Commodity Trader

I'm Keith Fitschen. My Commodity Trader is a unique commodity futures trading strategy for domestic commodities and stock indices. It is a trend-following strategy that uses the exact same logic and parameter values across all commodities. This approach minimizes curve-fitting and provides an extremely robust trading solution. The strategy wins about 55 percent of it’s trades, nets an average profit of about $160 per trade, and averages over $62,000 per year since 1980. Commodity Trader is only available through subscription.

Commodity Futures Trading: Commodity Trader Details

The trend-following logic enters a trade in the direction of a strong trend during a short-term pull-back. Signals are given before the open of the day session (usually posted by 6:30AM EST). We enter “at the market” on the open. If you prefer to trade electronic contracts rather than pit contracts, we recommend entering after 8AM EST when the electronic contract liquidity has increased and the bid/ask spread has tightened. To trade the strategy, we recommend an initial stop loss of $2,000 be used. The logic includes a volatility filter to measure the recent volatility of each commodity. If a minimum threshold is not reached, or volatility is well above the norm, we stand aside.

Commodity Futures Trading: Commodity Trader Performance by Commodity

The following tables show the strategies’ trade results from 1980 through June 2008. These figures were generated using continuous, back-adjusted contracts. No deduction was taken for commission.

These hypothetical results span about 28.5 years, but the majority of the commodities have not traded that long.

• The strategy is profitable on each group and each individual commodity, though when transaction costs are factored in, a few should not be traded (cattle, cocoa, S&P, and Midcap).

• The average trade lasts about 5 days, nets about $160, and is profitable about 55 percent of the time.

These results were generated using back-adjusted continuous contracts. No slippage or commission deduction was made. The following CFTC notice on hypothetical results should be noted.

Commodity Futures Trading: Trading the Strategy

The strategy works across the commodity groups. A way to use this characteristic is to trade a diversified portfolio of commodities with multi-group representation that suits your account size. Instead of just trading the “best” commodities, trade the “best” commodities in each group. This strategy minimizes exposure in correlated commodities which tend to make winning trades at the same time, and losing trades. Diversification smooths the equity curve which results in lower drawdowns. Since risk management should be the primary aim of every trader, diversification is an investment tool that should be used where possible.

The following portfolios were constructed with risk in mind. The least volatile commodities in each group were selected for the smallest portfolio, and added to in each larger portfolio. The prospective trader should examine the yearly max drawdowns to determine if the risk is suitable for his trading temperament.

Commodity Futures Trading : Starter Portfolio

The Starter Portfolio is suited for accounts in the $20,000 to $40,000 range. The portfolio is diversified across the commodity groups to gain exposure in uncorrelated markets. The commodities in each group have been carefully chosen for their profit-to-risk characteristics. The portfolio is: Corn, Pork Bellies, Cotton, Copper, Crude Oil, the Yen, and Ten-Year Notes. The following graph shows equity buildup when one contract is traded at each signal.

The table shows that each year but 2003 was profitable. Max annual drawdowns ranged from $4,497 to $16,393, with an average annual max drawdown of $8,931 for the period 1980 through June 2008..

Commodity Futures Trading : Mid-Size Portfolio

The Mid-Size Portfolio is suited for accounts in the $40,000 to $70,000 range. The portfolio is: Corn, Wheat, Pork Bellies, Lean Hogs, Cotton, Coffee, Copper, Palladium, Crude Oil, Natural Gas (mini), the Yen, Swiss Franc, Ten-Year Notes, the Eurodollar, and the Nasdaq 100 mini contract. The following graph shows equity buildup when one contract is traded at each signal.

Commodity Trader:Mid-Size Portfolio

As the graph shows, equity buildup is fairly smooth and consistent. The following table shows portfolio performance for each year since 1993.

The table shows that each year but 2003 was profitable. Max annual drawdowns ranged from $8,673 to $7,880, with an average annual max drawdown of $12735 from 1980 through June 2008.

Commodity Futures Trading : Full-Size Portfolio

The Full-Size portfolio is suited for accounts in the $70,000 to $100,000 range. The portfolio is: Corn, Wheat, Soybeans, Pork Bellies, Lean Hogs, Feeder Cattle, Cotton, Coffee, Sugar, Copper, Palladium, Silver, Crude Oil, Natural Gas (mini), Reformulated Gas, the Yen, Swiss Franc, Australian Dollar, Ten-Year Notes, the Eurodollar, Five-Year Notes, the Nasdaq 100 mini, and the Dow Jones mini. The following graph shows equity buildup when one contract is traded at each signal.

Commodity Trader: Full-Size Portfolio

As the graph shows, equity buildup is fairly smooth and consistent. The following table shows portfolio performance for each year since 1993.

The table shows that each year but 2001 was profitable. Max annual drawdowns ranged from $9,493 to $28,658, with an average annual max drawdown of $15,794 from 1980 to June 2008.

Commodity Futures Trading : All Commodities

All 46 domestic commodities can be traded with account sizes greater than $100,000. The following graph shows equity buildup when one contract is traded at each signal.

Commodity Trader: All Commodities

As the graph shows, equity buildup is fairly smooth and consistent. The following table shows portfolio performance for each year since 1993.

The table shows that each year but 2004 was profitable. From 1980 through June 2008, max annual drawdowns ranged from $10,755 to $65,821 with an average annual max drawdown of $28,890.

Subscription Signals

The Commodity Trader signals are only available through subscription. If you subscribe, you will select a user name and password. Each day you login to a website to see the signals. The following table shows the actual signals for July 10, 2008, based on closing data from July 9, 2008. Each of the 45 commodities is listed, along with it’s current contract month, position, and any new orders. It’s very simple to trade: all entries and exits are done “market-on-open”, so the orders can be placed before the open of trading. Once you’ve placed the orders, you’re done for the day.

Subscription Cost

If you trade the strategy yourself, the price for a subscription is $149 per month. Payment is made via credit card and auto-billed each month until you decide to stop.

Broker-Assist

You can also opt to have one of our “preferred brokers” trade the strategy for you. They take all the work out of the trading: managing entry, exit, and rollovers. If you trade the strategy through one of the brokers below, the price for a subscription is $99 per month, on a one-contract per signal basis. Payment is deducted from your trading account each month.

Preferred Brokers:

Trade Center, Inc.