Simple can often be better

I would like to present here a very e-mini trading simple system that I call PAB (whatever that means). This is a system for ES, an e-mini futures market of S&P 500.

The system is based on three pillars that every sound trend-following trading system should rest on:

1. it is selective (trades at most twice a day, but not necessarily every day),
2. it cuts losses short (sometimes even very short),
3. it lets profits run.

I like to think of this system as a toy or model system that embodies the sound principles of system design while being pretty simple at the same time. On this page you will see how it compares to the systems of the heavyweights of the vendor industry, access to which would cost you thousands of dollars in annual subscriptions.

I would also like to note that the other systems trade twice to thrice as often as my toy system making brokers quite happy. Now, you might think how much I would want to charge for this system, right? Well, I do not intend it for sale, simply because I do not use it myself and if I ever make it public it might be as a free bonus to some of the systems I use or perhaps in some other form. My point here is somewhat different, namely that high-priced systems are not always much better, if at all, than toys that other people play with.

As mentioned, the system is designed for trading ES and the comparison page provides the performance in points (1 pt=$50) without commission and slippage. I will continue updating the comparison page and so you may want to check it from time to time. Just for the fun of it ...

A little update is in order here. I post it on April 19th, 2006. As I said, I was hoping to keep the performance page updated, but, alas, the provider of System1 decided that his brainchild was not good enough and stopped providing it. Here is what he says on his site now: "Most people fail because they over trade the market. How can there be that many low risk, high probability trades floating around ? ? ? There isn't." He is now providing a swing system for his clients.

It took him only three years to arrive at this conclusion. If you check out this page, you will see that it was possible to figure this out way much sooner. Draw your own conclusion about the competence of the so-called "trading professionals" out there. No, it's not how I call them. It's how they call themselves. I call myself "a trader."

To be quite honest, my system did poorly in the first quarter of 2006, but since it is one of those indicator based systems and, God forbid, it even employs oscillators, I would not use it myself, even though the setup it is based on can be exploited quite profitably in a discretionary manner.