The Relativity Trading System
I would like to thank you for your interest in the Relativity Trading System
. After reviewing the piece below, I'm absolutely certain you'll agree that we have created something unique.
Allow me to start out by introducing myself. My name is Dean Hoffman. I have been in the commodity business for over twenty-three years, the last seventeen of which I have spent researching and developing specialized commodity trading systems.
In 2001, I created a financial software company dedicated to commercial trading systems. One of those systems has done so well that the Futures Truth Company, an independent trading systems evaluator, has decorated us with their illustrious Top 10
Trading Systems Ever award not once, but twice.
My experience ranges from running my own futures brokerage firm at the Chicago Mercantile Exchange to my latest position as a licensed Commodity Trading Advisor. I'm the founder and owner of two successful trading firms, DH Trading Systems and Hoffman Asset Management. Using my exclusive trading systems, I trade around 15 million dollars in the futures markets daily.
It is from these many years of expertise that I have refined the concepts that I'm about to share with you.
Trading System Basics
In this section, we are going to explore some of the basics of commodity trading. Experienced traders may want to skip ahead to the section on Relativity.
Trends
The first basic idea that must be accepted is trends. Trends are the root of all trading profits. Prices must trend higher from where a trader bought, or they must trend lower from where he sold to earn a profit. Some may argue they're counter-trend traders, but even these traders need a trend in price ( irrespective of how short term ) to make a profit.
When you think about it, trends can be seen everywhere. Temperatures gradually trend from warm to cold as winter draws near. The demand for gasoline continuously trends higher in the summer driving months. Ground moisture trends from moist to dry when a drought approaches, and interest rates trend from high to low or low to high over the passage of time and so on.
All of these events, whether seemingly natural or unnatural, can create sustained price trends in the commodity market, and it's from these trends that we are able to try to profit. Systems like these are commonly referred to as trend following systems. Calling them trend following systems is correct because these systems cannot and do not attempt to predict trends. Instead, they jump on board with the trends after they have begun, and there are numerous empirical studies that prove that commodity markets tend to trend well.
The real difference among traders is how they establish the start and end of a trend. A trader may define the starting point of a trend as something as basic as a slight change in the direction of a moving average. As an example, some traders might use a rising moving average of prices as a signal that the market is ready to go even higher. Counter-trend traders, on the other hand, might use this same indicator as a symbol that the market is overbought and making preparations to head lower. Both are potentially correct dependent on their exits. The real question is how we can quantify these trading approaches and code them into profitable trading systems.
Position Sizing and money Management
Along with entry and exit strategies, a trader must likewise have an excellent position sizing and cash management plan. Even if his exit and entry points are 90% accurate, if a trader risks it all on every trade, at some specific point the percentages are substantially in favour of him losing all his money. By the same token, a system that's only correct 10% of the time but has correct money management could do well.
The final analysis is that traders need to know precisely what proportion of their account to put at risk in any given trade. It is also required to find out how many positions to sell or purchase whenever there's a signal. An expert system should provide traders with all this info.
Definition of a System
A system can be outlined as a combination of entry and exit methods with a correct money management plan. Some individuals are content to trade one system while others may blend many different systems.
Trading Psychology
The final piece of the puzzle is proper trading psychology. It does not matter how brilliant a trader's systems are, if he is unable to take the heat in the inescapable drawdown periods, he will fail. By the same token, if he gets too ecstatic during winning periods, he will also tend to fail.
The key is emotional consistency and the ability to stick to a system through thick and thin. A trader must have complete confidence in his approach. Here is where in depth ( and correct ) testing can be useful. Testing may help to build up solid proof that what a trader is doing works over the longer term.
Summary
In summation, traders have to have an edge. This edge should consist of :
1. Proved entry and exit techniques
2. A proven position sizing and money management plan
3. Proper trading psychology
Bear in mind that, although it'd be simple to grow each one of those three points into an entire book of its own, my purpose here is just to give traders a high-level overview.
The Relativity Trading Method
Now that we have laid the basic groundwork, let's get into the specifics of the Relativity Trading System .
Relativity is a mixture of five different trading systems. Trading five systems simultaneously will give a trader much larger diversification than trading only one. All of these systems are basically trend followers, yet they also incorporate parts that are more inclined toward counter-trend following. Once more, even this helps add to diversification.
These five different systems also communicate with each other and trade together as one integrated unit. As an example, if one system has made significant investments in Japanese Yen, the other 4 systems know not to take any more trades in that market. Doing so would not help to diversify but only raise the risk in the same trading idea.
The Relativity Trading Program uses more than simply the basics of price direction as its system to generate signals. Relativity starts by using complex pattern recognition methodologies that enable it to more accurately identify the best risk-to-reward entry points. It then uses a series of different exits to limit risk and lock in profits. Many traders find this exit methodology pleasing, the explanation being that, unlike many other trend following systems, the Relativity Trading Program tends not to give much profit back after a large move in its favour.
Dynamic Portfolio
One unique aspect about the Relativity Trading System is its dynamic portfolio logic. Unlike most systems that predefine a smaller portfolio to trade, Relativity trades almost every commodity market, and it does this while still maintaining low minimum account size requirements.
The explanation for why it can do this is this systems programme ranks almost all the markets into percentiles on a day-to-day basis. It then narrows its list down to only those few markets that have the highest relative trending potential. The net result of this practice is that, while not so many markets may be on its radar at any specific time, that small list is consistently changing dependent on where the best opportunities lie, and the best benefit is that traders don't have to worry that the best trends will happen in markets that they do not trade!
Money Management and Position Sizing
The Relativity Trading Program also comprehensively handles position sizing and money management. It in particular manages how many contracts to enter when a trader gets a trading signal. This is essential because different futures contracts have different volatilities and trading them all in equal numbers wouldn't be properly diversifying. If a contract, as an example, tends to have high-volatility, a trader should trade fewer of those than another whose volatility is lower. The Relativity Trading Program uses a trader's account size to figure out the correct position size for each trade he makes. Frequently the right position size is simply 0, and there are four reasons for this :
First, if the trade occurs in a market that's not robust enough in rank to be in the dynamic portfolio. Second, if, given the account size, the risk in the trade is just too high. Third, if there's already enough or too much risk held in that given sector. And fourth, if there's already enough or too much risk across all of the current positions in the portfolio.
Relativity does not try to risk more than 1.5% of a traders account size in any specific trade. It will also not risk more than five percent of his account in any specific sector. Let's suppose, for instance, a trader purchases crude oil for his account. If the risk in that trade amounts to 5% or even more, Relativity won't take new trades in any markets that are highly associated like unleaded gas.
Relativity also won't try to risk more than 10% of a trader's complete account at any given time. Meaning, if each trade a trader is in were to hit its stop price concurrently, the total should represent no more than about ten percent of the whole equity of the trader's account. Once the risk level either reaches or goes past this ten percent level, Relativity will reject all new trades and return a position size of 0.
( * see risk disclosure on limiting risk )
Summary
In summing up, the Relativity Trading Technique mixes all of the parts that I believe are critical to a trader achieving success at trading commodities. Relativity diversifies not only across many successful systems but also across almost each commodity market. This, mixed with its conservative position sizing and money management, creates a system that shouldn't only meet but far surpass traders' expectancies.
For an exhaustive historical performance report, please visit our site at : www.RelativityTradingSystem.com
Dean Hoffman
DH Trading Systems
IMPORTANT RISK DISCLOSURES
*Risk percentages cannot be guaranteed, occasional market conditions could cause a traders stop loss orders not to be filled at the specified prices
Futures based investments are often complex and can carry the risk of substantial losses. They are intended for sophisticated investors and are not suitable for everyone. The ability to withstand losses and to adhere to a particular trading program in spite of trading losses are material points which can adversely affect investor returns.
Past performance is not necessarily indicative of future results.
HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN; IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR TRADING PROGRAM. ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE RESULTS IS THAT THEY ARE GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. IN ADDITION, HYPOTHETICAL TRADING DOES NOT INVOLVE FINANCIAL RISK, AND NO HYPOTHETICAL TRADING RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK OF ACTUAL TRADING. FOR EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR TO ADHERE TO A PARTICULAR TRADING PROGRAM IN SPITE OF TRADING LOSSES ARE MATERIAL POINTS WHICH CAN ALSO ADVERSELY AFFECT ACTUAL TRADING RESULTS. THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF ANY SPECIFIC TRADING PROGRAM WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL PERFORMANCE RESULTS AND ALL WHICH CAN ADVERSELY AFFECT TRADING RESULTS.
Relativity Trading Systemby: Dean Hoffman
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