LeBEAU
VIDEO

Serendipity 1.1  Bond System
by Charles LeBeau and David Elden

$1,177.00 AVG. WINNING TRADE - 68% WINNERS - LONG AND SHORT

Trade By Trade Report

Background: Ser-en-dip-i-ty n. : the faculty of finding valuable or agreeable things not sought for. The "Serendipity" Bond System was designed to be a short-term system that would trade successfully on the short side in order to complement and enhance our existing long only systems. However, as the Serendipity name implies, we were extremely pleased to find that this short side system has excellent historical results trading from the long side as well. In this report we present a historically profitable short term strategy that may be implemented to systematically trade the Treasury Bonds futures market from both the long and short side.

Strengths of the system: This system trades much more frequently than our other Bond systems, trading 140 times over the last 10 years. The average holding period was 4 days on winning trades and 3 days on losing trades. Trading one contract from 1/4/88 to 4/30/99 would have resulted in a gain of $67,031.25 with a maximum drawdown of $4,594. The system is reasonably accurate with 68 percent winning trades (95 out of 1140 trades were winners), and winning trades were slightly larger than losing trades by a factor of 1.18. The average winning trade was $1,177, a respectable number for such a short-term system. There were 13 consecutive winners and the maximum consecutive losers in the test period was 3. The largest winning trade was $4,806 (a short trade) which accounted for only about 7% of the net profit, confirming that the net profits gained were not skewed significantly by a single big winner. A modest but respectable profit factor of 2.5 summarizes the general efficiency of the system: it has made a gross profit of $111,843 versus a gross loss of $44,812 over the test period. Although this system is not as efficient as our long only systems, when we consider that this system was designed to short bonds frequently during a period of strongly rising historical price data we are more than pleased with these historical numbers.

Weaknesses of the system: The Serendipity System is designed to exit at a quick profit target and does not let profits run. This is because the system was designed to have a high winning percentage on the short side trades. In a strong trending market you may wish that it held trades longer. Remember that this system was intended to be used in conjunction with other bond systems that do hold winning trades much longer.

Summary: When we first offered our long only bond systems we were constantly questioned about trading the short side of the bonds. Because of the strong upward bias in the bond data the short side performance of the longer term systems was mediocre. To avoid losing money in a sustained downtrend these long only systems are designed to switch off and cease trading. However, there is potential profit on the short side and we wanted to capture whatever we could. We have spent more than six months of research trying to develop a solid system that would make money on the short side in spite of the strong historical data bias. We believe the Serendipity Bond System is capable of making consistent profits in either direction with a high percentage of winning trades. We think it is a very worthwhile addition to our bundle of well designed bond systems.

System Historical Results (TradeStation format):

Includes $100.00 per trade deducted for slippage and Commissions

Includes $100.00 per trade deducted for slippage and Commissions

Includes $100.00 per trade deducted for slippage and Commissions