This section explains how your account will be managed by Strategic Capital Management (SCM).
Short term stock and commodity trading is a high risk investment area and your advisor needs to be very skilled to make money for you in this area, in fact we beleive we are one of the few broking houses in the world who can offer a profitable service in this area. At SCM our overall investment philosophy is that you diversify your investment into a portfolio of several systems based around different futures markets around the world. As funds under management grow additional trading systems can be added to your account across different markets to both compound your return and diversify your portfolio.
From this introduction you will learn we will give you a brief outline of the types of trading setups we utilize for trading a clients account:
The trading setups that we look to take advantage of include the following:
- Machine Learning – Some of our systems are designed with the help of machine learning and genetic algorithms. With this type of system the computer analyses a vast array of data, which might include anything from price data, intermarket data, fundamental data, sentiment etc to arrive at a strategy that is most appropriate for the market being traded. We utilise TSL (Trading System lab) and CASB (Computer Assisted Strategy Builder (by The Grail Software)) for use in these circumstances. We may or may not take this a step further by applying our knowledge of the markets in modifying the resulting system to improve performance.
- Fundamental Analysis – Analysing economic data, market data and company data to assess the merits of investing in a particular company, market or commodity. The majority of our trading rules incorporate fundamental and seasonal setups. We use fundamental analysis in a variety of ways. Firstly many of our trade setups utilize a top down approach where we look to the overall market (The S&P 500 Index) to setup trades in selected stocks or other stock indices that we believe are unfluenced by the parent market. An example might be to utilise the S&P 500 Cash market to setup trades in the Hang Seng futures market etc. We also look at inter-market relationships such as that of stock to bonds and commodities to resource stocks and many of our trade setups come from markets that move the underlying stock, such as gold, copper, oil, interest rates etc.
- Public Sentiment – The percentage of traders who are bullish or bearish on a particular market. We look to buy when prices are depressed and the vast majority of traders or advisors are bearish or sell when the vast majority of advisors/traders are to bullish on the market. We utilize sentiment tools and surveys that tell us when the majority of trading participants are bullish or bearish on a particular market. We look to trade in the opposite direction of the generally perceived view of where the market is going when an extreme portion of traders are bullish or bearish. This makes sense as over 80% of traders fail to make money from trading.
- Overnight Gaps – short or long depending on the size of the opening gap. A gap is where the market opens significantly above the high or below the low of the previous day. An overnight gap suggests significant volatility in offshore markets. The secret is to wait for an overnight gap and then enter the market in the direction of the trend. If the gap is large enough the market often reverses and in this event we fade the gap.
- Continuation Patterns - Patterns that identify low risk entry points that get you into the market in the direction of a strong trend.
- Range Expansion – short or long on a breakout of a trading range. High volatility days follow groups or clusters of low volatility days, so naturally if we identify periods where the market has been quiet for a specific period we can anticipate that the market is getting set for some short term explosive moves.
- Seasonality - These trades are very powerful. Our system includes seasonal trades, possibly including the first trading day of the month and the Monday before options expiry or economic, company earnings release dates. Other seasonal trades include trades around public holidays and special situations.
- Oversold - When the market overextends itself an opportunity arises to fade the crowd and to trade a snap back in the opposite direction.
- Reversals - These trades identify over extensions on a specific day and anticipate a move in the opposite direction on the following day.
- Volatility Entries – trades entries are all based on a volatility factor above and below bar opening. The use of a volatility factor means that trades are entered only when the market has started to move in the expected direction.
- Exits – trade exits are based on a volatility factor above and below bar opening or after being in the market for a specified period of time, the close of the trading day (in the case of a day trading system) via a trailing stop for trend following or even a profit target when trading a swing trade system. The exit depends upon the system being traded. If the market suddenly reverses on a position the system will often cut a trade early as a new trend, opposite to the one we are trading may be emerging and enter a trade in the opposite direction.
Conclusions
The service offered by Strategic Capital Management represents an important advance on normal brokerage services. We are trading system developers as well as brokers and we combine these to benefit our clients. We make available our own proven systems and trade them for our clients. It is our philosophy that our top priority is for our clients to trade profitably. We achieve this by making our best systems available for our clients and also by trading these systems with our own money!
