Anomaly Introduction

Note: Click on buttons under <Anomaly Systems> on left side bar to view individual commodity P&L details, equity curves, and suggested portfolios.

As with many things in life, the conventional wisdom in speculative trading is very often wrong. For instance, all of our systems employ gradually tightening entry and exit stops as the strength of the trend increases. This flies in the face of the often repeated mantra that you need loose stops when the trend is strong so you don't get shaken out of a trade just before the price erupts in your favor. So too is it with stochastics. For years we have tried to develop systems consistent with the conventional wisdom that buys when a commodity is oversold and sells when it is overbought. We have tried everything under the sun to test this concept including RSI, stochastics, Bollinger Bands, and a slew of oscillators and overbought/oversold indicators...and nothing worked consistently. It was not until we inadvertently reversed our buy and sell signals while programming yet another attempt at discovering the overbought/oversold Holy Grail that we discovered that the conventional wisdom of this trading concept is also wrong. Our Anomaly systems are the result of that perhaps not startling breakthrough and are so named because they take advantage of this incongruous phenomena.

Both Anomaly 1 and Anomaly 2 use identical entry signals that buy when a stochastic indicator signals buying strength and sell when the indicator indicates strong selling pressure. They have a money management stop that will keep your losses to a predetermined maximum and a % profit retention stop that holds onto a portion of large open profits if the market moves against you quickly. The difference between the systems is the price-based trailing stop. Anomaly 1 uses an adaptive pivot point trailing stop while Anomaly 2 uses an adaptive price channel trailing stop. As with all of our systems, the stochastics-based entry and the exit signals are all adaptive and change based on the strength of the underlying trend.

Anomaly 1 trades much less frequently and its average trade is substantially larger than with Anomaly 2. Anomaly 1 is thus more suited to the trader who is comfortable with letting profits develop over a longer period of time while Anomaly 2 is a better choice for traders that want to grab profits more quickly and wait for another trading opportunity to reenter the markets.

We can't honestly say one version is better than the other so we give a steep discount if traders purchase both systems at the same time.

The following tables display the track record summaries obtained by applying the Anomaly systems to our standard 21-commodity portfolio from 01/01/1970 to 6/30/2008. The results for Anomaly 1 include $150 per trade for commissions and slippage using weekly data. The results for Anomaly 2 include $100 per trade for commissions and slippage using weekly data reflecting the shorter trade length requiring fewer rollovers overall.

Portfolio Statistics 01/01/1970 to 12/31/2007 Anomaly1 - Weekly Data

Total Net Profit          1,636,687.00  
Gross Profit              4,308,705.00  Gross Loss               -2,672,018.00
 
Total # of Trades             2,363.00  Percent Profitable              38.89%
Number Winning Trades           919.00  Number Losing Trades          1,444.00
Largest Winning Trade        82,590.00  Largest Losing Trade         -7,005.00
Average Winning Trade         4,688.47  Average Losing Trade         -1,850.43
Ratio AvgWin/AvgLoss              2.53  Average Trade                   692.63
 
Avg Days Winning Trade           19.00  Avg Days Losing Trade             6.00
Avg Days (win + loss)            11.10  
 
Max Drawdown                112,645.00

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Total Net Profit          1,842,486.00  
Gross Profit              4,632,762.00  Gross Loss               -2,790,276.00
 
Total # of Trades             3,315.00  Percent Profitable              41.60%
Number Winning Trades         1,379.00  Number Losing Trades          1,936.00
Largest Winning Trade        83,140.00  Largest Losing Trade         -6,955.00
Average Winning Trade         3,359.51  Average Losing Trade         -1,441.26
Ratio AvgWin/AvgLoss              2.33  Average Trade                   555.80
 
Avg Days Winning Trade           10.10  Avg Days Losing Trade             3.80
Avg Days (win + loss)             6.40  
 
Max Drawdown                 90,834.00