Keith's Trading | Short Clips Trading System

My name is Keith Fitschen and I devloped the Short Clips Trading System to trade a basket of commodities. Using a simple entry technique, it profitably trades across the basic eight commodity groups: the grains, meats, softs, metals, energy products, currencies, financials, and stock indices. The strategy issues commodity futures trading signals when a commodity is strongly trending, either up or down, and enters on a pullback from the trend. The Short Clips trading system uses an in-the-market $2,000 stop for risk control. Across a development basket of 68 commodities, the system trades each commodity about seven times per year and is in a trade an average of five days. This shorter-term trading approach yields an average profit of $161 per trade.

The key to this commodity futures trading strategy's consistency is diversification across the commodity groups. While some systems only trade the currencies, financials, or stock indices, Short Clips profitably trades all eight of the basic commodity groups. The exposure to all groups allows profits from the "moving" group to make up for losses in other groups. In the course of a year, a number of commodities in each group will strongly trend, which sets up the entry. TheShort Clips trading system pinpoints these, and the profits from those trades will more than offset the losses from the other groups. System performance, by commodity, from 1980 through September 2008 is shown below. These figures were generated using continuous, back-adjusted contracts. No deduction was taken for slippage/commission.

Short Clips Trading System on Meats
	Win	Loss	Profit
Pork Bellies	192	156	29,620
Live Cattle	140	165	-2,060
Lean Hogs	203	168	18,950
Feeder Cattle	172	163	14,700

Short Clips Trading System on Softs
	Win	Loss	Profit
Coffee	138	95	103,094
Cotton	220	164	58,589
Lumber	171	123	73,318
Cocoa	178	165	-2,330
Orange Juice	174	144	31,873
Sugar	141	125	22,200
London Cocoa	196	150	41,521
London Sugar	101	82	6,924
London Coffee	105	72	35,440

Short Clips Trading System on Metals
	Win	Loss	Profit
Gold	163	139	35,370
Silver	139	136	24,920
Platinum	163	131	38,095
Copper	170	146	31,950
Pallidium	123	103	55,735
London Copper	140	118	43,530
London Nickel	128	96	72,456
London Zinc	118	89	36,850
London Aluminum Alloy	91	79	20,690
London Aluminum	142	106	40,673
London Tin	97	69	28,110

Short Clips Trading System on Energies
	Win	Loss	Profit
Crude Oil	164	116	58,439
Heating Oil	157	133	24,338
Reformulated Gas	107	97	28,642
Natural Gas (mini)	89	71	30,524
Propane	100	63	57,156
London Crude	130	80	82,780
London Gas Oil	155	123	54,210

Short Clips Trading System on Currencies
	Win	Loss	Profit
Japanese Yen	185	111	126,713
Swiss Franc	183	137	87,975
British Pound	155	133	51,912
Euro-Currency	118	66	151,763
Dollar Index	149	125	64,270
Australian Dollar	155	118	25,130
Canadian Dollar	180	122	27,040
Mexican Peso	102	64	14,200

Short Clips Trading System on Financials
	Win	Loss	Profit
30-Year Bonds	193	150	58,390
10-Year Notes	198	141	63,375
5-Year Notes	152	101	36,390
2-Year Notes	133	79	35,200
Euro-Dollar	119	78	27,350
Long Gilt	149	133	40,700
Euro Bobl	126	88	21,547
Australian Bond	171	110	55,728
Canadian Bond	134	93	28,693
Spanish Bond	117	99	37,984
Euro Bund	147	93	37,371
Simex Japanese Bond	124	79	25,675

Short Clips Trading System on Stock Indices
	Win	Loss	Profit
S&P 500 (mini)	113	107	7,785
Nasdaq (mini)	89	81	10,309
Dow Jones	35	37	13,360
Russell 2000 (mini)	89	81	10,309
Midcap 400 (mini)	87	76	13,625
Nikkei	48	45	36,550
CAC 40	133	46	14,515
FTSE 100	111	92	31,638
Kospi 200	38	21	39,164
Hang Seng	69	61	28,724
DAX	48	44	9,413
Swiss Market Index	122	81	20,419

The Short Clips Trading System Total Across All Groups
Winning	Losing	Total Profit	Profit-Per-Trade
9,371	7,375	$2,701,649	$161

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

I recommend trading the strategy with portfolios of commodities for various account sizes. The portfolios use a "first-N-in-a-Group" approach to trading the strategy. Two or more commodities in a group are part of the portfolio, but only the first N trades in a group are taken. This strategy trades each commodity about seven times a year, but
trades only average five days in length. Trading a fixed basket of commodities will leave you with only a few trades on a great percentage of the time. Trading by group will generate more trades and balance risk exposure across the groups.

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.

SHORT CLIPS starter portfolio is suitable for accounts starting in the $10,000 to $30,000 range. The commodities in each group have been carefully chosen for their profit-to-risk characteristics. The portfolio is: Soybeans, Corn, Wheat, Lean Hogs, Coffee, Lumber, Cotton, Gold, Palladium, Copper, Crude Oil, Natural Gas, Reformulated Gas, the Euro-Currency, Japanese Yen, Dollar Index, 10-Year Notes, 30-Year Bonds, and 5-Year Notes. Only one commodity in each group is traded at a time, and a one-lot is traded. A dollar stop of $1,500 was used for all commodities
in the portfolio. A slippage/commission deduction of $25 has been taken from each trade. The following equity chart shows portfolio growth since 1980.

Short Clips Trading System Starter Portfolio Equity Curve

As the graph shows, equity buildup is fairly smooth and consistent. With an average annual profit of $13,709, the average first-year return on a $10,000 to $30,000 account would range from 46 percent to 137 percent. From the risk point of view, the average start-trade draw-down a trader could expect when initiating trading this portfolio would be $3,573, between 12 and 36 percent of starting equity. But the trader should note that in 2003 the maximum start-trade draw-down was $16,566. As equity builds, the portfolio can be expanded to maintain a high rate of return.

The following table shows portfolio performance year-by-year. The column marked average start- trade draw-down is compiled by finding the start- trade draw-down for the portfolio starting at each trade origination and then averaging the results. For example, if the portfolio generated 30 trades in a given year, 30 portfolio equity curves would be generated, one starting at the trade origination of each trade, and the low equity point found for each equity curve. Note that the start-trade draw-down tests every trade originating in a given year, but that the low equity point may occur in the next year. These are reported in the trade origination year averages. Also note that the annual profit is the average of all returns on year from the start date of the equity curve.

Forming a reward to risk ratio by dividing average first-year profit by average start-trade draw-down, the "gain-to-pain" ratio is 3.84. This metric can be used to compare portfolios against each other.

The Short Clips mid-size portfolio is suited for accounts starting in the $30,000 to $50,000 range. The portfolio is diversified across seven 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: Soybeans, Wheat, Corn, Rough Rice, Lean Hogs, Feeder Cattle, Cotton, Coffee, Lumber, Orange Juice, Palladium, Gold, Platinum, Copper, Crude Oil, Reformulated Gas, Natural Gas, the Euro-currency, Dollar Index, Swiss Franc, Japanese Yen, 10-Year Notes, 30-Year Bonds, 5-Year Notes, 2-Year Notes, and the Euro-Dollar. Only two commodities in each group are traded at a time, and a one-lot is traded. A dollar stop value of $2,000 was used for each commodity, and a slippage/commission deduction of $25 has been
taken from each trade. The following equity chart shows portfolio growth since 1980.

As the graph shows, equity buildup is fairly smooth and consistent. With an average annual profit of $30,462, the average first-year return on a $30,000 to $50,000 account would range from 61 percent to 101 percent. From the risk point of
view, the average start-trade draw-down a trader could expect when initiating trading this portfolio would be $5,166, between 10 and 17 percent of starting equity. But the trader should note that in 2004 the maximum start-trade draw-down was $20,562. As equity builds, the portfolio can be expanded to maintain a high rate of return.

Forming a reward to risk ratio by dividing average first-year profit by average start-trade draw-down, the "gain-to-pain" ratio is 5.90. This metric can be used to compare portfolios against each other.

The Short Clips trading system full-size portfolio is suited for accounts starting in the $50,000 to $100,000 range. The portfolio is diversified across all eight 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: Soybeans, KC Wheat, Bean Meal, Corn, Rough Rice, Lean Hogs, Pork Bellies, Cotton, Lumber, Coffee, Orange Juice, London Cocoa, London coffee, Palladium, Gold, Platinum, Copper, London Aluminum, London Aluminum Alloy, London Nickel, London Tin, London Zinc, Crude Oil, Reformulated Gas, Natural Gas, Propane, London Brent, London Gas Oil, the Euro-currency, Dollar Index, Swiss Franc, British Pound, Japanese Yen, 10-Year Notes, 30-Year Bonds, 5-Year Notes, 2- Year Notes, the Euro-Dollar, the Euro-Bund, Euro Bobl, Long Gilt, Spanish Bond, Australian Bond, Simex JGB Bond, the Nikkei, and the Dow Jones Index. A max of three commodities in each group are traded at a time, and a one-lot is traded. The dollar stop level is $2,000, and a slippage/commission deduction of $25 has been taken from each trade. The following equity chart shows portfolio growth since 1980.
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As the graph shows, equity buildup is fairly smooth and consistent. With an average annual profit of $52,805, the average first-year return on a $50,000 to $100,000 account would range from 52 percent to 106 percent. From the risk point of view, the average start-trade draw-down a trader could expect when initiating trading this portfolio would be $6,953, between 7 and 14 percent of starting equity. But the trader should note that in 2003 the maximum start-trade draw-down was $46,821. As equity builds, the portfolio can be expanded to maintain a high rate of return.

Forming a reward to risk ratio by dividing average first-year profit by average start-trade draw-down, the "gain-to-pain" ratio is 7.59. This metric can be used to compare portfolios against each other.

Many traders will review the portfolio material presented here (summarized in the table below) and decide that when account size grows, it is better to trade more than a one-lot of the Starter Portfolio than move up to the next larger portfolio. This is a mistake. Those traders are focusing on profits rather than risk. Risk control is the crucial element in whether a small-account trader will survive and grow to be a large-account trader.

The trader who looks at profits will see that on a $10,000 to $30,000 account, an annual return of between 46 and 137 percent can be made. He reasons that if he can make 137 percent on $10,000 by trading 1 contract per signal, when the account
size grows to $20,000 he can trade 2 contacts per signal and still make 137 percent. This is true, but what he is neglecting is risk. Trading the starter portfolio with $10,000 yields about a 67 percent chance of success; about a 2 out of 3 chance. Doubling the number of contracts at $20,000 still yields the 2 out of 3 chance. Sooner or later this
strategy will lead to a trading blow-out.

The true measure of the portfolio's effectiveness is the ratio in column 4 of the table. The higher this number, the better the return for the risk taken. As a small-account trader grows his account size, he should look to reduce risk (column 3) and take the best return he can get. RISK FIRST!

The Short Clips Trading System Global Portfolio is suited for accounts that are larger than $100,000. The portfolio is diversified across the commodity groups to gain exposure in ncorrelated markets. The commodities in the 68-commodity basket that had a profit-per-trade of $100, or more, were included in the portfolio. The portfolio consists of: Corn, Kansas City Wheat, Rough Rice, Soybeans, Soybean Meal, Wheat, Pork Bellies, Lean Hogs, Cotton, Lumber, Coffee, London Cocoa, London Coffee, Orange Juice, Gold, opper, Palladium, Platinum, London Aluminum Alloy, London Copper, London Aluminum, London Nickel, London Tin, London Zinc, Crude Oil, Natural Gas, Propane, Reformulated Gas, London Brent Crude, London Gas Oil, the Dollar Index, Japanese Yen, Swiss Franc, British Pound, Euro-Currency, 30- Year Bonds, 10-Year Notes, 5-Year Notes, 2-Year Notes, Euro-dollar, Euro Bund, Euro Bobl, Long Gilt, Spanish Bond, Simex Japanese Bond, the Dow Jones Index, DAX, the Hang Seng, the Kospi, the Nasdaq, the Nikkei, and the Swiss Market Index. The following table shows the yearly return and draw-down risking one percent of equity on each trade and limiting group exposure to four trades at a time, or less.

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

This example illustrates the power of implementing the money management strategies
available to the large-account investor. He can achieve a very high rate of return for a relatively low max annual draw-down. Moreover, he can adjust the percentage of equity risked to either increase his return or lower his draw-down until he achieves a risk/reward scenario suitable to his trading temperament. If, for example, an average
max draw-down of about 10 percent is too high for him, he can lower the amount risked and have lower expected draw-downs. Conversely, if he can stand more risk, he can up the amount risked and achieve a higher return.

The price for the Short Clips trading system package is $1,995. The price is very reasonable considering the fact that this is fully disclosed logic, not a "black box". You will understand exactly how the system works.

If you purchase the Short Clips trading system, 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.