The Daily Index Trader

[princetrader]

where's SteveBanks & he's PR machine today, bit quite. Wake up people!!! with a ratio of 2:1 you have to have two winning days for every losing day, just to break even. I know we're all searching for a good system, but you have to be honest with yourself. I worked out I would now require 8 winning days in a row just to break even.

 

[anddy26]

Guys im no expert on trading really..but i know many who would shudder at your exposure!! your risking twice as much as you can gain? that is a recipy for dissaster in my eyes.
we risk at the very worst 1-1 mostly 1-2 that is 50 pip spread for 100 pip gain.
and we risk 5% which again is higher than a lot of seasoned trainers..most risk 3%

why dont you tweak the system till it suits..decrease your £-pip and open youe spread...
to stick to this blidnly at the moment means your looking for a get rich quick scheme..im afraid that wont happen. ...i wont knock any system as they all perform at some point but im in favour of managing them...many a time ive seen them 5 pips away just to retreat to a loss..

i have trader dantes journal on price again now if any one wants it..message me and i will mail it off to you...btw its not the holy grail either its just another tool in the box

 

[leonarda]

where's SteveBanks & he's PR machine today, bit quite. Wake up people!!! with a ratio of 2:1 you have to have two winning days for every losing day, just to break even. I know we're all searching for a good system, but you have to be honest with yourself. I worked out I would now require 8 winning days in a row just to break even.

yes true, although admittedly based on their odds, the odds of 8 wins in a row is only 1 in 9, so not that outrageous!

 

[sarnia cherie]

i have had 5 losing days out of 6, and 50% success rate since I started (2 weeks ago). Early days yet but may reduce my exposure again for now.

 

[stevespray]

A few quick thoughts from me on Daily Index Trader.

I bought the system after it was offered for sale at open release on September 14th of this year. I started paper trading the system on the 15th September. Results have generally been pretty dire to be honest and this week in particular seems to have completely defeated most of the statistical evidence provided in the advertising literature.

As you can imagine, like most people, I get dozens of emails every week offering ‘risk free trials’ of this trading system or that. Most of them go straight in the trash bin for obvious reasons. What I liked particularly about DIT (according to the advertising) was the fact that the system was ‘pairs trading’. I’ve always been drawn towards the idea of pairs trading because I am by nature quite risk averse. The truth is that I’d never found the time to sit down and investigate the matter further. So when I started getting emails offering a system which was based on ‘pairs trading’ I considered that it warranted investment. I generally don’t have any objection to paying good money to someone who has carried out and prepared good quality research.

Obviously before diving in to all this I had some idea about ‘pairs trading’ and the general concept behind it. However, after reading the DIT document, I was slightly alarmed to find out that weren’t ‘pairs trading’ in the strictest sense. The aspect of only closing one position is fairly far removed from most people’s understanding of ‘pairs trading’ – basically because it leaves you ‘naked’ on the other half and the whole idea is that you are never ‘naked’ (so to speak). This obviously opens up the avenue where you can take what people have termed as a ‘double loss’ (both trades hitting the stop) which is, as many have found out, a very painful business. This should not happen in proper pairs trading.

My general view is that the draw down will frighten people off fairly quickly. As some have already mentioned; they feel the need to reduce stakes – this actually doesn’t do anything because you are not changing the risk/reward ratio! Whilst you might be risking less you also stand to win less. All you are doing is inhibiting the speed at which the system can recover your losses. You can be sure that the moment that you reduce stakes will be the moment that a winning run starts! Then, just as you work out that you’d actually be in profit if you’d have stuck with the staking plan, you’ll go back to full stakes only for the next losing run to begin.

I personally don’t like the system very much. There are three main reasons. Firstly, it isn’t really ‘pairs trading’. Secondly, the risk on any given day is around twice what you are likely to win – you obviously need 66.7% of days to be winning days just to reach the theoretical break even point. Thirdly, the system trades everyday regardless. Let’s say that there is an average of 22 trading days per month. Even with a 1 point spread on CAC and DAX we will still be spending (giving away) 44 points per month in trading costs. You need quite a good edge just to make that back let alone make a reasonable profit. 44 points per month is over 500 points per year in costs alone. I know some large FTSE options traders who live off less than 250 points in a year!! This is what we’re up against.

Hope some of this helps,
Steve.

 

[pimplico]

I purchases the system a week or so ago and have been paper trading it.

I like the idea behind the system but not the risk/reward which as stated here and with this system needs a 66% success rate to break even.

It would be interesting to know whether if the SL where kept the same but the PT where increased by 50% - in this way 1 losing day would equal 1 winning day- what this would do to the results. They may be less but more evenly distrusted over time or it might kill the system...

I’d love it if anyone more knowledgeable than me had any thoughts on the above

Best,
Charlie

 

[pimplico]

Apologies for the typos! I hope my meaning came across.

 

[leonarda]

i have had 5 losing days out of 6, and 50% success rate since I started (2 weeks ago). Early days yet but may reduce my exposure again for now.

I must say I can't quite grasp the "edge" in this system in terms of win rate, which to me tells me it is 50:50 ! of course that doesn't have to be a non-profitable system if you money manage it correctly eg.run your winners cut your losses etc. but this system has a 2:1 risk:reward so it doesn't do that...

 

[SteveBanks]

I must say I can't quite grasp the "edge" in this system in terms of win rate, which to me tells me it is 50:50 ! of course that doesn't have to be a non-profitable system if you money manage it correctly eg.run your winners cut your losses etc. but this system has a 2:1 risk:reward so it doesn't do that...

Hi leonarda,

many thanks for your posts.

I don't know if you've bought Daily Index Trader but the key element that I think you are overlooking is the Enhanced Profit element in the Evaluator. This does indeed take in to account winning and losing runs as well as days that produce more winning or losing days than others and adjusts stakes accordingly.

That is why the statistics of 2:1 risk ratios and strike rates etc. on their own don't give the full picture.

 

[leonarda]

I purchases the system a week or so ago and have been paper trading it.

I like the idea behind the system but not the risk/reward which as stated here and with this system needs a 66% success rate to break even.

It would be interesting to know whether if the SL where kept the same but the PT where increased by 50% - in this way 1 losing day would equal 1 winning day- what this would do to the results. They may be less but more evenly distrusted over time or it might kill the system...

I’d love it if anyone more knowledgeable than me had any thoughts on the above

Best,
Charlie

I think putting the PT even further away just gives more room for wipsawing to take both long and short out...?

You say you like the system, I am guessing the thing you like is the simplicity of set and forget with little effort maybe? To be honest, you don't make good money for no effort in this business. I would suggest if you wanted something like that you develop your own "signal" indicator which signalled long or short on an index or share that is based on some decent TA with a good 1:2 risk:reward stop/limit. It may not signal every day etc.., but you would need to spend the effort to develop it yourself, backtest it, forward test, have confidence in it, money manage and be disciplined etc...

As an example take a look at tommorton's Big Ben FTSE thread on the UK Indexes forum, might be just up your street...

 

[leonarda]

Hi leonarda,

many thanks for your posts.

I don't know if you've bought Daily Index Trader but the key element that I think you are overlooking is the Enhanced Profit element in the Evaluator. This does indeed take in to account winning and losing runs as well as days that produce more winning or losing days than others and adjusts stakes accordingly.

That is why the statistics of 2:1 risk ratios and strike rates etc. on their own don't give the full picture.

i've read posts refering to the evaluator. However, and you are correct in saying that historically certain days of the week are better/worse than others, so in theory over the very long run that should skew the risk ratio in a better favour, but I would say only very slightly. Taking into account losing/winning runs also is not a good bet, you are better off going with a technical "trend" and not a "trend" of how your trades have done! but maybe it does that somehow...?

 

[stevespray]

I've traded the markets for quite a long while now (12 years) and I've yet to see any real proof that 'the day of the week' has any real statistic basis when considering if a trade is any more or less likely to win. The only concession that I would make on that point is with certain forex markets + Fridays. Even then it's hard to create a hard and fast rule.

 

[Ian HDIT]

So what are peoples take on the figures quoted since April on the test account ie £1250 now approx £4800? Are we saying we dont belive these figures? If we do believe these figures then surely thats a pretty decent return and would probably be acceptable to most on here. The other side of the coin if the figures quoted have been made up then we should all be looking for a refund. Black and white isnt it?

 

[leonarda]

So what are peoples take on the figures quoted since April on the test account ie £1250 now approx £4800? Are we saying we dont belive these figures? If we do believe these figures then surely thats a pretty decent return and would probably be acceptable to most on here. The other side of the coin if the figures quoted have been made up then we should all be looking for a refund. Black and white isnt it?

one person's performance does not necessarily make a winning system for everyone, but that is very good I must admit, but I would say far too larger a risk. Typically systems that make that sort of return (400%) in a few months eventually get wiped out...

 

[SteveBanks]

So what are peoples take on the figures quoted since April on the test account ie £1250 now approx £4800? Are we saying we dont belive these figures? If we do believe these figures then surely thats a pretty decent return and would probably be acceptable to most on here. The other side of the coin if the figures quoted have been made up then we should all be looking for a refund. Black and white isnt it?

Hi Ian,

you've hit the nail on the head. I believe that the figures haven't been made up so there you have it.

You can could probably use all sorts of statistics to de-bunk any system that is developed but in the end it comes down to a matter of opinion and how it performs. Those of us who have bought the system based on trust and who are trading it to give it a fair trial are the only one's who will be able to categorically state whether it has made them money over the long term.

From what I understand Martin Carter is a trader of many years experience and no doubt he could hold his own in discussions with those pointing out why they think it won't work because of this or that statistic.

It certainly isn't a "get rich quick" strategy as someone on the forum has suggested. In fact if you look at the last years results it only really started making significant gains after at least 4 months.

I have read nothing to change my mind significantly and so will continue to trade the system and see how it performs over a longer timespan.

But it's always good to read constructive posts giving the opinion of those who have experience in trading.

Good luck tomorrow

 

[Ian HDIT]

one person's performance does not necessarily make a winning system for everyone, but that is very good I must admit, but I would say far too larger a risk. Typically systems that make that sort of return (400%) in a few months eventually get wiped out...

But the returns made by the creator Martin were made on the strict basis of setting and forgetting, so surely one persons performance equals all persons performance and therefore a winning system if the rules are followed. Sorry to look at this in such a basic manner, but i try and keep things that way. Dont get me wrong I am still not 100% convinced by it, but am certainly happy to keep it going for at least the 45 days to make a more informed decision. Im not sure why if a system that makes 400% then it will get wiped out? Does seem a rather sweeping statement, I hope there is a simplistic system out there that does make money, who knows this could be it..

 

[stevepatt]

I've been reading through the post here and it seems to me the best way to evaluate any new system is to demo trade, or at most trade to very small stakes, for the 45 day guarantee period and then decide wether to keep it or return it. The markets aren't going anywhere.

 

[Dommo]

Having just read through some of the posts I can see this system is not a mean reversion pair trade, but a simple automated momentum capturing trade based on the idea that at 9:15am markets have usually started up high/flat and fading during the morning, or start low/flat and rising. The Long DAX (Stop entry-X, Limit entry+2X) and Short CAC (Stop entry+Y, Limit entry-2Y) will win as long as DAX/CAC are highly correlated and the momentum of the market is steady in one direction through the morning/day. The hope being you get stopped on one for -X but win the other for +2X, net +1X. Of course if the market wipsaws you out of both you lose -2X, hence risk:reward of 2:1.
...

Just a couple of thoughts. (i) If Leonarda's summary is correct and you know how to calculate X and Y then this is testable. Or are X/Y calculated in a black box? If the latter you could probably speculate on how its calculated and try testing that.

(ii) if the underlyings are highly correlated and the aim/belief is to capture a continuation of momentum, why not just wait until -X or +Y is touched, then enter (in either index) in the direction of momentum. It would seem to create a similar position, paying half as much in spread.

 

[leonarda]

Just a couple of thoughts. (i) If Leonarda's summary is correct and you know how to calculate X and Y then this is testable. Or are X/Y calculated in a black box? If the latter you could probably speculate on how its calculated and try testing that.

(ii) if the underlyings are highly correlated and the aim/belief is to capture a continuation of momentum, why not just wait until -X or +Y is touched, then enter (in either index) in the direction of momentum. It would seem to create a similar position, paying half as much in spread.

I don't know the exact system as I've only gleaned what people here have said, so I don't know exactly how the System works out X,Y other than the obvious ratio.

Your point (ii) is an excellent point! and would acheive the same result far cheaper, and also actually shows what a nonsense the system really is! as there is actually no TA/fundamental analysis at that point as to why the momentum should continue. However, there is one good point for the system in that it installs "discipline" in the user by being set and forget in terms of entry and profit taking, which is partly why it should return some results.

Anyway, as Steve says I think these guys should keep digging away at this and see if it works. But from my traders point of view I would never use it as I don't see any logic in it with the unquantifiable edge, expensive spread, and bad risk:reward... I am commenting on it, a) because I find these things interesting and I like to help, and b) because I hate for people to lose money unnecessarily

 

[leonarda]

But the returns made by the creator Martin were made on the strict basis of setting and forgetting, so surely one persons performance equals all persons performance and therefore a winning system if the rules are followed. Sorry to look at this in such a basic manner, but i try and keep things that way. Dont get me wrong I am still not 100% convinced by it, but am certainly happy to keep it going for at least the 45 days to make a more informed decision. Im not sure why if a system that makes 400% then it will get wiped out? Does seem a rather sweeping statement, I hope there is a simplistic system out there that does make money, who knows this could be it..

A system that is making 400% in such a short timeframe is very likely using far too higher risk. I believe in the test it was using 7% risk per trade, and on the so called advanced risk option sometimes doubling that to 13% on certain days. With that sort of risk when you get the inevitable run of losers, say only 5 or 6 in a row, then you've halfved your account, get 10 or so in a row (and at the moment the system is well on the way to achieving that!) and you get your margin call... bang!
I suggest you read some of the other threads on these forums on such systems.