TRADETHINK ARTICLES : Evaluating Trading Strategies for Today's Commodities Markets

September 9, 2009

Evaluating Trading Strategies for Today's Commodities Markets

By Chris Morse

When evaluating a trading strategy for today's commodities markets it is important to see the results of both winning and losing trades to truly understand the ups and downs of a particular trading strategy. You should be able to evaluate the current positions a system has on and know what trades (winners and losers) the system has recently and historically signaled.

It is of great importance to see how a particular trading strategy performs and performed across a wide range of diversified markets in a portfolio. A robust trading strategy should be able to trade across all market sectors; metals, currencies, grains, fuels, softs (foods and fibers) and interest rates.

To illustrate a diversified portfolio I have selected ten markets that our Trade Think clients have available to follow and get daily trading signals for. To get a complimentary evaluation to Trade Think signals go here.

The portfolio below shows every recent trade for every market (winners and losers) in the ten market portfolio of diversified markets. There are five open trades (you can see the entry date and price along with the current P/L). For the other five markets (ten markets in total) you can see where the system signaled to enter and exit. All trades are shown for recent open positions and closed trades on every market in the portfolio.

Current Open Trades

Copper

Currently Think MT is shown to be long (bought) the Copper futures contract. Think MT signaled to go long (buy) HG on 7/15/2009 at 238.40. Please see the chart below:

As you can see Think MT went long (bought) HG and is currently long with an open profit of $12,062.50 per contract as of the 9/4/2009 market close of 286.65.


US Dollar Index

Currently Think MT is shown to be short (sold) the US Dollar Index futures contract. Think MT signaled to go short (sell) DX on 7/15/2009 at 79.57. Please see the chart below:

As you can see Think MT went short (sold) DX and is currently short with an open profit of $1,400 per contract as of the 9/4/2009 market close of 78.17.

Euro FX

Currently Think MT is shown to be long (bought) the Euro FX futures contract. Think MT signaled to go long (buy) 6E on 5/20/2009 at 137.06. Please see the chart below:

As you can see Think MT went long (bought) EC and is currently long with an open profit of $7,537.50 per contract as of the 9/4/2009 market close of 143.09. If you would like to see complimentary signals for markets like the Euro FX go here.

Palladium

Currently Think MT is shown to be long (bought) the Palladium futures contract. Think MT signaled to go long (buy) PA on 8/21/2009 at 284.35. Please see the chart below:

As you can see Think MT went long (bought) PA and is currently long with an open profit of $1,165 per contract as of the 9/4/2009 market close of 296.

Wheat - Spring

Currently Think MT is shown to be short (sold) the Spring Wheat futures contract. Think MT signaled to go short (sell) MWE on 8/6/2009 at 602. Please see the chart below:

As you can see Think MT went short (sold) MWE and is currently short with an open profit of $5,175 per contract as of the 9/4/2009 market close of 498.50.

Recent Closed Trades

British Pound

Recently Think MT was long (bought) the British Pound futures contract. Think MT signaled to go long (buy) 6B on 7/31/2009 at 165.85. Please see the chart below:

As you can see Think MT went long (bought) BP and exited the long with a loss of ($1,300) per contract on 8/17/2009 at 163.77.



London Gas Oil

Recently Think MT was long (bought) the London Gas Oil futures contract. Think MT signaled to go long (buy) IGO on 8/5/2009 at 619. Please see the chart below:

As you can see Think MT went long (bought) IGO and exited the long with a loss of ($1,300) per contract on 8/11/2009 at 606.

Soybeans

Recently Think MT was long (bought) the Soybeans futures contract. Think MT signaled to go long (buy) ZS on 8/13/2009 at 1051. Please see the chart below:

As you can see Think MT went long (bought) ZS and exited the long with a loss of ($1,300) per contract on 8/13/2009 at 1025.

Sugar

Recently Think MT was long (bought) the Sugar futures contract. Think MT signaled to go long (buy) SB on 6/24/2009 at 17.00. Please see the chart below:

As you can see Think MT went long (bought) SB and exited the long with a gain of $5,062.40 per contract on 9/4/2009 at 21.52. If you would like to see complimentary signals for markets like Sugar go here.

Ten-Year Notes

Recently Think MT was short (sold) the Ten Year Notes futures contract. Think MT signaled to go short (sell) ZN on 8/5/2009 at 114.17 (1/100). Please see the chart below:

As you can see Think MT went short (sold) ZN and exited the short with a loss of ($1,300) per contract on 8/13/2009 at 115.47 (1/100).

If you took the time to really look at the ten markets we followed in the above portfolio you will see a few things.

1.There are five open trades for a total profit of $27,340.
2.There are five closed trades; four losers at $1,300 each for a total of ($5,200).
3.The final closed trade (Sugar) made a profit of $5,062.40.
4.Counting every recent trade in every market; we had a net profit of $27,202.40.
If you were to follow this ten market portfolio with $25,000 you could be up $27,202.40, you account would be valued at $52,202.40 for a 108% return.

The above trades include every recent trade for every market. To get a complete review of how this trading strategy works you may want to consider looking at every past trade signal for every market.

About the Author

Chris Morse is the Developer of the TradeThink trading system. He has been involved in the development of trading strategies for nearly ten years. Mr. Morse developed a very robust system which is now in private use at one of the largest FCM's and has earned sizable returns for the last 3 years. Mr. Morse now focuses his time exclusively on developing and managing his systems.

Disclosure: Commodity trading has large potential rewards, but also large potential risks. You must be aware of the risks and be willing to accept them in order to invest in the futures markets. Don't trade with money you can't afford to lose. This is neither a solicitation nor an offer to buy/sell commodity interests.

Notice: Returns are hypothetical. Hypothetical or simulated performance returns have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since 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 lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight, no representation is being made that any account will or is likely to achieve profits or losses similar to those shown.

PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. INVESTMENTS IN FUTURES INVOLVES HIGH RISKS AND YOU CAN LOSE A LOT OF MONEY.

FUTURES TRADING HAS LARGE RISKS. YOU MUST BE AWARE OF THE RISKS AND BE WILLING TO ACCEPT THEM IN ORDER TO INVEST IN THE FUTURES MARKETS. DON'T TRADE WITH MONEY YOU CAN'T AFFORD TO LOSE. YOU SHOULD CAREFULLY CONSIDER WHETHER YOUR FINANCIAL CONDITION PERMITS YOU TO PARTICIPATE IN THE FUTURES INDUSTRY. IN SO DOING, YOU SHOULD BE AWARE THAT TRADING FUTURES AND OPTIONS ON FUTURES CAN QUICKLY LEAD TO LARGE LOSSES AS WELL AS GAINS. SUCH TRADING LOSSES CAN SHARPLY REDUCE THE VALUE OF YOUR ACCOUNT. THIS IS NEITHER A SOLICITATION NOR AN OFFER TO BUY OR SELL FUTURES INTERESTS.

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