Wednesday, December 05, 2012


The chart above shows the trades the system has produced recently. I have left out the last few days just to protect the people who are using this from showing what is currently going on. I have had more questions asked about the Bond system than anything else, so today I am going to address all of them. The track record  for all the trades that have happened is at the end of the post by month since the August roll out.

Could you give me a longer track record so I can see how much money I need during the draw downs?

This is the question I have had asked more than any other and it is a great question that should be asked. There is a long answer to this. First, in general this system is the same as it was 10 years ago, IN GENERAL. The concept of it, the way it selects trades and manages them etc is exactly the same as it has always been. However, there are subtle little changes that I have made over the years as market conditions change that have enabled it to adapt well to the changing world we live in. For example as I explain in the web site, we used to have all sorts of gap openings in this market and there were rules specifically tailored to that situation. Now we have almost no gap openings and the ones we do have are different than the "old days." As a result the logic to trade them needs to be different now and it is.

There are other changes that have taken place that have resulted in some minor adjustments that are done each year. As a result there is no exact version that has been the same for the whole 10 years. In order to get a continuous track record I would have to take snap shots of the periods in between adjustments and that is a ponderous project that would take me a month. I don't have records of the dates I made minor changes. The track record of this system for the purposes of evaluating it as it is should be April 1 of 2012. It was the same on January 1 2012 but it was not offered or discussed at all in here until April.

A live track record means so much more than any other way of measuring a trading approach. I wish I could tell you how many systems I have created that were great in the lab that flopped live. I know prospective clients want a longer record and it is not a matter of me not wanting to give it. I felt it was important to explain this.

Last month we kind of got kicked back and forth a little and wound up with only $656 net for the month so in a sense that was a draw down since there were a couple of losing trades. I always figure draw downs on the basis of 3 consecutive losses even if they have not happened. A good system should not have more than 3 losses in a row.

How large of an account do I need to trade this?

This is an individual question that I can't completely answer but here is my attempt. If you use the 3 consecutive loss idea from the prior question and this system risks $1625 per trade you get to $4875. That is what would be the draw down if 3 straight losses of the full amount were to occur. As those you have been using it know, the losses are not always the full amount of the stop loss. Some trades are reversed before that amount is hit and we have had a few of those where the losses were very small. However, from a money management stand point a full loss should be assumed.

It is up to an individual to determine if they lost $4875 of the account balance what level of comfort they have with what would remain. I hate draw downs and trade very conservatively, so what is going to be comfortable for me may not be the same as what it is for someone else. Only you can determine what amount you need to have to begin with that if the above scenario were to happen, you would still be able to keep going.

In this wacky world we live in now I cannot give advice on this, it is up to you. The markets will be here tomorrow and so will we. If you are not sure take your time and wait until you have more. I guarantee losses will happen.

What market does it trade?

ZB the 30 Year Treasury electronic market

Does it work in the 10 Year or any other market?

No it does not

How should I determine when to add contracts?

This is also a question that is an individual decision. I like to risk no more than 2% of my account on any one trade. Due to the PFG theft of most of my money I  do not currently have the luxury of being that conservative any more. This is up to you and it depends on how much volatility you can stand. Many beginning traders have smaller stakes so this is going to fall upon you to determine your own level of comfort.

When do I place the orders?

The market opens at 5 pm CST that is the opening you will have to monitor. Orders are based on opening prices.

Do I have to be in front of a computer all day long?

No only at the opening. Once you have placed your orders you can go about your business and you are making a mistake if you death watch these trades intra day. They often swing against us or back and forth. If you are watching this you are going to add stress to your life.

What is this based on?

The $64,000 question. This is essentially a compilation of many of the techniques I have developed over the years all blended together. It would be impossible to explain even if I was willing to divulge it which I am not. For those who have been in this since I offered it and have made all the money you have made so far, I think you can understand why I am keeping this to myself.

Why are you limiting the number of subscribers isn't the Bond Market the biggest market in the world?

This is a situation I am monitoring on an ongoing basis. The single most important aspect of all of this is that the system continues to perform. If by having too many people using it the performance suffers that is not acceptable. I currently have a number in mind and that number may not be the correct one. This is a huge market and should be able to handle a lot of volume at all levels. We have had one fill already that was very suspicious so this is something I am monitoring. It is possible that one fill could have been a coincidence.

This may not look that great I am having some computer problems so I just screen captured out of the summary we just sent out. Total profit so far per contract has been $11,409 since I first offered this at the beginning of August.

If someone had told me the system would have made half this amount by now after going public I would have been ecstatic. It is one thing to trade in isolation and have your wins and losses and it is entirely another to do it out in the open like this. I have built up a good bit of credibility by doing this blog for several years and I ran the risk of pissing all that way by doing this. There is pressure on my end. I also do the trades so when they are no good I lose money too on top of taking the PR hit. Net net it is not easy to do this. I also know from my own trading that there are lots of ups and downs with trading and for those who are new to it there is a period of time it takes to get "used" to it.

In any event with all that aside, this is the best overview I can provide on this approach and what it entails. I wish I knew when it was going to have good and bad periods but I do not. Ideally one would catch a sub par period and start using it at that time for a reversion to the mean type of situation. With that type of logic now might be a good time to start since we just had the worst month of the 4 so far. However, it still made a net profit, so it is not really a draw down yet. 

I will be sending out the summary of the Swing Trades from last month. I have had my main computer go down and am working off a lap top that does not have all the correct software to create this PDF easily so it is taking me longer than it should be. I will get it done tomorrow.

Good Trading


Anonymous said...

That's a great system regardless of the length of time shown. At
$11,409 over 88 days (4 months x 22trading days per month)is in excess of $120 per day NET of C&F per single contract WITHOUT ever having a drawdown except intraday.
If readers need to make more money than that they can justtrade more contracts. THAT is fabulous and if people don't "get it" then maybe they shouldn't be trading at all.
Slow and steady is the way to be successful at making money in the markets.
Great job creating this system.
Don in Virginia

Chris Johnston said...

Thanks Don

Anonymous said...

I am currently subscribers of swing trading system. After many years of struggles (mainly losses), I realized money management is key. For small traders like me, the best is 1 contract trading.

Chris, I promise stay as a ONE contract trader as long as you provide this service. Probably, I will subscribe soon for the Bond Trading Service with separate account a 15K account.

After a one month paper trading of swing trading, I really loved it. Though I started trading real account from November 1st and now in losses, I believe that in the long run This service will make it up.

All my requests goes to every subscriber please don't create damage for your self and your fellow subscribers by trading too many contracts or sharing with others.
A subscriber like me , really looking for a additional income to accommodate my kids education and improve my economic situation.

One thing, I am sure is that if you don't follow basic principles ( money management ) in the long run you won't have money to trade.