MESA Phasor

Complete 5 year trading report for MESA Phasor trading the ES contract

View Report
E-mini S&P 500

Complete 5 year trading report for MESA Phasor trading the US contract

View Report
US Treasury Bonds

Complete 5 year trading report for MESA Phasor trading the TF contract

View Report
E-mini Russell 2000

Complete 5 year trading report for MESA Phasor trading the S contract

View Report
Soybeans

 

Purchase

 

What it is and how it works

MESA Phasor is the most advanced futures trading program on the market!

MESA Phasor derives its name from the sinewave generator you probably recall from your high school trigonometry class. As you can see in the diagram, the rotating phasor generates a sine wave in the time domain, visualized as a shadow from the arrow tip of the phasor on the vertical axis. A cycle is completed on each full rotation of the phasor. The angle of the phasor increases at a constant rate, and is reset to zero when 360 degrees of rotation have been achieved. The idea of the trading system is to buy low at the valley of the sine wave, when phasor passes the lower angle, and to sell short at the crest of the sine wave, when the phasor passes the upper angle. Now the trade entries and exits are defined in terms of angles, which are in the frequency domain. Therefore, trading decisions are removed from waveform vagaries in the time domain. This means that the trading decisions are robust across various futures contracts and across all kinds of market conditions.

MESA Phasor is Statistically Predictive

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 setting the phasor angle back from bottom-dead-center and top-dead-center. These are the bottom angle and top angle of the the MESA Phasor trading system. Again, setting the phasor angle is universal, regardless of what futures contract you are trading.

MESA Phasor is Easy to Trade

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 Phasor on a single contract of the ES S&P Futures contract over the five year period from 2010 to 2014. There is no allowance for slippage and commission and no compounded growth. MESA Phasor is easy to trade because it uses daily data. The trading signal is given at the close of the trading day for exercise at the market at the open of the next trading session. It just doesn't get any easier than that. Using market order at the open mitigate the necessity for having an allowance for slippage. An added advantage of only trading at the open is that it gives you piece of mind because you need not follow the market during the day. The default stop-loss is set at 6%. You can set the stops tighter, but then they will interfere with the performance of the trading system. The final parameter under your control is the length of data used for analysis. This is typically a half-period of the dominant cycle, and ranges between 6 and 14 bars.

 

Performance Statistics are a Better Descriptor

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 Phasor hypothetical trades on the ES Futures contract over the last four 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 50,000 years, 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 Phasor on ES the gain-to-pain ratio is 3.7.

   

 

Trading a Small Portfolio Can Improve Results

As a simple fact of statistics, deviation of the probability distribution can be reduced by the square root of 2 for each doubling of the members of the ensemble. In other words, we can attain better performance by trading a portfolio of contracts. Equities and Bonds are often short-term anti-correlated, and therefore simultaneously trading the combination of the ES and US contracts is a good candidate for a small portfolio. The equity curve for MESA Phasor trading the combined ES and US contracts over the 2010-2014 (inclusive) period is shown below. The Monte Carlo simulations for profit and drawdown are shown below the equity growth chart. In this case, the "gain-to-pain" ratio is 4.5.

   

 

MESA Phasor is Robust Across Most Futures Contracts

To demonstrate the robustness and diversity of MESA Phasor, I show the hypothetical performance on the Soybeans Futures contract over the five year period from 2010 to 2014 below. The "gain-to-pain" ratio is 6.6.

   

 

 

View Complete Report for ES, E-mini S&P Futures Contract

View Complete Report for US, Treasury Bonds Futures Contract

View Complete Report for TF, Mini Russell 2000 Futures Contract

View Complete Report for S, Soybeans Futures Contract

View Complete Report for NQ, E-mini NASDAQ 100 Futures Contract

View Complete Report for YM, E-mini Dow Futures Contract

View Complete Report for GC, Gold Futures Contract

View Complete Report for CL, Crude Oil Futures Contract

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.

 

Purchase