increased volatility. Conversely, a market that is trending upward tends to create complacency, and range tends to contract. It is these two principles that form the basis of Spectrum.
HOW DOES IT WORK?
Spectrum is a unique system with 2 optimizable entry parameters, one for long and one for short. Its logic is very simple: it is based upon pivot extremes in volatility.
Originally Spectrum was intended for the S&P market, but it quickly became evident that the principles would apply to other equities indexes. The very first draft of the system showed profits, and the original parameter for long positions that was chosen based upon observation turned out to be the best one in testing. After initial testing on the S&P, the rough rules for short entries were developed. Then the S&P 400 Midcap, Nasdaq, Russell 2000 and Dow Jones were added to the test field. From early in the process, rules, parameters, and stops were added depending on the results for all 4 indexes. This helps ensure that curve-fitting was minimized. Spectrum uses exactly the same rules for all indexes, and the excellent uniform results are proof of its robustness. Further evidence of robustness is the fact that the Dow Jones contract results are excellent, as are the real-time results.
Spectrum is very selective about when to trade, and unlike many day trading systems, it does not trade often. Trading the 5 markets together yields about 3 trades/month. Separately, each systems averages about .5 trade/month. Another unique quality of Spectrum is that it may also be traded as a position system, although it still takes about the same number of trades. In either mode, the system can go for extended stretches where there are few, if any trades.
Because equity markets tend to move in the same direction, there are similarities in the equity curves of the 5 markets, and their correlations are around .50. However, by trading the systems together, both the extreme and average drawdowns
are reduced by 45% and 36% respectively.
Spectrum is a very easy system to trade. A trader knows the day before if a trade is possible the
next day. About half the entries are market orders placed immediately upon the closure of a set bar at the same time each day. If no entry occurs at that time, then a stop order is entered.
Spectrum works best with wide exit stops. In fact, the day-version is almost as profitable without any stops as it is with. A protective "disaster" stop is placed immediately but is rarely hit (for the S&P, 4 of 131 trades were stopped out with the disaster stop). Another stop locks in a small profit when a trades advances sufficiently. A profit objective is also utilized. Finally, 15 minutes before the session end a close stop is used. The latter is the actual exit over 60% of the time.
WHAT ABOUT OPTIMIZATION OR CURVEFITTING?
A good system is based upon empirical observations of the market, rather than a computer blindly crunching numbers. Through observation, patterns are noticed. These patterns, when objectified, may become a series of trading rules. By its very nature, a pattern is a form of optimization, because the extraneous is ignored in order to see the rule.The trick, then, in trading is to not overoptimize or overcurvefit. As mentioned above, Spectrum is based upon observations of the market that were then refined through testing. With only one optimizable parameter for long and one for short, and with its backtested success on 4 markets, the system was created with a minimum of curvefitting.
WHAT'S THE EASIEST WAY TO TRADE SPECTRUM?
If you purchase Spectrum ($995), you will receive the fully revealed system in a TradeStation EasyLanguage file & written text rules. If you lease the system (from $50/month), the rules are not revealed, & you would trade it either through selected brokers or in a TradeStation account with an encrypted, time-limited file.
As an example of current performance, consider Spectrum ES. It has a very low drawdown of $1595, which would allow one to capitalize an account at $5000. Since early 2001, it has made $8,700 ($30 slippage.commission) trading 1 contract. Despite infrequent trading, Spectrum has performed consistently well, particularly in comparison to other SP/ES systems. The other markets that Spectrum trades have also performed well. Since release in late August, 2003, these 5 markets combined would have netted a profit of over $8,300. Few systems are able to exhibit such consistent performance over a range of indices. The performance reports and charts below include slippage/commission of DJ $60, emD $30, eRL $30, NQ $30, and ES $30.