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Subject:  Why Futures? Date:  9/25/2007  3:59 PM
Author:  CHsurfer Number:  139 of 162

Hi, I'm new to this board so I'll give a little back ground before my question.

I have been working on an automated trading program for the last five months or so (coding in Java, concepts from Covel, Faith and Elder and others). My idea was to apply trend following rules to the Hidden Gems picks. I figured that these stocks due to their volatility and good fundamentals would be more likely to trend than just any old stock. The systems I'm working on currently look for the main trend, wait for a pull back and then enter in the direction of the main trend if it resumes. Surprisingly, in my simulations, I tend to make just as much money on the shorts as I do on the long. Not always, it depends on the particular parameters that I've chosen, but more than I expected (Hidden Gems should always go up, right??). This is actually the reason that I wanted to get into trend following. I've made great returns in HG over the last year and a half, but I want a system that can make money when the market goes down as well as up. I think the dollar is headed down and I'm more than a little worried about what will happen when all the baby boomers start cashing out their stocks to enjoy their golden years (hopefully their $$s will still have some buying power...)

My question is why are futures or ETFs most often associated with trend following systems? Whats wrong with stocks? Are futures more 'trendy'?

Any enlightenment would be greatly appreciated.


PS. My sims show that if you consider all the HG rec's from before 2005, take only a limited number of positions based on trend efficiency (weeds out the less trendy stocks) you can turn $100'000 in Jan 2005 into about $250'000 in the middle of 2007. Max draw downs are typically about 10-15% and there are minimal margin requirements. The system is set up so that you just have to enter orders and update stops after the market close (< 30 minutes per day). This is pretty much what I have been looking for so I will start trading it in the mid term future if the last of the testing works out (longer term, different group of stocks...)
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