Discover... A Better Way to Trade A Better Way to Trade
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Introduction‌ This book is the result of what our team has learned through trading with fully automated trading systems. The Investing Through Recessions section reflects a specific course of discovery where we have learned that the rules of investing have changed. We encourage you to take the time to review each of the videos, links and supporting documents because they all carry important information that will help you realize that if you follow the same advice as everyone else when it comes to investing, you will get the same results. Automated System Trading may or may not appeal to you, but we offer this book as an introduction to what we feel is a more consistent way to pull money from the markets regardless of the direction that they take. In order to become a successful systems trader, you will discover a lot about yourself and how you feel about money and investing. The best way to assure success is to start slow and keep your profits and losses small until you are consistently profitable. We trade the systems that you see in this book and are willing to share them with you. In doing so, we hope to build a large team of professional traders through a cooperative and mutually beneficial relationship with our clients. It is our sincere belief that trading the markets is a team sport and that the individual who wants to learn on their own will have a much more difficult time in meeting their goals and succeeding in the long term with their trading. Thank you in advance for studying the following material. If you find the following information unsettling, this may be a sign of positive change or a shift in your paradigm. As soon as you learn that your financial advisor, the media, and even the government itself may not always have your best interests in mind, you may find yourself on the path toward financial enlightenment.
Massive Success, www.AutoSystemTrader.com
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Investing Through Recessions Have you lost money as a result of the recent recession? Are you worried about your retirement? Are you looking for a better way to invest and protect what you have left? Albert Einstein once said, "The definition of insanity is doing the same thing over and over again and expecting different results". If this is true, wouldn’t it make sense to consider an alternative way to invest from this point forward? Would you like to learn an objective way to trade the markets so that you know exactly what to do and when? How about learning a way to know exactly what your risk is before you enter the market? Would you be interested in teaching others what you have learned as a result of your own success? This book is designed to introduce you to a new way to trade the markets. It is meant to help the average investor become above average with a greater knowledge of the markets and the risks and rewards that they carry. This book will demonstrate some of the most common mistakes that may have led you to where you are today and offer a new method of trading that might offer you the potential to profit regardless of market direction. The first step in changing your financial future may be unpleasant, but it is a necessary step required to change your future. It requires you to sit down and look at what actually happened to cause the loss that you and millions of other well-educated, professionals failed to see while the economic house of cards was falling apart all around us. Everyone felt that the markets in 2006 and 2007 were going to continue to climb and they laughed at anyone who suggested otherwise. People who followed the advice of well-respected financial advisors were led astray and lost a lifetime of savings…here is an example. In cases like this, choosing the road less travelled, makes all the difference. In order to realize what is happening today, you need to learn things that they don’t teach you in school. Finance and investing is seldom taught in schools and when it is, it remains the same today as it has for hundreds of years. Today, if your banker tells you that it is important to save money, you will end up bankrupt. Why? Because the value of the dollar is collapsing due to the rapid rate of inflation. (Who Took My Money?) This may not make sense to you now, but after watching this, it will. This is a series of short videos that will change your financial future…and they are all free! The Crash Course is the world's most concise video seminar on where our economy is headed and why it is important to change the way you think about investing. We can’t overemphasize the importance of watching the entire course of short videos presented in the Crash Course. Now, after you’ve watched the Crash Course, I would suggest you bookmark the site and watch it several times. Many of those who watch it find it difficult to believe the impact of what is covered in the 2
series because it turns many of our belief systems upside down, creating a paradigm shift…a major change in thinking. If you enjoyed the series, we recommend you share it with others. It will lead you out of the insanity that has caused millions of people to lose their money. To support this further, there are two last things that need to be reviewed. The first is a short video from David Walker, the former Comptroller General of the United States. This video will illustrate why continuing along the course that we have followed since 1971 will no longer work. For those who feel the worst is behind us might find this a bit overstated, but if you’ve reviewed the Crash Course video series, you will understand that the hockey stick of printed fiat currency has already occurred. Take a look at the chart below of the Adjusted Monetary Base as reported by the St. Louis Federal Reserve Bank…
Source: http://research.stlouisfed.org/fred2/series/AMBSL To support this further, there is a website that you should also review that justifies all of the information that the media and politicians don’t want you to know about. This is the National Debt Clock, which keeps a running tally of the financials of the United States economy. After reviewing this material, you should feel better in realizing that even if you’ve lost money, you still are way ahead of where we are nationally and internationally. Today, we have a global economy. As this is being written, Greece’s economy is collapsing – a country the size of Louisiana. As a result, the value of the Euro, the second largest reserve currency is also declining. This is unprecedented in that this currency is only eleven years old! The International Monetary Fund (IMF) which is an organization of 186 countries charged with overseeing the stability of exchange rates to promote international trade 3
has promised $1 Trillion dollars to prevent the collapse of the Euro. The United States is responsible for 17% of that. Today, May 20th, the Dow dropped 376 points the largest drop in two years taking the markets into negative territory for the year. To make matters worse, the market is down with a devalued dollar. Unemployment remains high, banks are restricted and more regulated than ever with regard to their lending and investment practices, the auto industry in America is still struggling, and all the while, we are being told that the worst is behind us. We’re afraid that the opposite is true. The worst is yet to come. In America alone, 76 million baby boomers are facing retirement and have no money. Those that do will be forced to pull out money from the stock market to fulfill the requirements of their retirement plans and those that don’t will turn to their families, friends and the government to make ends meet. Of course, the government currently holds an unfunded debt liability of over $108 Trillion dollars. This information is shared with you to encourage you to change now. If you don’t, you may never be able to survive the next recession which many suspect will be even larger and more catastrophic. (Rich Dad’s Prophecy)
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Mistakes Made By Most Investors Now that we know how important it is to change the way we invest, we need to realize why most investors fail. Let’s take a look at some common beliefs that cost most investors money. 
Buy and hold. Invest for the long term. This is old advice that doesn’t work anymore. We no longer have cash, we have a fiat currency which constantly expands and devalues. Investing for the long term we see as risky in that it is like holding a cube of melting sugar in your hand. There are certain items which make sense to invest in for the long term, but they are not found in the stock market. Investing in commodity based assets is the best long term investment in that their value will increase as the expansion of the currency supply expands. Items like gold, silver, other precious metals make sense to us now, and very soon, when the market collapses again, movement of money into land and real estate and eventually even food may be a good hedge against a total economic collapse. Of course, these types of investments are beyond the scope of this book but they are important considerations for your overall financial plan. Below is chart of the value of the U.S. dollar with respect to time.
Source: http://mykindred.com/cloud/TX/Documents/dollar/
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Here is a chart of the Consumer Price Index (a measure of inflation). The chart below takes $100 in 2007 and shows what the equivalent dollar amount is for each year (so in 1774 that would be $3.77).
Source:
http://www.visualizingeconomics.com
Still not convinced? Check out the graph below which represents the cost of living which tells the same story‌ remember the hockey stick explained in the Crash Course?
Source: http://mykindred.com/cloud/TX/Documents/dollar/graph2.php
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On average, the stock market has risen at 8-10% annually Again, this is old advice that has cost most people more money than it has made them. This may have worked in the Agrarian or Industrial Age, but not since 1971 when the dollar was taken off of the gold standard. Take a look at the charts of the three major US Indexes spanning 10 years or more…where is the 8-10% annual return? If you are facing retirement soon, like the 76 million baby-boomers in America today, how long will you have to wait, work, or save to have enough left to retire? Even if the prices increase over 10% annually in the stock market, they are now doing so on a devalued dollar. The illusion is we are gaining wealth, but the hidden tax of inflation takes it all away…and then some.
Dow Jones Industrial Average – Source www.BigCharts.com
Nasdaq Exchange – Source www.BigCharts.com
S&P 500 Exchange – Source www.BigCharts.com
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Dollar cost averaging Dollar cost averaging is a timing strategy of investing equal dollar amounts regularly and periodically over specific time periods. If you believe the first two arguments made above are true and that inflation is nowhere to be seen in your future, then this investment strategy may work well for you (but don’t count on it).
Unfounded Trust in Financial Advisors We often wonder what advice you received when the market was crashing. What advice were you getting from your financial advisor (if you had one)? Were they looking for better stocks, bonds, mutual funds? Were they asking for a review of your portfolio? Were they telling you, “Now is the time to buy” as the market continued to find new lows? For us, the falling markets brought us unusual profits. If you have an advisor that can keep you profitable regardless of market direction, you are very fortunate, but this is seldom the case. In today’s economy, you need to be able to find investments that can make you consistent and reliable profits regardless of market direction. Ironically, most financial advisors make the majority of their money from the fees that they collect from their clients rather than what they make from their own investments. This is why we cannot believe that the traditional “Financial Advisor” has your best interest in mind.
Not keeping track of their investments Have you ever received a statement of your investment returns in the mail only to leave it unopened promising that you will review it later? No one will care more about your money than you. It is your responsibility to track your finances frequently. More money is lost due to negligence than probably any other factor listed above. Most professional investors track their investments no less than monthly and oftentimes more frequently, depending on the type of investments or trading that they do.
No plan to enter or exit the market If you want to accelerate your returns, preserve your capital, and change your outcomes you absolutely need to know when to enter the market and when to exit the market for each and every trade you make. This should be written down and must be objective so that there is no question of the action you should take when a certain price or time has been reached. This is relatively easy to do, being able to follow it without getting emotionally wrapped up in the outcome is more difficult than you can imagine. If you currently hold long term market positions and don’t have them protected with stop loss orders or profit targets, then you are subject to losses similar or perhaps even more extreme than was seen in the most recent recession.
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Investing for capital appreciation rather than cash flow The successful trader or investor generally looks for higher returns on their investments. The sophisticated investor wants to see 100% ROI as quickly as possible while also minimizing their risk. This differs from most investors as the sophisticated investor will pull money out of their accounts as profits are made providing cash flow before capital appreciation. For the average investor, they will invest their money and hope that it will grow and provide them the funds that they need at retirement. Don’t be an average investor. Learn to invest for cash flow FIRST, then proceed to invest for cash flow AND capital appreciation.
An Introduction to Automated System Trading Now that we have a more comprehensive understanding of what lies ahead of us, we can look at a new way of trading the markets that eliminates all of the common problems faced by the majority of traders. This type of trading is called Automated System Trading which utilizes an objective rules based computer program to define when we enter and exit the market. Automated system trading allows us to participate in the market without having to be glued to the computer or know how to even analyze the fundamental and technical data that is oftentimes subjective in nature and can be interpreted in many different ways. For more information about what Automated System Trading is, watch this video. The greatest part about starting with automated trading strategies is that a very low amount of capital is required because many professional investors utilize automated systems to trade the markets using leveraged securities, futures, or foreign exchange currency pairs to trade the markets. For the professional investor who trades these systems, money can be made (or lost) regardless of the market direction. This offers the professional investor the ability to trade with much less capital, still manage their risk, and never lose a trade when conditions are favorable to profit from the market. There still is a learning curve, and when starting automated system trading, it is important to follow rules that are clearly defined so that there is no question of what action needs to be taken and when. For a list of rules that successful traders follow, click here.
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Learning More about Trading Futures and Forex Markets Before moving any further into automated system trading, it is important that you have a basic understanding about the risks and rewards of trading leveraged investments in the Futures and Forex markets. If you have little or no experience in trading these markets, take a moment to review the following online tutorials‌ Forex Trading Tutorial Futures Trading Tutorial
Understanding How Automated System Trading Works Whether or not you choose to have a broker trade your systems or do it yourself on your own platform, it is important to introduce what automated system trading looks like on a chart. In this example, we will look at a trade chart on a 30 minute EURUSD currency pair with a system called FX TradeMaster.
How to Evaluate Performance Reports Now that we know what the trades look like on the charts running automated systems, we need to look at how to read or evaluate a system and portfolio performance report. There is a great deal of information contained in these documents, and for the technical trader, it is all important. However, we have found that much of the data can be understood through some of the more basic and easily understood criteria. These are the things that we feel are important when judging a TradeStation Strategy Performance Report.
Portfolio Merge Performance Report Once you understand how to review performance reports, it is time to improve your chance of trading success by combining a variety of different systems with different trade logic. We use a program called Portfolio Merge to combine strategy performance reports into a single document. Portfolio Merge performance reports contain much of the same information as TradeStation reports, but in a slightly different format. Portfolio Merge also has a very important measure of correlation between the combined strategies to further reduce risk of trading too heavily in a group of systems with the same trading logic. Here is a video that explains how to combine three different strategies into an effective portfolio of systems and how to analyze this with a Portfolio Merge document.
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Calculating the Proper Position Size for your trading Position sizing refers to how much money you use to trade a specified number of lots and/or contracts. The more leverage you use, the higher your risk. We have found that most people who try to achieve exorbitant returns with maximum leverage are the traders bragging about double or triple digit monthly returns. These same traders seldom talk about the large losses that are incurred to achieve these returns and typically don’t last very long in the trading arena. It is our belief that the trader who achieves consistent profits, relatively low drawdowns measured as a percentage of their investment capital, and is able to trade for many years, will always end up much more successful when compared to the trader always looking for home-runs. In order to help you reduce your chance of overtrading your account, we have created a position sizing calculator to help you trade according to rules commonly used by professional systems traders.
A Word of Caution about Automated System Trading We have learned a lot through loss. What has driven many systems traders out of the market has helped us become better systems traders. We want to help you avoid some of the mistakes that have cost us thousands of dollars. That is why we felt that this book was important to share. One of the mistakes that most traders make is falling victim to promises made of high returns with a state of the art system based on secrets never before revealed, available only for a limited time at a price that will only be available for the next 10 minutes… You have heard the pitch. If you have ever made a mistake like this, don’t be embarrassed. It happens to all of us. The difference is what you choose to do with the lesson learned. That brings us to share some of the mistakes that we have made. There is a term that is called over-optimization that refers to creating code and then adjusting the inputs of the code to backtested data to produce results that cannot be reproduced in real-time trading. In order to understand this, it is probably best to show you equity curves of systems that we have purchased that have been over-optimized. The lesson here is to start slow and increase your position size over time. If a strategy does not have any real time data, don’t trade it until it does. This is so important that we have real time trade data results posted on our website updated periodically so that you can see that the system holds up. We will post no strategy unless it has a minimum of three months worth of real time data. Here is a short video explaining where to find our real time trade data.
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What makes AutoSystemTrader.com different? If you are interested in learning more about automated system trading, we want you to know that we have been where you are now. We have made plenty of mistakes, but were either too stubborn or too stupid to stop when the lessons got hard and the losses stacked up. We stuck with it and were able to find out what works and what doesn’t. We are here to help. Our focus is to provide professional trading systems at an affordable price and provide the team and training to take you as far as you want to go. Our best advice is to start slow, learn how to develop a trading plan, create a trading journal, determine the correct position size for your risk tolerance and trade for cash flow first then capital appreciation. All of these topics will be covered in the Accredited Investor membership level on our website. This is appropriate for those who want to learn to treat their trading as a business rather than a hobby. If you are interested in developing your own trading strategies we provide the tools and lessons that we’ve learned to help you meet your goals and gain a better understanding of market dynamics. We will train you how to use genetic optimization in an effort to prevent overoptimization of strategies so that they will hold up with real time trading. This will be the focus of our Inside Investor membership level. For the Ultimate Investor membership level, we will take your experience from the preceding training and turn your focus to marketing your trading strategies through our list of brokerage clients and network of professional traders. It is our intent to provide all of our systems to the Ultimate Investor at no charge if you are willing to contribute and serve those traders just getting started with our team. This is our dream for AutoSystemTrader.com. We are just getting started, so there is plenty of room for discussion and development. We need your input and will do whatever we can to make this training the best in the industry. We hold the value of team as paramount, and we want to be an organization that exceeds expectations on every level.
In Conclusion Thank you for taking the time to learn more about automated system trading. This is an e-book that will be updated frequently so if you ever experience a link that is broken, please go to the website www.AutoSystemTrader.com to download the newest version of this document. I am admittedly not outstanding at video production. If you have any experience with video production and would like to trade our systems for free, please submit your resume and one of our managers will contact you to conduct an interview. If you would like to contribute news, documents and or videos to supplement our research, please submit your findings to AutomatedSystemTrader@charter.net with your name so that we can credit the source. 12
Thanks again and best of luck to you with your trading.
Supporting Material‌ Videos Meltup United States Economy Collapsing The Truth About The Economy: Total Collapse
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