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The best trading we have going on with in my brokerage operation that is
public information has been a CTA, Defender Capital Management, Inc.
Defender has about a 2 1/2 track record and is showing up on our internal CTA
results tracking of 600+ programs to #1 for performance in 2001 year to date
and is ranked #1 for compound performance over the last 24 months. Not all
CTA programs are in this data base and some of the 600+ may not have reported
yet for July. Slow reporting though is normally a sign of a drawdown.
Report your losses slow and gains fast to maximize the positive record of
your program. At least that is how it seems the game is played.
Defender trades only one market, the Tbonds at the CBOT. It offers a $20,000
minimum account size, which makes its results that even more outstanding. It
is hard to find a quality program with a minimum under $50K or $100K.
The CTA is Jon Matte. He designed the system himself. And this is the
interesting part. Jon was a software programmer and human process analyst
before he became a trader and CTA. He was introduced to the markets in the
same way many people are, by some guru come on. After trading some and
concluding the systems he examined had little validity, he applied his own
background as a human process analyst to the markets. He broke the market
down into big blocks of what it did. He defined those blocks. Then he
established some rules for how those ideas would prove they are what they
appear to be; trend, chop, etc. Then he took some data and applied it to the
rules. He went through the data by hand to get the results and a feel for
the data. A little tweaking, some more testing and then onto the disclosure
document.
He did have a misfire in his original CTA program, which was started amid the
volatility of August 1998 during the Russian debt crisis. He quickly shut
down the program after seeing oversized gains and oversized losses relative
to his historical testing.
He went back to the drawing board and built some more volatility rules into
the system, or refined some of the existing ones. He also stumbled out of
the gate when he launched his new program in the spring of 1999. He
experienced about a 25% drawdown the first two months. Since then the
drawdowns have been infrequent and much less volatile. I believe he said he
made one or two adjustments after the first two months, but nothing since
then. One hundred percent of his accounts in the current program have been
profitable after 12 months, according to the data I have.
His rules based trading system takes about 15 minutes a day to compile the
signals and get the orders ready for the next day. The system has some
position sizing rules as well to adjust to different volatility levels. He
currently has on a 1/2 position size.
One of the hats I were as a broker is being registered with Price Asset
Management, Inc., a recommending CTA. We find quality top performing CTAs,
or new and emerging CTAs we think can be top performers, and sign them to
marketing agreements. We then market them to the retail public and to other
brokers. We have been successful so far in helping Defender go from about
$400K this spring to about $2.5 million at the current time. That total does
include appreciation of the equity as well.
Brokers at Lind Waldock, Refco, Man Financial, PFG, PMB, Fox Investments and
The Price Group have accounts with Defender.
Defender charges 20% incentive fees and 1.5 % management fees for accounts
under $50K. The maximum commission charge allowed is $35 per round turn +
fees. New accounts will also have a give up fee they need to pay to allow
for consolidated execution. The bond program only trades about 35 times a
year, though of late has been on a much slower pace do to longer held
profitable positions. For example, one position was entered into in March,
there were no trades in April and it was exited in May. The interesting
thing is that May's record will show a drawdown, but no actual losing trades
were experienced. The drawdown was only the result of a very favorable
marked to the market position at the end of April and a worse exit of the
trade in May. Sometimes you need to look beyond the numbers for the real
story.
Price Asset Management gets paid a percentage of the incentive fees and
management fees of accounts we help in raising at our firm and through other
brokers. Thus, this is not a pitch to open an account with The Price Group.
You can do your broker a favor and have the account traded through them.
Savvy brokers know the value of having managed futures accounts in their book
of business, so bringing a program like Defender to their attention,
especially if you are going to open an account for Defender to trade, would
be a nice gift to your broker.
Another issue is notional funding. Defender will allow for notional funding
of accounts, and some of the $2.5 million under management represent notional
amounts. So if you have a $50K account you are trading your own system in,
you can open a sub account to have Defender trade and only put in 1/2 or so
of the amount you want them to trade. Some firms may allow you to cross
margin accounts as well, giving you added leverage for your funds. You also
add diversification of traders to the mix while doing this, which may have
some value for you.
Defender's web site is www.defendercapital.com. Jon Matte is actually out in
Anaheim this weekend at the Online Trading Expo, if any of you live out that
way and are planning on attending. He will be in the Crown Futures booth.
One of the things that has amazed me most about Defender's performance during
the last two years is the how well he has done, versus some of the big names
that have closed up shop. Jon is an original thinker. Some of you might
know him as Troutman, Defender of Sticks, an Internet persona he adopted when
he started in the industry as a broker/CTA. He differentiated himself with
original thinking, detailed research and analysis of various trading systems
and styles (see his web site) and a grounded personality full of wit and
humor. Now he is differentiating himself with his performance.
Regards,
John J. Lothian
Disclosure: Futures trading involves significant financial risk. Only risk
capital should be used for trading. Past performance may not be indicative
of future results. John J. Lothian is the President of the Electronic
Trading Division of The Price Futures Group, Inc., and Introducing Broker,
and is registered with Price Asset Management, Inc., a recommending CTA.
In a message dated 8/17/01 9:36:20 PM Central Daylight Time,
smokegreenbuds@xxxxxxxxx writes:
<< In general, how has the last four months trading been
for you.
Interested in hearing comments from both camps,
mechanical system and discretionary traders.
How has the drop off in daily ranges and volatility
effected your performance.
In advance, thanks.
-RNM >>
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