Complete 1 year trading report for MESA Intraday trading the TF contractView Report
MESA Intraday is entirely different than most trading programs. It determines trading conditions by working in the frequency domain. This means that gap openings and erratic short term price fluctuations do not cause the analysis distortions that commonly occur with squiggly-line indicators in the time domain. The precise frequency components required for effective trading are filtered from the price data and artificial waveforms are synthesized. The necessary, but not sufficient, condition for creating trading signals result from the crossing of the Wave and Trigger waveforms. The power in the cyclic wave and the range, or volatility, of the price data are also considered. All the trading rules are in open code for you to examine, or perhaps change to your preferences, and the complex computations in the frequency domain are conducted in a Dynamic Linked Library. In a nutshell, trading decisions are removed from waveform vagaries in the time domain. This means that the intraday trading decisions are robust across most futures contracts and across all kinds of market conditions.
In several of my technical articles I demonstrate how the turning point in prices must be anticipated for effective trading rather than waiting for confirmation of the signal. Having characterized the data as a cycle, there is a reasonable expection that the cycle will continue for a short time into the future. The turning point is anticipated simply by the crossing of the Wave and Trigger waveforms. Working in the frequency domain is universal, regardless of what futures contract you are trading.
The typical way of demonstrating performance of a trading system is with an equity growth curve. Following tradition, the chart below is an equity growth using hypothetical trades of MESA Intraday on a single contract of the @ES.D S&P Futures contract basically over calendar 2014. There is no allowance for slippage and commission and no compounded growth. MESA Intraday is easy to trade, using 15 minute data. The trading signal is given at the close of a 15 minute bar for exercise at the market at the open of the bar. It just doesn't get any easier than that. The MESA Intraday indicator provides trade alerts. Using market order at the open mitigates the necessity for having an allowance for slippage in historical results. MESA Intraday can trade up to two times per day, but averages about one trade a day. The only parameter under your control in addition to the Stop Loss is the length of data used for analysis. This is typically a half-period of the dominant cycle, and can range between 8 and 40 bars, depending on the specific contract being traded. For example, Treasury Bonds does not have a day session contract (but MESA Intraday only trades during the trading day).
Ric Way and I have shown in our paper "Why Traders Lose Money (and What to Do About It)" that equity curves can be randomly generated knowing just the percentage wins and Profit Factor of the trading system. The problem with equity curves is than you can sometimes get a lousy curve from a good system and, worse yet, get an excellent equity curve from a lousy system. I prefer to describe the performance of a trading system with Monte Carlo simulations to get a better statistical picture of performance expectations. The Monte Carlo results displayed use the MESA Intraday hypothetical trades on the day session ES Futures contract over the last five years. The Monte Carlo procedure randomly draws those trades from the proverbial hat until a year's worth of trading has been completed. The annual profit is recorded. Then the drawing process is repeated 50,000 times to simulate trading over 170 years (averaging about 280 trades per year), using the more current data. The result is the bell-shaped probability curve below. This presentation makes it easy to visualize profit expectations and the variance from the mean. The Monte Carlo simulation for drawdown is done in the same fashion, with the result being a Rayleigh probability distribution. This is because drawdown cannot have a negative value. Thus, the drawdown probability shape is analogous to that of an arrow hitting a target. It is impossible to exactly hit a bullseye, the probability increases with radius, and then declines as the probability of a wide miss decreases. These Monte Carlo simulations make it easy to compute the "gain-to-pain" ratio as the ratio of the most likely profit to the most likely drawdown. (gain-to-pain defined as the ratio of the average profit to the average drawdown). In the case of MESA Intraday on ES the gain-to-pain ratio is 4.0.
HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR TRADING PROGRAM.
ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE RESULTS IS THAT THEY ARE GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. IN ADDITION, HYPOTHETICAL TRADING DOES NOT INVOLVE FINANCIAL RISK, AND NO HYPOTHETICAL TRADING RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR TO ADHERE TO A PARTICULAR TRADING PROGRAM IN SPITE OF TRADING LOSSES ARE MATERIAL POINTS WHICH CAN ALSO ADVERSELY AFFECT ACTUAL TRADING RESULTS. THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF ANY SPECIFIC TRADING PROGRAM WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL PERFORMANCE RESULTS AND ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL TRADING RESULTS.