I’m going to focus today on system trading, where you let the computer do the hard work for you. The unique advantage is that you can see past hypothetical results and potentially know what your level of expectations should be for the future. Today, I’m going to highlight Tony Ritenour with New Futures Trends and why his systems have done particularly well recently. His auto trading systems don’t seem to overtrade, are very selective in trade execution, and seem to get an early jump on the markets when compared to other systems. Please read below for my interview with Tony on July 10th, 2011.
Drew: How would you define system trading?
Tony: System trading is basically a set of entry and exit rules programmed to execute trades in a trade manager automatically. The advantage of systems is you can test those rules over the past data and create hypothetical results to see how you would fare. I think if a lot of traders could actually write there rules down and back test them they would see results that might motivate them to learn new ideas. I can’t imagine anyone would take an idea and execute it with real money without knowing the approximate parameters of winners and losers they might experience. I guess if anything systems give you confidence.
Drew: Why do your systems seem to fair better currently versus other trend following systems?
Tony: When I began programming, I viewed net profit as the key to success. When I put this into practice, I soon learned it’s not profit that should be considered first but draw down. My systems by nature take fewer trades than many other systems, so it helps to avoid choppy trading environments. Furthermore, by changing over to a portfolio of systems, the trading curve became less reliant on one type of logic. As an example, Ezekiel [program] uses three different types of systems that help to smooth the results.
Drew: What kind of volatility filters are you using?
Tony: I don’t use volatility filters per say. What I have identified in watching the markets for years is [the importance of the] intra day. There are maybe six patterns that each day could be identified by. What I do is try and develop systems that try and capture what I feel are the 7-8 trading days of profit. By using multiple trading systems in a portfolio, I can use the system to look at just one environment and let the others focus on the other environments [v]ery rarely do the systems in Ezekiel’s trade on the same day.
Drew: What was your drive to become a system developer?
Tony: As a student of the market I was not initially focused on futures or trading systems. I began as an investor and moved to a discretionary trader. I began to focus on futures for the leverage without having to rely on options and deal with time decay and volatility. It’s hard enough to trade market direction without all the variables in option trading. With three young children at home it became harder to stare at the market all day, so I began to computerize my systems. It then was a natural transition to look for a reputable brokerage firm to house those strategies and execute and monitor the positions, so I could free up my time. That’s what led me to Daniels. Now I offer the same systems I trade for lease through Daniels.
Drew: Explain your systems.
Tony: My systems are actually very simple in nature. I feel any computerized system should follow the real rules you would trade by with a discretionary trader, but the computer will enhance the system by making you stick to those rules. Basically, I like to use price movement and not rely on indicators. Indicators are good for filters showing the past but really have no forward-looking characteristics. All the systems currently offered in Ezekiel are traded during the day, and don’t hold positions overnight. I have no restrictions on profit. I do have variable stops on each system so the risk is potentially minimized and the systems range from as little as $300.00 per contract risk to $600.00 per contract risk per trade.
End of interview.
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