Advanced Methods for Trading Seasonals In stocks, futures and Forex by Jake Bernstein 9 September 2016

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1 Advanced Methods for Trading Seasonals In stocks, futures and Forex by Jake Bernstein 9 September

2 Today review method of seasonal trading in stocks futures and Forex I will show you how to pick the best seasonal trades how to get into seasonal trades early how to get into seasonal trades late how to pick the right trades for your budget how to maximize the trading profits how to develop your personal seasonal trading portfolio how to use weekly seasonal charts how to use daily seasonal charts how to find hidden seasonals how seasonals can tilt a trade in your favor I will show you seasonal day trading methodology 2

3 Imagine if you knew 1) Which stock or commodity to trade 2) Whether to buy or sell that markets 3) The EXACT time to buy or sell short to within one minute or less 4) Your odds of success 5) Your average profit and your average loss over many years 6) Your stop loss or risk as well as your first profit target 7) The profit / loss ratio of your strategy 8) The complete track record of your strategy as far back as you can acquire historical prices 9) Your average profit and loss in points and % 10) The largest profit or loss this strategy has ever produced 11) The maximum drawdown (to be defined) 12) The maximum upswing (to be defined) 3

4 13) The number of consecutive losses 14) The number of consecutive profits 15) The accuracy of your strategy in % 16) How to minimize your potential loss 17) How to maximize your potential profit 18) When to move your risk to an effective zero risk stop loss 19) When to EXIT your position Imagine also that 1) EVERYTHING about your strategy is 100% objective 2) Crystal clear at all times no opinions just facts 3) NOT subject to interpretation or opinion 4) Proven valid and reliable 5) Adaptable to stocks, commodities or spreads 6) Adaptable to YOUR level of risk tolerance 4

5 Definition of seasonality Seasonality is the tendency of a given data series to move in a predictable direction during specific times of the year in various time frames Seasonality is not necessarily a function of whether, climate or crop conditions or planting intentions or underlying fundamentals 5

6 The evidence is undeniable and statistically valid. History is what it is and it cannot be rewritten when it comes to seasonality and its historical validity. Compare what we know about seasonality to what we don t know about methods and systems that require interpretation. I will show you my advanced seasonal methods in this Webinar with 100% objective rules and procedures. 6

7 Perspective and reality Most traders are correct less than 50% of the time as are most trading systems Most traders take small profits and large losses being unable to maximize profits Most traders are not rule-based or procedure- based; they are shamefully inconsistent Most traders use a smorgasbord of trading strategies often combining inconsistent methods to create the illusion of them information Most traders have no track record or back test for anything they are doing Learn a lesson; don t be like them safe 7

8 The other alternative can you make money with low accuracy? Yes but low accuracy means you must significantly maximize winning trades Most successful hedge funds trade with low accuracy but large profits on winning trades Most traders don t have the capital to trade large positions or the discipline to stay in winning trades a long time (define) 8

9 PATTERNS There is a huge difference between patterns and PREDICTABLE patterns EXAMPLES! VERY IMPORTANT TO UNDERSTAND THIS ESSENTIAL CONCEPT LOOKS GOOD vs SOUNDS GOOD vs IS GOOD! 9

10 Seasonal trading is the single best method I have found for doing the least work in the most effective way with the best results in the most objective way BUT it has to be done the right way. We KNOW the RIGHT rules and advanced methods. I ll be teaching them today with 100% objective rules and procedures 10

11 Fact vs fiction Let s look at a big picture vast historical perspective high probability seasonal pattern that most people don t even know about or trade I am always asking myself what s wrong with this pattern? What is it traders don t like about over 80% accuracy for nearly 100 years? 11

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13 Finding seasonals Searching for seasonals the usual way at You don t have seasonal trader, no worries, I will let you try it at no charge The usual way I search for seasonal trades 13

14 My Trading Model SETUP TRIGGER FOLLOW THROUGH Seasonality in all forms is a SETUP WE need TRIGGER and FOLLOW THRU 14

15 My process Find the seasonal trades. I will show you several ways Determine timing Enter trade with profit target and stop Exit strategies. I will show you several ways Timing trigger discussion next slide 15

16 Seasonal timing Simple moving average 8 open vs 8 close Discussion of set up trigger and follow through 80% accuracy rule Next slide 16

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18 Other applications Seasonals with MAC swing trade Seasonals with two and five bar pattern Seasonal open close pattern day trade Seasonal open below/above 8oc Alternative search criteria: profit versus accuracy All illustrated today 18

19 Finding seasonal setups 19

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29 Adding 3MA trailing stop 29

30 Open/Close pattern in seasonal 30

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32 : how it turned out 32

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35 March/April DJ seasonal 35

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40 C>O day trade pattern 40

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47 ACCURACY vs $$$ DEMO Live demo with Chris 47

48 Futures spreads Search criteria 75% PL 5 >=10 days Markets: meats, grains (no oats) sugar, copper, Zb/Zn, coffee*, cocoa*, crude oil Why these? 48

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55 Key Seasonal Concepts Market structure Repetitive patterns Danger zone concept: CRITICAL! Profit maximizing strategy: CRITICAL! Spreads to reduce risk Timing trigger or not? Data mining or reality? 55

56 Remember Seasonals are highly accurate and very consistent They have been so for many decades BUT as in the case of most powerful tools they require focus and a consistent method of application they need to be used the right way 56

57 The accuracy continuum My evaluation of % accuracy for various indicators and methods Darts EW Fib Guessing Gann Intuition All with MA crossover Risk management Breakouts VB systems Donchian FPO MAC Swing 3x3 8OC Divergence Based systems 25% 35% 45% 55% 65% 75% 85% Seasonals Stocks Futures Forex Spreads 57

58 Searching for a trade My criteria 75% win PL 4 or > Days in trade <=25 No more than 2 consecutive losses Avg profit $400 or > (2% or > for stocks) Positive growth Example 58

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69 2016: NOTE PT 69

70 The reality of seasonals Seasonals are a valid trading tool that you MUST know and use They are NOT perfect They are NOT used by most traders which is why they are not discounted before the fact Most traders lack valid seasonal information Most traders lack the discipline to use seasonals Most traders do not have a solid 3 part (STF) strategy for seasonals Most traders do not manage risk with seasonals Most traders do not know how to maximize seasonals Most traders take small profits and big losses Most traders do not have a sufficiently long seasonal history Too many traders use deep out of the money options with seasonals for stocks and futures 70

71 Profit maximizing strategy 3 units (3, 6, 9, 12; 300 shares, 600 shares. 900 shares etc PT1 avg profit per trade (2% on stocks) PT2 Exit date and followup Trailing stop: 75% or 3MA low/high or parabolic: examples in next session 71

72 Arguments against seasonals There are no seasonals they are an artifact of the data Seasonality can t make you money because everyone knows them Finding seasonals is data mining Seasonals are caused by weather when weather patterns change so will seasonals Only agricultural markets have seasonals Seasonality cannot exist in stocks because they are not affected by weather Seasonal changes are anticipated by smart traders and professionals and so their effect is minimal 72

73 The Danger Zone Concept Every trade must have a first target When target is hit raise stop to break even Take profit on part of position The more often you can get out of the danger zone the more profitable you will be by eventually catching the major moves Most traders use trailing stops that are too close to the market Volatile markets require larger trailing stops 73

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77 Pre-Holiday Seasonals Defined The high probability of prices to move up or down prior to major U.S. holidays Christmas, new years, good Friday, Jly 4 th, Easter, Labor Day, Thanksgiving, Memorial day, Veterans day Example: Good Friday 77

78 12/1/1950 4/1/1952 8/1/ /1/1954 4/1/1956 8/1/ /1/1958 4/1/1960 8/1/ /1/1962 4/1/1964 8/1/ /1/1966 4/1/1968 8/1/ /1/1970 4/1/1972 8/1/ /1/1974 4/1/1976 8/1/ /1/1978 4/1/1980 8/1/ /1/1982 4/1/1984 8/1/ /1/1986 4/1/1988 8/1/ /1/1990 4/1/1992 8/1/ /1/1994 4/1/1996 8/1/ /1/1998 4/1/2000 8/1/ /1/2002 4/1/2004 8/1/ /1/2006 4/1/2008 8/1/ /1/ % Christmas: Trades 62 Wins 43 Win % 69% 20.00% 15.00% 10.00% 5.00% 0.00% 78

79 11/1/1950 3/1/1952 7/1/ /1/1954 3/1/1956 7/1/ /1/1958 3/1/1960 7/1/ /1/1962 3/1/1964 7/1/ /1/1966 3/1/1968 7/1/ /1/1970 3/1/1972 7/1/ /1/1974 3/1/1976 7/1/ /1/1978 3/1/1980 7/1/ /1/1982 3/1/1984 7/1/ /1/1986 3/1/1988 7/1/ /1/1990 3/1/1992 7/1/ /1/1994 3/1/1996 7/1/ /1/1998 3/1/2000 7/1/ /1/2002 3/1/2004 7/1/ /1/2006 3/1/2008 7/1/ /1/2010 USA Thanksgiving: Trades 62 Wins 45 Win % 73% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% 79

80 12/1/1950 4/1/1952 8/1/ /1/1954 4/1/1956 8/1/ /1/1958 4/1/1960 8/1/ /1/1962 4/1/1964 8/1/ /1/1966 4/1/1968 8/1/ /1/1970 4/1/1972 8/1/ /1/1974 4/1/1976 8/1/ /1/1978 4/1/1980 8/1/ /1/1982 4/1/1984 8/1/ /1/1986 4/1/1988 8/1/ /1/1990 4/1/1992 8/1/ /1/1994 4/1/1996 8/1/ /1/1998 4/1/2000 8/1/ /1/2002 4/1/2004 8/1/ /1/2006 4/1/2008 8/1/ /1/2010 New Years: 55% 14.00% 12.00% 10.00% 8.00% 6.00% 4.00% 2.00% 0.00% 80

81 The RULES DJIA or proxy BUY on close day before the day before holiday. Exit on close day before holiday Example: Dec 25 th. BUY close DEC 23 exit on close DEC 24 th Comment: stop, target and observations 81

82 Spread of effect My definition Why look? HIGH ODDS How? 82

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91 Q&A Q: Why is the initial stop loss on a seasonal trade close only what exactly is close only? Q: Can I use my own search criteria? Q: What to do if I have too many trades? Q: Why can t I search all stocks or futures? Q: Why did you pick the stocks that are there? Q: What does the Y or N mean? Q: When do you points vs % avg profit for PT1? Q: Can I use options for seasonal trades?* 91

92 Options for seasonals: guidelines AT or in the money 3 mo or more to expiration High delta: min.75 Bull spread / bear spread Binary options Targets and stops based on underlying Pros / cons 92

93 More Q/A How did you arrive at your search factors? Why do we need a timing trigger < 80% What s different about your seasonals? Can I make seasonals my only system? How much $$$ do I need to start? How often are the statistics updated? If this type of trading is so good then why are you telling everyone? Why not keep it secret? 93

94 Q: how flexible are the starting and ending dates, the targets and stop losses? Q: can I use options or binary options with seasonals? Q: can you explain why regulatory agencies are opposed to seasonal trading and your experiences with their attacks on those people who promote seasonal trading?(chart) Q: approximately what percentage of your trading should be allocated to seasonals? Q: Jake, seems to me that you have too many rules but I m new to trading so maybe you are right. Why do other methods look so much easier than this? Why do we have to work so hard at this? Q: why not take only 90% or more winners? 94

95 Step by step process Search and find seasonal setups (several ways) Use timing trigger as needed (TBD) Enter MOC on date or next open (15% trigger leeway) Trade units of 3 Exit pt1 avg profit per trade Stop loss initially % close only Initial stop no longer valid after pts Stop position 2 break even; 3 rd position 75% trail anduse 2% rule for futures 5% rule for stocks If not stopped out by exit date but at a loss exit all moc If not stopped out by exit date and pt 1 not hit exit 2/3 and ts 3 rd position 3ma rule 95

96 Q&A Q: Why is the 1 st trade found by a search the best trade what makes it so? Q: what are your thoughts about getting into seasonals early? Q: why do you say spreads are best overall? Q: What s the down side of spreads? Q: What does red mean on a spread seasonal? Q: What does the Y or N mean? Q: When do you mean by don t overweight? Q: My broker says HFT has ruined seasonals. Is that true? Q: Can I use CQG DOMtrader to get better fills on seasonals ** Q: Are there other timing triggers I can use with seasonals? Q: My broker says seasonals are a self fulfilling prophecy why does he say that? 96

97 Q: Can we trade seasonals in markets like canola, rice, peso, etc? Q: What if thousands of traders are trying to enter or exit the same seasonal at the same time? Q: can you explain your 2% futures / 5% stocks trailing stop rule** Q: your seasonals are based on exact dates but other seasonal programs use day of year what s best? Q: do you think global warming will change seasonals in ag commodities? Q: what factors could cause currencies to have reliable seasonal patterns? Q; can we trade mini and or micro contracts for seasonals? 97

98 Futures seasonal porftolios Conservative Soybean oil, wheat, oats*, sugar, 10 yr tnote, hogs, mini gold, mini aus $: Max 2 units Aggressive All active futures 3 units 98

99 Stocks seasonal portfolio Conservative Do not duplicate No short sales <$35/share No longs > $50/share 100 shares minimum Entry sequence or in the money 99

100 Stocks aggressive portfolio Do not duplicate No short sales <$35/share Entry sequence Units of 300 shares Options ok 100

101 Mentoring appointment interview click link below: Thank you for attending Write me at: Write Chris: 101

Jake Bernstein Advanced Trader Sessions (ATS)

Jake Bernstein Advanced Trader Sessions (ATS) http://www.jakebernstein.com 800-678-5253 831-430-0600 ATS 1 Session 4 16 February 2012 January Effect Weekly Trigger: Status Big Moves and COT: A Much Closer