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An Asset Allocation Model
The information on this page is offered as one hypothetical model according to which a trader may wish to allocate assets within a futures account. The model makes no representation that it is appropriate for any particular trader’s overall financial situation, nor does it represent that it is appropriate to any trader’s financial situation to trade at all in the futures markets. The model is offered for informational purposes and as a paradigm to consider for those who have decided, after consultation with appropriate financial advisers, that they may wish to trade index futures contracts.
The model is discussed in the context of current margin requirements for e-mini S&P 500 (ES) contracts ($3938 for initial overnight margin) and for e-mini Nasdaq 100 (NQ) contracts ($3750 for initial overnight margin).
In trading the Dynamic Trading System, upon a signal to either go long or short the model generally initiates a position in 1 e-mini contract per $7,000 in liquid value in a futures account. The model would in no event trade more than 1 e-mini contract per $6,000 in liquid value except if that account were to decline in liquid value to below $6,000. If the account were to decline to below $6,000 then 1 e-mini contract would be traded in total, keeping in mind the limitations and constraints created by the e-mini contract's margin requirements.
For example, if a futures account were opened and funded with $7,000, then this asset allocation model would trade 1 ES contract. If the account were funded with $14,000 the model would trade 1 ES contract per ES signal and 1 NQ contract per NQ signal.
If the account were to appreciate to at least $21,000 in liquid value, then the account would trade 2 ES contracts per ES signal and 1 NQ contract per NQ signal. And if the account were to appreciate to at least $28,000 in liquid value then the account would trade 2 ES contracts per ES signal and 2 NQ contracts per NQ signal.
On the other hand if the account were to fall to, say $11,000, then the account would return to trading 1 ES contract per ES signal and no NQ contracts.
Of course traders may wish to trade smaller asset allocations. Traders may also wish to trade differing allocations of ES and NQ contracts than those specified above. As well, traders may wish to limit allocation to a maximum size and/or withdraw funds from their futures accounts according to their own particular financial situations.
Important Disclosures This model makes no representation as to the appropriateness of any individual's asset allocation to the futures market nor as to whether it is advisable for any individual to be trading in the futures market in the first place. This model is in no way to be construed as personalized or individualized advice, but is rather offered as a general hypothetical framework that a futures trader might wish to consider while examining a variety of allocation models.
Futures and Options trading have large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the futures and options markets. Don't trade with money that you can't afford to lose. This is neither a solicitation nor an offer to buy/sell futures or options. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on this Web site. The past performance of any trading system or methodology is not necessarily indicative of future results.
Performance results are hypothetical. Hypothetical or simulated performance results have certain inherent limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades may not actually have been executed, the results may have under- or over-compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown.
The Agile Trader and all individuals affiliated with The Agile Trader assume no responsibilities for your trading and investment results.
The Agile Trader is published by Dog Dreams Unlimited Inc. (DDUI), a Guaranteed Introducing Broker, member National Futures Association, registered with the Commodity Futures Trade Commission, and working in association with Peregrine Financial Group Inc.
As a publisher of a financial newsletter of general and regular circulation, The Agile Trader cannot tender individual investment advice on the suitability and performance of your portfolio or specific investments. Refer to your registered investment adviser for individualized advice.
In making any investment decision, you will rely solely on your own review and examination of the facts and the records relating to such investments. Past performance of our recommendations is not an indication of future performance. The publisher shall have no liability of whatever nature in respect of any claim, damages, loss, or expense arising out of or in connection with the reliance by you on the contents of our Web site, any promotion, published material, alert, or update.
Trading commodity futures involves significant risk of loss . Past results are not indicative of future returns. DDUI and all individuals affiliated with DDUI assume no responsibilities for your trading and investment results.
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