Could you use a purely mechanical timing formula that has produced 30 percent gains a year since 1986 with strictly controlled risk? Nelson teaches you everything you need to trade the Pankin Sector Fund Strategy for exceptional profits and reduced risk. The Pankin Strategy trades Fidelity Select sector funds. Sector funds tend to trend more consistently than individual stocks or commodities and produce unusually reliable trading patterns. If you had traded this simple yet powerful system over the past twelve years, you would have outperformed 99 percent of all CTAs. The Pankin Strategy takes just a few minutes each week to update, uses straightforward logic and works for virtually any size account.
The Pankin Strategy has a superb hypothetical track record — 35 percent annual gains since 1986 (real-time performance has been just as strong). However, the original strategy requires withstanding drawdowns most individual traders find unacceptable. Money manager Mark Pankin, developer of the system, posted returns of 57 percent in 1995 and 45 percent in 1996 but the drawdowns sometimes represented as much as 25 percent of total equity.
To better gauge the risk, Nelson tests the Pankin Strategy over a wider range of market conditions. In this workshop, he simulates Pankin trading back to 1970 (considerably longer than the Fidelity Select sector funds have actually been traded). You will see that the original strategy would have generated reassuringly strong profits throughout the past twenty-eight years but with frequent and often punishing equity drawdowns (the maximum equity dip would have been an unacceptable 45 percent).
To help curb the risk, Nelson introduces you to a variety of defensive tactics he uses along with the original Pankin Strategy. As he adds risk-control measures, you will observe a powerful trading system unfold. To insure that the evolving system is theoretically sound, he tests the findings across multiple portfolios, time frames and signals. The resulting variant of the Pankin Strategy has gained 30 percent a year since 1986 with just 12 percent drawdown!
Central to this final comprehensive trading system is a filter Nelson uses to confirm Pankin signals. He demonstrates how this indicator is almost certain to capture every major stock market trend. With this and other defensive measures, you will trade the Pankin Strategy more confidently to achieve aggressive profits with limited risk.
Building a Mechanical Trading System from the Ground Up (1996).
Testing is a critical area often neglected by technicians and traders. Nelson clearly demonstrates the ease with which testing can be performed given today’s sophisticated workstations and high-performance computers. The testing power that these tools provide is now readily accessible to all traders and managers.
Nelson describes the process of building a mechanical trading system, providing concrete examples of high-return/low-risk strategies for a range of markets. Nelson also shares his favorite high-performance trading systems tested on TradeStationTM. The code (which is given to you) and methods Nelson uses are clearly stated and can be translated for use with many other popular software systems.
Nelson Freeburg is editor of Formula Research, a monthly financial letter that builds systematic timing models for the futures, fixed income, cash, and stock markets. Nelson took up trading while pursuing a Ph.D. at Columbia University. Totally absorbed by the financial markets, Nelson left academia. He decided to let the markets, rather than the university, provide his education. He began publishing Formula Research in 1991 in order to share his findings with a small nucleus of professional traders. Today, Formula Research serves hundreds of money managers and serious researchers in the cash and futures markets. Nelson’s subscribers include many of the leading names in global trading and finance. Nelson initially confined his research and trading to chart signals. When overall results proved poor, he began to examine point and figure, Elliott Wave, Market Profile, candlestick analysis, and an assortment of other technical theories. Nelson considers all of these methods deficient in their application because of their reliance on subjective judgement. In particular, Nelson feels that chart patterns become elusive in fast-paced, highly leveraged markets (such as cash foreign exchange) and that the clear buy and sell signals illustrated in textbooks rarely appear as clearly and reliably in practice. To address these shortcomings, Nelson began testing the theories of leading technicians as well as his own theories against an extensive historical database covering a broad variety of traded market items. Nelson uses the financial database he built, which reaches back into the last century, to test systems in which he can examine clearly defined and precise mechanical buy and sell signals, devoid of subjectivity. Using these objective standards, Nelson can rigorously evaluate complex system features. Additional rules, such as the user’s profit targets and stop orders, or mental stop points, can further strengthen this testing process. As a result of his research, Nelson has developed an impressive number of advanced trading systems.