Advanced Futures Trading Strategies By Robert Carver

Advanced Futures Trading Strategies By Robert Carver

Part One: Basic Directional
Strategies

You must read all of Part One before reading the rest of the book.
You must read the chapters in Part One in order: each depends on the
previous chapters.
Strategy one introduces the simplest possible strategy. Strategies two to
eight gradually improve upon previous strategies, introducing several
important components that any trading strategy should have.
Strategies nine, ten and eleven are fully featured trading strategies which
can be used as a basis for other strategies in Parts Two and Three:
Strategy nine implements a specific kind of trading signal, trend
following, which is traded across multiple time frames.
Strategy ten introduces an additional trading signal, carry.
Strategy eleven combines both trend following and carry.

Strategy one: Buy and hold, single
contract
What have I told you since the first day you stepped into my
office? There are three ways to make a living in this business.
Be first. Be smarter. Or cheat. Now, I don’t cheat.
— John Tuld, the fictional bank CEO played by Jeremy Irons in the film Margin Call
Like John Tuld, I don’t cheat. And I believe that consistently being first is
not a viable option for futures traders, except for those in the highly
specialised industry of high frequency trading. That just leaves being smart.
How can we be smart? First, we need to avoid doing anything stupid.
Examples of rank stupidity include: (a) trading too quickly – slowly
draining your account through excess commissions and spreads; (b) using
too much leverage – quickly blowing up your account; and (c) designing a
set of trading rules that assume the future will be almost exactly11
like the
past (also known as over fitting or curve fitting). During the rest of this
book I’ll be explaining how to avoid these pitfalls by using properly
designed trading strategies.
Avoiding stupid mistakes is a necessary but not sufficient condition for
profitable trading. We also need to create strategies that are expected to earn
positive returns. There are a couple of possible methods we could consider
to achieve this.
The first way, which is very difficult, is to find some secret unique pattern
in prices or other data, which other traders have been unable to discover,
and which will predict the future with unerring accuracy. If you’re looking
for secret hidden formulae you’re reading the wrong book. Of course, if I
did know of any secret formula I’d be crazy to publish it; better to keep it
under my hat and keep making millions in easy profits. Sadly, highly
profitable strategies tend not to stay secret for very long, because of the
substantial rewards for discovering them.

Advanced Futures Trading Strategies By Robert Carver