The S&P 500 Alpha Day Trading System:
Release 2001
Dear Fellow Trader,
In January 1997, we published the S&P 500 Day Trading System. We were delighted with the interest and the favorable response we received from traders. This interest actually was responsible for two Stocks & Commodities Readers’ Survey Awards in 1998 and 1999.
Spurred on by the success of the S&P 500 system and favorable comments, we started working on the ambitious goal of developing a system that would trade all markets from Futures contracts to Stocks. In order to achieve this daunting task we could no longer use, as the signal alert, the main indicator used in the S&P 500. We needed to find a valid pattern that would enable any trader to identify a trend reversal and then place an order using a precise entry rule. Equally as important, if not more, it was imperative to institute a limited but precise stop rule. As every trader well knows, controlling the losses is the most important aspect of trading. After all, we always have our winners but they will not help very much if the inevitable losses exceed the profits.
“I
have traded stocks and commodities for 30 years.
Your system has proven to be the best and the only one I can
trade with confidence.
I only day trade.”
M.W.,
Atascadero,
CA, May 2000
After extensive research, we found the solution and about one year later the Global Trading System was born. This is a trading approach that is comfortable with trades ranging from Pork Bellies to T-Bonds, from QQQ to Stocks and any thing in between. Launched in mid-1998, this system was very well received and you may see many charts with typical signals if you visit our site at www.alphafin.com.
Fast forward to late 1999 and early 2000 when volatility got out of hand and trading the S&P 500 became harder. We started applying the Global Trading System approach to the S&P 500 contract. And we came out with a totally new system that we consider our best work so far.
The 3-minute charts displayed in this flyer show the theoretical entry signals for using the stricter, more precise entry rules of the 2001 release of the S&P 500 Day Trading System as determined by the rules for Conservative Traders or Beginners in Chapter 3.
Our approach to trading has always been to identify trend reversals. With a trend reversal we can enter the markets not far from the top or the bottom. This enables us to place the stops relatively near the top or the bottom and thus protect our position with a relatively small stop. So if the trend reversal aborts, our stop will be hit and we are out of the market with a controlled loss. But if the trend reversal goes on - as we were lead to believe with the indicators and patterns that we use - then we start benefiting from the new trend and the profits will be increasing as the trend gets stronger.
The key component of the new
trading approach is the Alpha Channel, an ingenious channel that
seem to bracket the prices in a way that helps to identify whether
the market is reversing up or reversing down. Supplemented by
a set of simple but effective tools, the Alpha Channel alerts
to the points where a trade entry is warranted under Rule #1.
In a new trade we face the highest risk when we identify a trend
reversal and see that the trend seems to be indeed reversing.
It is at that time that the probability is highest of the new
trend reversal being aborted and having the protective stop hit,
usually with a loss. But when the trend does reverse as anticipated
by the chart indicators we use, then we have the probability
of sticking with the trend and gradually adjusting the stops
in order to keep locking in the possible profits.
Trading approaches for Conservative Traders/Beginners and for Aggressive Traders
Using a clearly defined trend direction that identifies
right from the open the essence of the market moves, Conservative
Traders/Beginners could have made about three daily trades in
the four weeks of trade analysis as documented in the manual.
That is the period from October 19 to November 17, 2000 covering
the charts analyzed in the manual. That kind of theoretical profits
would have been possible even after avoiding trading while the
trend reversal is not clear. In other words, Conservative Traders
and Beginners can have a shot at about 60% of each main move
of the trend as it is clearly identified every time a chart is
open, before the open or intraday.
In contrast with the Conservative Trader rules, the Aggressive Trader is not limited by some of the restrictions we impose to the former group. Those rules, by the way, are used for protecting the traders’ funds by reducing the number of trades that still present good potential but would be taken against the main trend. For as long as the trend is the trader’s best friend, trading against the trend has to entail more risk. But the fact is that the longer a given trend lasts, the more likely it is that a countertrend will be developing soon. These countertrends often provide excellent trading opportunities but they carry more risk. The rules for Aggressive Traders are detailed and analyzed in Chapter 5.
As a consequence, the Conservative Trader will be
locked out of those days when the trend is turning up or down,
as shown in the manual. We recall the comment by the famed British
stock investor Nathan Rothschild to the criticism that he never
had picked a top or a bottom. His answer? “Gentlemen, you
can have the top 20% and the bottom 20%, I will be happy with
the 60% in between”. This is similar to what may happen
with the Conservative Trader as the 3-minute chart for 23 days
in the first page well suggests.
The net result is that by trading
also the countertrends, the Aggressive Trader will have the opportunity
of trading more times throughout the day and should end up the
day with potentially higher profits. Yet the percentage of winning
trades may well be lower than the Conservative Trader who only
trades in the direction of the trend. This means trading fewer
times but with a potentially higher percentage of winning trades.
And certainly a less stressful trading day.
The manual has a great chapter 4 showing how to maximize the
profits. There we present EIGHT simple and original ideas that
may help increase the odds of success and try to get more from
each trend. Most of them refine the basic trend reversal approach
and enable a trader to trade for higher profits. Even in these
instances the stop remains unchanged at 300 points or $750.00,
a very modest risk considering the size and the volatility of
this contract.
Closing well a winning trade is the hardest part of trading
We consider that exiting a trade (when we were not
stopped out) is the real hard part of trading. And that is the
reason why we dedicate Chapter 6 to the analysis of the dilemma
we face when we decide to exit a winning trade.
By definition, our trend reversal approach will never let us buy at the bottom or sell at the top as some people claim. The big advantage is that we will ride the longer lasting trends, thus reducing the risk and benefiting from the gradual and eventual strengthening of the trend. Along the trend continuation, there are times when we may see small countertrends that may be due to profit taking, hitting Fibonacci levels, etc. Often the nervous trader will close the position and then find that the trend returns to the initial direction. We got out too early and missed most of the potential profits from the trend.
Other times, probably recalling when we got out too early, we will stay longer with a trend that shows a small reversal against the main trend. We are looking for the main trend direction to reassert itself but to our dismay the reversal starts looking as new trend. And we blame ourselves for not exiting sooner and let our eventual profit go away.
The suggestions we have for handling the exit are practical, sensible and eventually profitable. This does not mean that at times we will regret staying a little too long. But that is when we should recall the instances when we stayed too long and regretted it. It is the eternal duel between fear and greed that the most successful traders confront all the time and that only through discipline can be properly handled.
Any time frame,
same rules, even applicable to other indices
As with all of our
systems, traders can use any time frame. All the charts (more
than 40) in the manual are displayed in 3-minutes and signals
are traded with 300 points or $750.00 stops. But it must be expected
that an increase in the time frame of the bar charts needs to
have the stop adjusted. Most orders are at the market, but we
suggest an order on a stop for some type of trades.
Like every single system we published, the rules are fully disclosed. Better yet, they are not tied up to a specific charting software. The charts were all generated by MetaStock Professional release 7.02 with real-time data feed from eSignal. And because the rules are simple and known, some traders have adjusted our ideas to accommodate their own, thus resulting in a somewhat hybrid system.
Although all the charts in the manual cover exclusively the S&P 500, the system can be used for trading other futures contracts like the DJIA, ND, etc. without any changes in the rules, save for an adjustment in the stop size. Any trader who purchases the system may request charts for either of these contracts or even both. International contracts in most exchanges can also be traded with this system. But since we do not receive the data feed for international contracts, we will be unable to provide the corresponding charts to any interested buyer.
“Have
you written any thing new? I like your trading ideas.”
S.H.
,
New
York, Feb 2000
Like in the S&P 500, any other futures index contract can be traded in any time frame with the same rules. However we may not provide any suggestions on the size of stops for any other contract outside of the DJIA and the ND.
Unusual money back guarantee
Please let me quote in full the text of the money back guarantee since our first promotion in 1997:
“We are so confident of the potential of this Trading System that I offer this unusual guaranty: send the printouts of the trades entered showing that you have applied the Rules correctly. If you did and you did not make at least FIVE TIMES the cost of this system trading daily during the first 90 days, then I will refund your payment in full as long as you commit not to use my system anymore nor divulge it ever.” End of quote.
This is a guaranty that stands unique in the last four years and of which we are very proud. As a matter of fact we never saw this kind of guaranty offered in any of the many promotions of financial products we received. And it is a guaranty we are glad to extend to this completely new system.
We wish you profitable and enjoyable trading.
Sincerely,
Luiz V. Alvim
The CFTC requires displaying the following notice: Hypothetical
or simulated performance results have certain limitations unlike
an actual performance report. 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 benefit of hindsight. No representation is being made
that any account will or is likely to achieve profits or losses
similar to those shown.
Order Coupon
Please
rush by Priority Mail the Alpha Trading System for Day Trading
the S&P 500. Send the manual to:
|
Name ______________________________ Address____________________________ ___________________________________ City/State/Zip________________________ |
Phone___________________________ Fax_____________________________ E-mail___________________________ Real-time Software_________________ |
Mail completed
coupon, Alpha Trading
Systems |
I am enclosing $750 ($375 for previous buyers) by bank draft or money order (personal checks will need to clear bank before shipping) made out to Luiz V. Alvim for full payment of the manual. I understand that I may return the materials for a full refund after the first 90 days of trading, as long as I comply with the terms of the guarantee as described in the offering letter. I also understand that I may not return the manual nor request reimbursement for any other reason. I agree to keep the system, materials, and methodology confidential and I commit not to disclose this information or any part thereof to anybody.
Signature_____________________________ Date___________________________
For more information, please e-mail Luiz Alvim. Or call (281) 759-9925, fax (281) 759-9925.