Old Faithful is one of the most consistent, logical, simple and powerful strategies in any market, let alone the S&P E-mini. There is no "holy grail" in trading, but this is about as close as you will ever come to seeing a strategy approach that kind of status. In fact, it is so powerful that it alone almost out-performs the buy and hold in the S&P Since the
inception of the S&P 500 index in 1982. Since 1982, the S&P 500 is up about 1,100 points. The Old Faithful S&P Strategy is up about 800 points, non-compounded (Make sure you read the compounding section in this report). What is really impressive is that this strategy is only in the market about 7 to 8 days a year. What this means is that the
non-compounded profit potential of this strategy is about the same while only having about 2.5% of the risk exposure.
In short, Old Faithful has similar profit potential as the buy and hold, with a fraction of the risk. While the buy and hold has seen dramatic drops in the overall investment value (as much as 55%), Old Faithful has seen less than 10% drop. If you compound the growth according to a conservative compounding strategy, the profit potential increases to 8,000 points with a drawdown equity highs of less than 5%. (See compounding section in this report).
The equity graphs below illustrate the difference between the buy and hold and Old Faithful.
- S&P E-mini Strategy Report
Old Faithful is a very simple strategy, based on very sound logic. It is buy only with many different variations that can be traded depending on how aggressive the trader is and what their goals and risk levels are. As long as the main premise of the strategy is followed, the overall probability of solid performance is very good.
Here are the statistics for the most conservative and best performing variation while keeping the strategy very simple.
These statistics are some of the most impressive strategy statistics I have ever seen and I have been actively creating and trading strategies for over 20-years full time. A strategy that is so simple with a 92% accuracy rate on 68 trades is simply unheard of. Throw a 17.75 profit factor and average trade of almost 12 points per trade ($2,916) and these are simply staggering. This is why I say that every trader should strongly consider this strategy in their portfolio to some degree.
Demand causes prices to move higher. If you know when the most demand is, you can develop a solid trading strategy for it. However, sometimes it is the reverse that is true. If you can find when the market moves up the most, you might have an idea of when the most demand is in play.
Based on the statistics above, the most consistent demand for stocks is going into the first calendar day of each month. The basis of all variations mentioned in this report is to be long the S&P E-mini on the first calendar day of the month.
It is said that this is the day 401k and funds pump money into the stock market to bolster their holdings for reporting purposes. I first discovered this strategy back in 2004. The historical results and the performance since then have been outstanding.
As stated, there are many variations of this strategy. You can buy on the close of the day before the first calendar day and exit on the close of the first calendar day. Or you can buy
on the open and exit on the close of the same day. You can hold an extra day, etc. There are also several filters you can apply. The filters for the variation that produced the stats above are simply:
1. The close of the day before the first calendar day is at least 3.00 points below the previous day's high
2. Don't trade in August.
That's it. When those two conditions are met, buying on the close of the day before the first calendar day and exiting on the close of the first calendar day has carried a whopping 92% accuracy rate.
What about without those filters?
As you can see, even without the filters, this strategy is extremely robust. 72% accuracy rate, a profit factor of 4.04 and total net profit of $244,937 (979 points).
The breakdown of these stats reveals some more interesting facts. What follows is a monthly and day of week breakdown of the performance without any other price action filters being applied.
As you can see, August is the only month that does not perform with this strategy. The two worst performing months outside of August are July and November. All other months have outstanding performance numbers.
(NOTE - These stats are based on buying on the close of the day before the first calendar day and exiting on the close of the first calendar day).
Night Session verses Day Session:
When the stock market closes in the US, there is still trading going on overseas, and now, thanks to globex, US stocks also trade overnight. The "night" session is based on the price change from the close of the day before the first calendar day to the open of the first
Night session movement is still strong at 67%, $112,312 in net profits and a 3.38 profit factor. In short, about 46% of the profits of the Old Faithful strategy comes in the overnight session. Below are the Day session only stats:
Even though the overall net profit for the day session is higher, other statistical factors are actually less impressive than the night session only stats. The day session has a lower accuracy rate and the profit factor is smaller at only 2.65.
Clearly though, the best execution for this strategy is to buy on the close of the day before the first calendar day and exit on the close of the first calendar day.
The monthly breakdown is very similar to the night + day session with maybe the only real noticeable difference being in the November results.
The monthly breakdown of the night session only is very interesting. The bulk of the profits are made during March, June, September and December. In fact, these four months make up 85% of the total net profit of the night session trades. The common denominator with these months? Each one is the month prior to the end of the quarter.
Breakdown by Day of Week:
Below is an analysis of the Day of Week performance. This means when the first calendar day falls on a Monday, Tuesday, Wednesday, Thursday or Friday. These are also divided by night and day sessions.
All of these are solid stats, but as you can see by the accuracy rate and the profit factor, Wednesday is the best performing day. Tuesday is in a close 2nd and actually has a higher net profit level, so some big moves are made on a Tuesday.
Despite the many variations that can be used with strategy, and the many filters, the only principle you need to understand with using a filter is that you do not want to buy if the market movement on the day before the first calendar day is significantly bullish. If the last trading day of the month posts a bullish move, the stats for the first calendar day become little more than breakeven:
Here are the stats for Old Faithful based on the filter of having the close of the last trading day less than the previous high. Below are the stats when the close is greater than the previous high:
As you can see, if the last trading day has a close higher than the previous high, the stats for buying on the first calendar day are only slightly bullish.
When the close is higher on the last trading day, the day session only variation of the first calendar day actually loses money.
Accordingly, any "less than bullish" move on the last trading day is the only filter you need to use with this strategy. Generally, the less bullish, the better the overall stats are. However, the more stringent you get with the filter, the fewer the trades. A good medium is to have the close at least 3.00 points less than the previous high on the last trading day.
The Power of Compounding
No trader should trade any strategy without a well thought out trading plan, and one that includes how and when to compound profits that occur. I have spent much of my career preaching the power of compounding in trade. In 1995, I created a compounding strategy that has proven again and again to be one of the most efficient compounding strategies for active traders. This strategy is called the "Fixed Ratio" money management method. I fully explain this method in the book "The Trading Game" (1999, John Wiley & Sons), and in my 10-hour online course called "Mission Million Money Management".
Below is the equity curve of starting with a single S&P E-mini contract and applying a conservative Fixed Ratio money management strategy.
The Fixed Ratio money management method can be applied to any strategy in any market. The purpose of this report is not to explain the Fixed Ratio method, but traders need to understand its power and learn how to apply it to their trading, so I at lease wanted to illustrate in this report.
I first published the Old Faithful strategy in 2004. There have been some knockoffs with this strategy, but it wasn't until 2010 that I was able to really analyze the strategy and find what the key principle was in the filter (anything other than a bullish day on the last trading day). It was in 2010 that we began to be able to utilize the software program "Quantum Charts" and really analyze the markets (See section below). It is through this software program that we have also been able to discover many, many other great trading strategies in all types of markets. We have begun to make available these strategies through the QC System Club (the website where you requested this report).
QC System Club Limited Time Access
For a limited time only, you can get full access to all the strategies we make available through the QC System Club for one low price. You don't have to buy each individual strategy, or try to pick which ones to buy, we make them all available for one low price. Since we have not yet even released this site to the general public (you cannot get there from a public web search), you have an opportunity to become a QC System Club member before the public release and significant price increase. The "Old Faithful" strategy alone is worth the club membership. Go to this link to sign up now.
How We Discover Trading Systems
When you become a QC System Club member, every strategy is fully revealed. You also get access to Quantum Charts Research version for no extra cost. With each strategy, you also receive a file you can open up in Quantum Charts and begin to customize each strategy based on your own ideas. It is extremely simple to do through a unique drag and drop process no other trading tool in the industry offers. Here is what the Old Faithful strategy looks like (conditions were dragged and dropped, not typed).
All conditions are conveniently categorized and listed for you. All you have to do is drop them in the right spot, which is super easy to learn. Be sure and go to our website and watch of few or our amazing videos on the power of this trading tool. www.QuantumCharts.com