To create a truly diverse investment portfolio astute investors focus on finding multiple “profit drivers” to fuel overall portfolio returns. Investments in equities, dividends, fixed income, and real estate are some of the vehicles traditionally used to generate those returns.
However, with US equities near all-time highs and valuations getting more expensive the risk vs. reward in holding equities becomes less attractive. Even more, as interest rates rise the value of fixed income investments like bonds and Treasuries will go down. In other words, the primary “profit drivers” in traditional portfolios (especially since the 2008 financial crisis) may no longer provide sufficient risk adjusted returns to investors. Smart investors are wise to consider reallocating a portion of their assets into additional “profit drivers” thereby creating a truly diverse portfolio.
Traditionally, retail investors allocate their investable assets into a mix of long (bullish) positions such as stocks/equities, mutual funds, and bonds. While this buy and hold strategy has worked perfectly over the past four years, it was devastating to investors in 2000/2001 and 2008/2009. During the next major market downturn the long only buy and hold investor will suffer if they are not properly positioned to profit from market volatility.
Investor Motion is creating a path for retail investors to diversify into alternative “profit drivers” through futures and commodity markets. Our trading systems are designed to capture short-term trends in bullish markets, bearish markets, and even sideways markets. Trading in these markets can hedge downside risk in the overall portfolio in falling (bearish) markets, while at the same time enhance overall portfolio returns in rising (bullish) and/or sideways (neutral) markets.
The Markets We Trade and Suggested Capital Levels
Investor Motion’s trading strategy analyzes a combination of short to medium term price trends and technical indicators within those trends to determine trade set-ups in 14 different futures and commodity markets.
The four trading “Levels” (1,2,3,4) illustrated below show the number of markets traded within each ”Level,” and the suggested trading capital for each “Level.” This allows clients to choose an acceptable trading level and capital level based on their individual investing goals and risk profile.
Our Trading Process
Success in trading and investing can be accomplished if one views the market differently than the majority of other market participants. To capitalize on this idea we created a trading system that is largely based on overbought and oversold markets. In other words when a market becomes oversold we want to consider bullish positions (buy first, sell later). And when a market becomes overbought we want to consider bearish positions (sell first, buy later).
The markets we trade each possess their own unique set of conditions that change often. Risk is managed through stop losses and we always strive to improve our trading process with new analysis techniques and algorithms to generate trading signals. The bottom line is we want to be right or right out of trades and we want to let winning positions run. At the same time our strategy is designed to harvest profits when our signals tell us to do so.
The basic technical make-up of our trading system is based on moving averages, relative strength, average true range, and trailing stop losses. The system uses exponential and simple moving averages to help determine the direction of the trend. Additionally, price support and resistance filters, overbought/oversold signals, and momentum divergences are used across multiple timeframes to generate entry and exit signals.
Studies suggest that markets only trend up or down about 1/3 of the time which means most of the time markets tend to move sideways in a choppy pattern. To compensate for the lack of time a market is in a trend a good trading system will follow multiple timeframes which gives the system the best chance of finding and capturing emerging trends and trend reversals, even in sideways markets.
The trading system calculates long, short, or no entry signals based on the individual market’s current trading range, volatility, and technical market levels (support/resistance, overbought/oversold, and Fibonacci to name a few). If a market with an active signal trades to our buy stop (breakout above price resistance) or buy limit (price support) then we enter a new long trade, and if the market trades to our sell stop (breakdown below support) or sell limit (price resistance) then we enter a new short trade. If a market with no active signal is trading within a price range we may enter long or short positions depending on overbought or oversold technical signals.
Once a trade has been opened the system calculates: 1) trailing stop losses to help manage risk, and 2) exit rules and targets to help harvest profits. Trailing stop losses help manage risk as not all trades will follow through as expected. When a trade starts to become profitable the system calculates exit signals with stop and/or limit orders. Depending on market conditions, some trades are held on a very short-term basis (i.e. intra-day) and some are held for several days and even weeks.
Why Multiple Markets
Not all markets trend at the same time so following multiple markets and having a system in place designed to capture moves on a consistent basis is important. Our system follows equity indices, US Treasuries, oil, grains, and gold. This allows us to get in and get out of various markets and take advantage of the next trend. Also, the system allows subscribers to choose an acceptable level of trading capital based on their individual investing goals and risk profile.
Trading a diverse set of markets provides the best chance at finding and capturing emerging bullish, bearish, and even sideways trends. As an example, the system’s 4 levels as a whole may be Long the S&P 500, Short 10 YR Notes, Long Crude Oil, Long Soybeans, Long Volatility, Short DJIA, Long 30yr Bonds, and be Flat/Neutral 7 markets.
This structure provides a diversified portfolio within one “profit driver” of an investor’s overall portfolio that is designed to perform in unique market conditions. Investing in these markets provides diversification to the overall portfolio and can hedge downside risk in bearish markets, while at the same time enhance overall portfolio returns in bullish and/or sideways markets.
To access our Trading Signals CLICK HERE
It is important to remember that past performance is not necessarily indicative of future results. Futures and commodity trading is complex, and presents the risk of substantial losses. As such, it may not be suitable for all investors. The ability to withstand losses and to adhere to a particular trading program in spite of trading losses are material points which can adversely affect investor returns. For more Important Disclosures CLICK HERE