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Untitled Document The USI Daytrading System (With ETF Examples) The USI daytrading system is a systematic daytrading system for the S&P 500, and other major indices. The system uses simple rules and underlying market data to pick specific entry and exit points. If you are a TradeStation user then I will supply you with my strategy file so you can test and verify my results for yourself, although the USI daytrading system is not exclusive to TradeStation so it can be used with other trading platforms too. This is not a black, or gray, box system. The rules for the USI daytrading system are completely revealed and the strategy file is 100% open source, so you can understand exactly how the system works from day one. I use this system on the S&P 500 and so the majority of the information I have shown below relates to the SPY. However, the USI daytrading system is not exclusive to the SPY, or S&P 500, and can be used on other ETFs instead like those shown below with the QQQQ and DIA examples. The figures and charts below are from simulated trades that took place between January 1st 2007 and October 20th 2008 using 5 minute bar intervals. The results are based on using $10,000 per trade, unless using DVPS (more about that below), and exclude commission and slippage. SPY QQQQ DIA PROSHARES Traders seeking extra volatility with the potential to increase returns can use proshares like SSO or SDS to take advantage of the USI daytrading system. SSO DYNAMIC POSITION SIZING I have included as part of the USI daytrading system my dynamic volatility position sizing (DVPS) formula. While DVPS might sound impressive it is actually quite simple. The DVPS option will allow you to automatically adjust position sizes based upon market volatility by increasing position sizes in low volatility markets, and decreasing position sizes in high volatility markets. DVPS is an optional function of the USI daytrading system and you can choose to use it or not. DVPS has the potential to give greater returns over time with similar drawdowns to using a fixed position size. Below I have shown a comparison between the performance of the USI daytrading system while using a fixed dollar amount per trade and while using DVPS for the SPY. The first set of figures uses a fixed amount of $10,000 for every trade taken, while the second set of figures uses DVPS. The DVPS results are based upon $10,000 per trade but the DVPS formula adjusts the actual trade size based upon market volatility. The volatility factor can be adjusted to suit your individual style of trading but for this example I selected a mid-level volatility factor which had similar drawdowns as the non DVPS version. As you can see from the results, just by using DVPS increased the overall profitability of the system by over 60% in less than two years. While using DVPS has the potential to give greater returns over time what I like most about using DVPS is the smoothing effect it has on the equity curve. Just compare the equity curves for the same test below. STOP LOSS The USI daytrading system has the option to include a stop loss as part of the strategy. The strategy gives you the flexibility to choose your stop loss limit based upon your own risk tolerance. The first table is taken from the SPY and uses a fixed $10,000 per trade. I have included three different stop loss values of $50, $100 and $200 (equating to 0.5%, 1% and 2% respectively). $50 Stop Loss $100 Stop Loss $200 Stop Loss The reason for using dollar based stop loss rather than a percentage becomes more apparent when we look at applying a stop loss to the USI daytrading system while using DVPS. If we were to use a percentage based stop loss with DVPS then the actual dollar value of the stop loss would change with the volatility of the market and could result in larger losses. By keeping to a fixed dollar stop loss with DVPS we allow the DVPS formula to adjust the trade size based on volatility but maintain a fixed and precise stop loss for each trade. The table below shows how the same $50, $100 and $200 stop loss values would effect the performance of the USI daytrading system while using the same mid-level DVPS value we demonstrated earlier. $50 Stop Loss $100 Stop Loss $200 Stop Loss BAR INTERVALS While I have demonstrated the effectiveness of this system above using 5 minute bars you may consider this time frame too slow, or too fast. Below I have tabled some results using the USI daytrading system on the SPY, and including the same DVPS settings as before. I used a short 1 minute bar chart, a longer 30 minute bar chart and a slightly irregular 16 minute bar chart. 1 Minute Bars 30 Minute Bars 16 Minute Bars If you are interest in purchasing the USI daytrading system then please click the buy it now button. If you have any questions or would like to see some performance reports for the USI daytrading system please use the ask seller a question link at the top of the page. Thank you. It should not be assumed that the methods, techniques, or indicators presented in these products will be profitable or that they will not result in losses. Past results of any individual trader or trading system published are not indicative of future returns by that trader or system, and are not indicative of future returns which can be realized by you. In addition, the indicators, strategies, columns, articles and all other features are provided for informational and educational purposes only and should not be construed as investment advice. Examples presented are for educational purposes only. Such set-ups are not solicitations of any order to buy or sell. Accordingly, you should not rely solely on the Information in making any investment. Rather, you should use the Information only as a starting point for doing additional independent research in order to allow you to form your own opinion regarding investments. You should always check with your licensed financial advisor and tax advisor to determine the suitability of any investment. HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN INHERENT LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING AND MAY NOT BE IMPACTED BY BROKERAGE AND OTHER SLIPPAGE FEES. ALSO, SINCE THE TRADES HAVE NOT ACTUALLY 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.
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