ELP PROGRAM: Description
Name: ELP Program (ELP).
General: ELP is a portfolio of swing trading systems based on the daily timeframe. All trades are to be executed at, or as near as possible to, the closing price of the day of the respective instrument. ELP generates signals to buy or sell based on the daily closing price of the S&P500 spot index. When you know the S&P500 index closing quote for today, you know immediately if there is a signal, and have enough time to execute a trade in E-mini S&P500 futures or any other similar instrument. All signals can be computed beforehand, based on the previous day’s close, which is very convenient. You can chill out all day, check the Index’s close (sometimes also high and low prices for the day), and, if it matches with the signal, calmly make the trade at the prevailing market price.
Composition: ELP Program is made up of several systems each based on a separate and very distinct fundamental pattern of the S&P500 index price movement in time. These patterns have been identified on a set of data dating from 1995 and before, and have remained valid and viable. And if we say fundamental, we really mean it. For example, the Program has a "long bias", that is, spends most of the time in the "long" position, because in the long run, the S&P500 goes up. It is an intrinsic feature of the Index, it was built that way. The other patterns are not so evident, but no less fundamental.
How it works: Each
system generates signals to buy or sell according to its own fundamental
pattern. But even such basic patterns get disrupted from time to time,
however rarely, by certain powerful influences, such as 9/11 or other
force-majeure events, before reinstating themselves. At such times, any
one system which is a component of the Program may post a drawdown or
outright loss. But there are other systems acting as a backstop
at such times, because the fundamental patterns are different, and
offset one another at their extremes. If one component is a “buy” and
another is a “sell”, then the Program generates no signal. Or, if you
are already long 1 contract, say, in E-minis, and another component
generates a signal to go short, then the overall position will be zero
because the two systems will offset each other. Thanks to it, the ELP
Program is INTRINSICALLY robust.
Moreover, if more that 3 Program component systems generate a buy, you go long only 3 contracts. Others are to be ignored for the time being. They are open only "conditionally", which means that if any of the actual long positions are closed when “conditionals” are still open, you just stay put. (No such problem with short positions). If it sounds complicated, not to worry: these nuances will be accounted for in actual signals generated for the users.
Recommended capital :
$70,000 for E-mini S&P500 futures (a unit of capital; $7,000 or $350,000 for E-micro or standard S&P500 futures, respectively (hereinafter "a unit of capital"). Hereinafter, all examples will be for the E-mini S&P500 futures).
In certain circumstances, the majority of the Program components
may give signals in one direction, and you may end up with up to 3 “longs” or
“shorts” per unit of capital required (see above), although never immediately after you only just start trading. The amount covers the required margin for 3 contracts ($6600 x 3, as of November, 2019) plus one and a half the biggest intraday drawdown ($32,000 x 1.5) as a safety cushion. (See Analysis for more details). It has ensured safe and steady trading without worrying about margin calls.
Important note: The said recommended capital is based on the average 24-year leverage of 2.5 and index values below (in the earlier years well below) the current values of over 3,000. We think that it would make sense now, in order to keep this kind of leverage and to reduce drawdowns, to adjust our recommendation to $80,000, beginning with the New Year 2020. We will base our calculations of the past performance on the assumption of $70,000 for E-minis, and our forward-looking calculations and recommendati0ns on $80,000.
Development and testing:
The systems constituting ELP were developed in 2009. Since then,
no changes were made in them, and they have withstood the test of time. This is
important, because it guarantees that the program is not just
“curve-fitted” using the hindsight, and is robust enough to have stayed unchanged through a
variety of changing market conditions and for quite a lengthy period of 10 years.