George IV - Special results

"I am really having great time with this strategy. Three trades and I am up almost 25 pts! I have never done that well before."  - John Schwab

John Schwab is one of my first George IV customers. He was very kind to provide a testimonial for me which you can find on the main page of George IV. It looks like John has become a great enthusiast of this strategy. He uses it in a slightly different way than I originally suggested. It is a still a very reasonable way, though.

John sent me this email to tell me about his continuing success with George IV and how he uses this system. It turns out that John chose to target 10 pts with the same size of the stop-loss which he trails per my suggestions.

Now, that should work too.

The beauty of the system is that as long as you allow the market to go in the direction called by the system, you are very likely to end up with a good profit provided you grant the market some freedom to evolve.

In many cases, the stop-loss of that size is not necessary, but in some situations the market may pull back before it takes off in the direction called by the system.

However, I believe that it is more advisable to target at least 15 pts with the stop-loss of 10 pts, particularly at this time (late 2007) when the current volatility allows us to score even 20 pts on a good day. I believe that this should continue well into 2008 and perhaps even into 2009.

On the other hand, the system is very flexible.

I recently got this email from another happy customer of mine, Bill, who has been doing very well with George IV since he started trading it in mid February 2008. Unlike John's "square" choice of 10/10 pts, Bill's choice is decidedly more "rectangular," 6/9 pts, which is in line with one of my strategies, for those less patient customers. This strategy did very well in the first half of 2008 as during this period the market was not trending as well as in the second half of 2007. The other half of 2008 (it is 6/08/08 as of this writing) may change things though, but I expect this particular combination of target/stop-loss to do well overall.

"I am not patient enough to wait for 18, 15, or even 10 pts, and 6 pts is just about reasonable. Also, I work at home on other things, not related to trading at all, and don't want trading to interfere much with these other activities, so the 6/9 pt strategy is optimal for me.
I hope to average $500 a month with this system and so far I am well ahead of my goal. That's a good feeling for sure.
June started very well for my strategy and I hope the second half of the year is going to be at least as good as the first one." - Bill

It is certainly a good idea to start trading this system, or any other for that matter, when it is in a drawdown, just as Bill did. Three losses in a row is probably as many as you will ever see with this system, but this does not happen that often, so you may need to wait a while for that. You can spend this time learning the system and getting ready to use it.

Because of his judicious timing of the starting point, Bill is up over 55 pts in less than 4 months. And since 1 ES pt is worth $50 and he trades with 2 ES contracts... well, you do the math.

As Bill was kind to observe, drawdowns that shallow and rare is a hallmark of robust, safe systems.

Because of that, I believe this is a good system for beginners, but more advanced traders should benefit from it as well. In fact, they may even appreciate it more.

Let us now see how John has been doing with his strategy since he started using it, which, incidentally, coincides with the first trade after the system release. Let us also see how the 5 pt and 15 pt targets change things. Only the trades generated by the system proper are included in the results, no trades that might have  been inspired by the system have been added to the total tally.

John's original 10/10 strategy with target variations

  5  pt target39.75 pts after 40 trades/ 28 winners

 10 pt target: 32.25 pts after 40 trades/ 22 winners

 15 pt target: 52.25 pts after 40 trades/ 22 winners

The results in the original 18/9 pts selection, as seen in the main page of George IV for the period before the system release, are comparable to the results in the 15 pt target category of John's strategy when tracked since December 2007, the first full month after the system release. 

For comparison, let us see how Bill, who started on February 28, 2008, is doing with his strategy compared to the original 18/9.

Bill's 6/9 strategy with a target variation

   6  pt target70.0 pts  after 33 trades/ 23 winners

 18  pt target71.25 pts after 33 trades/ 17 winners

Notice that even if you were to target only 5 pts (you chicken little, you...), you would still make money. That's because Mr. Market loves you when you are not messing up with him but simply follow his trail on days of strong trends that the system identifies.

In fact, after 40 trades (as of 6/06/08), you would be doing better than with John's "square" approach, but this could well be only a temporary anomaly. 

Notice also that the 15 pt target has done much better so far than John's original 10 pts, which I anticipated in late 2007 (see above). I would expect this trend to continue, but John's original approach is likely to do well in the long run too.

Let me comment on one important thing here: after 40 trades, 28, or practically 3 out of 4, have been winners in the 5 pt target category.

3 out of 4! That's a very good performance that indeed shows that the system does pick the trend well enough to produce at least sizable scalps most of the time.

Yes, 5 pts is definitely a nice scalp in ES!

Let's now wrap this up: what we have here is a system that not only has very shallow and rare drawdowns, but also produces about 75% of winners when you go after smaller targets, although 5 pts is not so small for most ES traders.

And that's not all yet. I would also like to point out that as of May 2008, the worst losing month since the system release has been just 10 pts. In any target category. And that's for the system with a pretty generous stop-loss of 9 or even 10 pts!

I update the trading records for John's and Bill's strategies from time to time, every 20 trades or so. It makes little sense to do so more frequently as this is a type of system whose performance should be measured in quarters rather than in months and if you stick to this yardstick, you are very likely to see a nice progress in your bottom line, quarter after quarter.

I also continue to monitor the system performance and may suggest new targets or other improvements in future, of which the system owners will be notified. Some suggestions of this nature may also be posted in Notices and because of that, if you trade or intend to trade this system, you are advised to check out this section frequently.

"... I do like that you provide concrete objective results to show that the system works. That is not always the case even with much more expensive things. I think that's what attracted me to George IV in the first place and I do appreciate your integrity, but now I think that it's what George IV offers as a strategy that I like about it most."  - Katherine