STC Millennium Eurodollar Trading System

Background: The Eurodollar is one of the worlds most actively traded interest rate futures markets and has tremendous amounts of volume and open interest. For only about $500 dollars in margin a trader can trade a million dollar contract that fluctuates with the rise and fall of short term interest rates. Eurodollars are dollar denominated deposits held outside the United States (most often in London banks). The price is quoted as 100 minus the short term interest rate on these 90 day deposits. Unlike most U.S. futures markets where the highest volume and open interest are in the nearby contracts, the Eurodollars are typically most active in the contracts that are six to twelve months out. In order to accurately reflect this preference for the distant contracts our Eurodollar system was designed and tested using carefully constructed historical data that linked together the more distant contracts rather than the nearby contracts.

Strengths of the System: The ED contract, although having a small volatility, is one of the best trending markets we have found and the Millennium ED system applies the best of our exit techniques to capture as much of the trend as possible. One of the strengths of the system is a powerful combination of exit strategies that are designed to hold the profits throughout most of the trend. We have spent a lot of time perfecting the exits for this system and we believe that the exit concepts in this system will be equally applicable to many different trend-following systems. Trading one contract since 10/17/88 would have resulted in a hypothetical gain of $44,950 with a maximum drawdown of only $1,500.00. These gains may appear modest at first glance but remember that the margin to trade in the Eurodollars is usually only about $500 dollars per contract. The system is reasonably accurate with 71 percent winning trades (60 winners out of 84 trades), and the winning trades were larger than losing trades by a factor of 3.23 to one. The average trade (win and loss) was $572, which is a very respectable number when compared to the margin for these trades. The Millennium system displays an unusually high profit factor (gross profit divided by gross loss) of 8.08.

Weaknesses of the System: Unlike most of our systems where the most recent years are the most profitable, the distant years in our ED study show the most profits. We are not sure if this should be a cause for concern or if it's just a case of observing a typical ebb and flow of volatility over the years. If that is the case we should now be coming into a period where we are due for an increase in volatility and profits. Even given the low volatility recently the ED still seems to provide an unusual of "bang" for very little margin. If we compare the returns of the ED with a comparable sized investment in S&P futures the risk and reward seem more than adequate. Remember that for the margin of one S&P we could have traded 40 or 50 ED contracts and just look at the potential profits we might have obtained.

Summary: The Millennium ED system is an excellent trend-following system designed to enter during significant low-risk periods in prevailing uptrends or downtrends. It includes new research findings and logic to distinguish between a retracement that may be a low-risk trend following opportunity and a retracement that is likely to become a dangerous trend reversal. This new indicator helps us to identify potential trend reversals and significantly improves the accuracy of the system. The Millennium ED System has many outstanding characteristics, especially in terms of the high profit factor and the fact that the average trade (win and loss) exceeds the usual margin requirement. The parameters we selected appear to have a wide margin for error and we found that it wasn't necessary to do a great deal of curve fitting to generate a very appealing system. We believe the Millennium ED System with a money management stop of less than $1,000 and unusually small drawdowns can be safely traded by both large and small traders. The ED market should appeal to conservative traders who enjoy trading a market that displays low volatility and great orderliness most of the time. We might also point out that long positions in Eurodollars seem to fare particularly well in periods when the stock market is crashing.

Performance Summary: 10/17/88 to 9/07/99
Includes $75.00 per trade deducted for slippage and Commissions
Total Net Profit	$44,950.00	Open Position P/L	$-175.00
Gross Profit	$51,295.00	Gross Loss	$-6,345.00

Total # of Trades	84	Percent Profitable	71%
# Winning Trades	60	Number Losing Trades	24

Largest Winning Trade	$3,850.00	Largest Losing Trade	$-1,025.00
Average Winning Trade	$854.92	Average Losing Trade	$-264.38
Ratio avg Win/ avg Loss	3.23	Avg Trade( Win & Loss)	$535.12

Max Consec. Winners	11	Max Consec. Losers	4
Avg Bars in Winners	21	Avg # bars in Losers	12

Max Intraday Drawdown	$-1,500.00
Profit Factor	8.08	Max Contracts Held	1
Account Size Required	$1,500.00	Return on Account	2997%

Performance Summary: Long Trades 10/17/88 to 9/07/99
Includes $75.00 per trade deducted for slippage and Commissions
Total Net Profit	$35,525.00	Open Position P/L	$0.00
Gross Profit	$39,907.50	Gross Loss	$-4,382.50

Total # of Trades	62	Percent Profitable	69%
# Winning Trades	43	Number Losing Trades	19

Largest Winning Trade	$3,850.00	Largest Losing Trade	$-750.00
Average Winning Trade	$928.08	Average Losing Trade	$-230.66
Ratio avg Win/ avg Loss	4.02	Avg Trade( Win & Loss)	$572.98

Max Consec. Winners	9	Max Consec. Losers	3
Avg Bars in Winners	20	Avg # bars in Losers	10

Max Intraday Drawdown	$-900.00
Profit Factor	9.11	Max Contracts Held	1
Account Size Required	$900.00	Return on Account	3947%

Performance Summary: Short Trades 10/17/88 to 9/07/99
Includes $75.00 per trade deducted for slippage and Commissions
Total Net Profit	$9,425.00	Open Position P/L	$-175.00
Gross Profit	$11,387.50	Gross Loss	$-1,962.50

Total # of Trades	22	Percent Profitable	77%
# Winning Trades	17	Number Losing Trades	5

Largest Winning Trade	$2,500.00	Largest Losing Trade	$-1,025.00
Average Winning Trade	$669.85	Average Losing Trade	$-392.50
Ratio Avg Win/Avg Loss	1.71	Avg Trade( Win & Loss)	$428.41

Max Consec. Winners	6	Max Consec. Losers	2
Avg Bars in Winners	22	Avg # bars in Losers	13

Max Intraday Drawdown	$-1,262.50
Profit Factor	5.80	Max Contracts Held	1
Account Size Required	$1,262.50	Return on Account	747%

The hypothetical performance data above was generated using Omega TradeStation, with $75 deducted per trade for commissions and slippage. In our opinion, the account size required and return on account calculations may not accurately reflect the actual account size required to trade this system nor the return to be expected. Past performance is not necessarily indicative of future results.

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 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.

PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.

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