Harmonic Edge Swing Trade Model

The purpose of this chart is to illustrate what someone's trading results might have looked like had they taken all of our trades since we began posting them in late June of 2000. To produce an equity curve we made certain assumptions. For example, we have assumed each trade would have been for the nearest whole amount of shares rounded down from $10,000.00. In practice, you will have to short stocks in even lots of 100. Additionally, we have assumed that limit orders were used and that brokerage fees were $15.00 per trade (If you use Interactive Brokers your total brokerage fees will be a maximum of $4.00). Finally, we assumed that no interest was credited to the trading account and that no margin interest was charged to the account, this may approximate slippage that might have been experienced.



With an initial trading account balance of $50,000 back in late June of 2000, and estimated net proceeds of $118,249.46, the return on investment is approximately 41.13% per annum. This calculation does not account for margin interest, so the actual return would be somewhat less.

Here are some system statistics:


 
Number of Wins
Number of Losses
% Win Loss Ratio
Average $ Win
Average $ Loss
Winning Months
Losing Months
626
418
60%
 $438.64
 $(336.55)
60
9

 
One appealing aspect of the system is that it typically produces small draw downs on trading equity. This makes it well suited for conservative traders who want to avoid the large draw downs frequently associated with many momentum based trading systems that utilize moving averages.

It is important that you understand that this equity curve and the estimated returns are for illustrative purposes only. This is not a backtest since we adjust system guidelines according to market conditions thus our system is discretionary. Your actual trading results will vary based on numerous factors including your ability to be disciplined about entering and exiting every position, your ability to set protective stops as directed, the availability of stock at your brokerage firm when you want to short, slippage if you use market/stop orders instead of limit orders, the amount of interest you are paid on your account balance when funds are available, the amount of margin interest you might be charged, the brokerage fees you are charged, divedends, etc. These variables will influence your actual return which will be different, probably less, than shown in this illustration.

Subscribers can access an Excel spreadsheet which documents all of the trades.  Please note that this data applies to "Swing Trading". For those interested in "Day Trading", we believe that a reasonable and achievable goal is to return an average of 5 - 10% a month on a non margined trading account. Trading is not a get rich quick scheme, but rather a profession that requires education, discipline, capital, tolerance for risk, patience, etc.



Harmonic Edge Disclaimer

Please note that charts and commentary provided by Harmonic Edge are for educational purposes only.  Any trades placed upon reliance on Harmonic Edge charts and commentary are taken at your own risk for your own account. Past performance is no guarantee of future results. While there is great potential for reward trading stocks, futures and options, there is also substantial risk of loss and you must decide your own suitability to trade. Future trading results can never be guaranteed.  This is not an offer to buy or sell stock, futures, options or commodity interests.

Most trading systems are based on historical formulas which have worked in the past.  However, what has happened before may or may not happen again.  You can lose all your money trading futures and options and you must decide your own suitability as to whether or not to trade. Only trade with true risk capital you can afford to lose. Only trade markets you can properly afford to trade.  Properly funded trading accounts typically perform better than those that are not. Never risk more than 2-3% of your account on any one trade. Always define your risk before entering a trade and place a stop to limit your risk.

There are no guarantees or certainties in trading. Trading involves hard work, risk, discipline and the ability to follow rules and trade through any tough periods during a system’s draw downs. If you are looking for a guarantee, trading is probably not for you. Most people lose trading. One of the reasons is that they lack discipline and are unable to be consistent. A system or methodology can help you become consistent. Ironically, worrying about the monetary aspect of trading can contribute to and cause a trader to make trading errors. Therefore, it is important to only trade with true risk capital.

©2005 La Canada Capital Management, LLC -  All rights reserved.