Andrew Abraham

andy-0101 My name in Andrew Abraham. I have been investing in commodities and managed futures since 1994. I adhere to the philosophy of trend following. Trend following stresses a disciplined approach to commodity/ futures trading. Successful trend following and commodity futures investing requires patience, discipline and actively managing the risk. What sets me apart from other traders is that I am not only concerned about the return on investment but how much risk I will have to tolerate to achieve my goals.

Contact Details

If you are interested in contacting for speaking engagements. Please email me at Andrabr9@gmail.com or call 954 903 0638.

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Risk Warning

Futures and commodity trading involve substantial risk. The evaluations of futures and commodities may fluctuate and as a result, clients may lose more than their original investment. In no event should the content of this website be construed as an express or an implied promise, guarantee or implication by, that you will profit, or that losses can or will be limited in any manner whatsoever. Past results are no indication of future performance. Information provided on this website is intended solely for informative purposes and is obtained from sources believed to be reliable. Information is in no way guaranteed. No guarantee of any kind is implied or possible, where projections of future conditions are attempted.

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USD Trend Driven by Rate Hike Bets

USD Trend Driven by Rate Hike Bets

Since the beginning of 2015, the dollar index level has stagnated and after a brief attempted at a breakout, ‎near 100 it has returned to levels seen 20-months ago. The long term trend in the greenback is driven by ‎interest rate differentials, that are slowly moving in favor of the dollar, but recent volatility in U.S. ‎economic data points, has generated whipsaw price action as the USD trend is driven by U.S. rate hike ‎bets.‎

irit

During the last week of August communication from the Federal Reserve turned bearish, and the stage was ‎set for a September rate hike, assuming the data was consistent with the current trend. Well, August U.S. ‎economic data has been softer than expected, and the weakness has been broad based. The most ‎disappointing was the jobs numbers, which would have likely confirmed an interest rate hike, despite weak ‎manufacturing survey data.‎

The August jobs data showed that weakness was broad-based. Additionally, payroll growth is moderating ‎since a relatively firm 2014, given just a 181k average monthly payroll gain thus far in 2016.‎

The household survey, was also disappointing. The August gains of 97k for civilian jobs and 176k for the ‎labor force, were mild when compared to the large July gains of 420k and 407k. The average prior monthly ‎declines of 74k and 135k in Q2, where offset by big average gains before that of 464k and 484k in Q1, and ‎‎329k and 322k in Q4 that reflect a net acceleration in both measures since September despite some Q2 ‎setbacks.

The jobs data followed ISM Manufacturing data which saw the survey dip into contraction territory at 49.4. ‎The news saw Fed Fund futures dip driving the chance of a rate hike down to 50%, following a peak of a ‎September hike at 65% following the Jackson Whole Symposium. During this gathering both Fed Chair ‎Yellen and Vice Chair Fischer communicated that the Fed was poised to increase rates, if the data ‎warranted. It appears that traders were slightly off sides and the August payroll nearly eliminated any ‎chance of a hike according to the market.‎
The last straw could be the U.S. ISM services report which dropped to 6-year lows. The headline reading of ‎‎51.4 in August from 55.5 in July brought the index below the prior two-year low of 52.9 and down to a 6-‎year low. There were declines in every component but deliveries. The employment gauge fell to 50.7 from ‎‎51.4 in July, versus a 49.7 two-year low in May that was also seen in February, leaving weakness that was ‎captured in Friday’s jobs report.‎

The upshot is that the Fed has induced yields to climb making the dollar more attractive, ahead of their ‎meeting in late September. The catalyst is that the data continues to trend toward a stronger economy. ‎With the jobs data not cooperating at the moment, the trend in the dollar will likely continue to be ‎consolidation. ‎

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Stock Market Crash Alert (When ??)

There will be a nice crash at some point, that is what stock markets do. Maybe this will be next week…maybe next month…maybe next year. Stock Market crashes completely normal. However it will not likely be a problem for you if you are closely monitoring leading stocks, closely monitoring indexes, not using leverage, and have a good set of sell rules that you follow without hesitation. Learn these lessons and add them to your daily routine, and then a market correction becomes an opportunity you look forward to.

More money is made coming out of bear markets then bull markets!!!

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Multiple Trend Following Entries On $BABA

Many times leading stocks give us multiple entries when trend following. Regarding BABA we had two such trend following entries.

The first entry was a double bottom break

The second entry was a traditional Cup and Handle with sloping trend line.
Studying charts on trend following sharpens your skills and helps you become better traders and trend followers.

baba

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The Grind of Trend Following

Systematic diversified and risk-managed trend following doesn’t produce crashes, just Draw downs that Grind.

We are in one of those grinding moments now….

Typical Trend Following!!!

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Is It Time to Change the Trend Following Systematic Model?

I am presenting 2 charts. What is very interesting is that they are exactly the same model algometrically of managed futures. However the returns are vastly different….Some say it is due to the low volatility low interest rates. I have been trading this way since 1994. I have never seen a continuous period of non performance…However it is so true…Past performance is not indicative of future performance. Actually have one manager whom we have invested with, still down from 2012 almost 24% who was an original turtle looking to increase leverage due to the elections and all the global background. Will be interesting to see what happens.

Would like to hear thoughts…equity2

equity2011

PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. THE RISK OF LOSS IN TRADING COMMODITY FUTURES, OPTIONS, AND FOREIGN EXCHANGE (“FOREX”) IS SUBSTANTIAL.

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AUGUST 2016: TREND FOLLOWING DOWN -7.32%, YTD: -7.95%

It never gets easy trend following. There are lumpy returns. You have to go through tough times. The last couple years have been the toughest…Maybe all the low interest rates …whatever..who knows.

For trend following stocks, completely different story…very successful!!

I received this email and thought to share…

AUGUST 2016: TREND FOLLOWING DOWN -7.32%, YTD: -7.95%

August was mostly one-sided, sliding down to a strong negative performance, and taking with it the Year-To-Date performance to a similar level. Interesting to note the shorter timeframes weighing on the index while the longer timeframes are still positive/neutral on a 12-month horizon (we do offer trading systems with long-term timeframes).

Note the drawdown level as well, getting a little bit closer to the Max Drawdown (since the start date of the index in Jan-2000). These occasions have historically proven a good time to start investing in a trend following strategy. It will be interesting to monitor the evolution of the index over the last few months.

Despite this recent performance, the index is still well positive (+35%) since launch in live monitoring in 2013, which interestingly was at similar levels of drawdown. The performance since the start of the backtest in 2000 is still well in positive territory at +1,279% (total return), or +16.53% (Compound Annual Growth Rate).

Below is the full State of Trend Following report as of last month.
Performance is hypothetical. Chart for August:

Wisdom State of Trend Following – August 2016

And the 12-month chart:

Wisdom State of Trend Following 12 months – August 2016

HORIZON RETURN ANN. VOL.
Last month -7.32% 10.31%
Year To Date -7.95% 15.74%
Last 12 months -8.47% 16.23%
Last calendar year (2015) 7.57% 16.88%
Since Index Launch (08-13) 34.47% 14.58%
Current DD -20.55%
MaxDD (since 2000) -31.94%
Individual System Contribution

The index is composed of several systems, each traded over different time horizons (short, medium and long) with a diversified portfolio of futures.

We can measure the contribution of each system variation by charting the evolution of their respective performance attribution over the last month:

System Attribution August 2016

And further below, the performance attribution of each system over the last 12 months, sorted by ranking.

System Attribution-12 months August 2016

SYSTEM 12-MONTH LAST MONTH
BBB-S -1.87% -0.43%
BBB-M -0.39% -0.77%
BBB-L 0.24% -0.47%
DMA-S -1.67% -0.83%
DMA-M -1.13% -1.07%
DMA-L 0.21% -0.44%
DON-S -1.09% -0.22%
DON-M -0.59% -0.55%
DON-L -0.01% -0.36%
TMA-S -1.75% -1.17%
TMA-M -0.42% -0.81%
TMA-L 0.02% -0.2%
Index -8.47% -7.32%
Methodology

The index performance is simulated using Trading Blox and CSI data (back-adjusted contracts rolling on Open Interest). The performance of the index is directly derived from the performance of a Trading Blox simulation suite composed of each system component as a system part of that suite.

The simulation uses realistic trading friction parameters (slippage, commissions, interest as detailed aside).

The portfolio used in the simulation is a sample of the 300+ global markets accessible to Wisdom Trading clients. The portfolio selected for the index represents a diversified mix of over 40 global futures balanced across all sectors (check the exact portfolio here).

Please check the post on the blog (and subscribe if you haven’t yet) to check details on simulation assumptions (slippage, commissions) and more info on the systems used and their parameters.

Disclaimers

Material Assumptions

The test is set-up with an arbitrary starting capital of 1B, starting in 2000. As the test is intended to represent an hypothetical index, no liquidity/volume constraints are enforced, making the results less dependent on actual simulation capital.
Profits are compounded (assumed to be reinvested).
The purchase or sale price for each trade that generated the hypothetical results is based either on 1) open price, the day after the Buy or Sell signal for the Moving Average-based systems or 2) stop level set by the relevant indicator for the Bollinger or Donchian systems. The actual simulated fill price is obtained by calculating a slippage factor, which is added to (or subtracted from) the theoretical entry price. For a long entry, the slippage factor is calculated by measuring the range from the theoretical entry price to the day’s highest price, and multiplying that amount by the Slippage Percent. (For short entries, the slippage factor is calculated by measuring the range from the theoretical entry price to the low). The slippage factor is then added to, or subtracted from the theoretical entry price, to obtain the simulated fill price.

Risk Disclosures

Commodity Trading involves high risks and you can lose a significant amount of money. Commodity trading is not suitable for many investors. Any performance results listed in all marketing materials represents simulated computer results over past historical data, and not the results of an actual account. All opinions expressed anywhere on this website are only opinions of the author. The information contained here was gathered from sources deemed reliable, however, no claim is made as to its accuracy or content. Different testing platforms can produce slightly different results. Our systems are only recommended for well capitalized and experienced futures traders.

CFTC-required risk disclosure for hypothetical results:

Hypothetical performance results have many inherent limitations, some of which are described below. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown. in fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program.

One of the limitations of hypothetical performance results is that they are generally prepared with the benefit of hindsight. In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk in actual trading. For example, the ability to withstand losses or to adhere to a particular trading program in spite of trading losses are material points which can also adversely affect actual trading results. There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results and all of which can adversely affect actual trading results.

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WB Cup and Handle Trend Following

Weibo is a classic example of a GREAT Trade. First off Weibo was fundamentally strong

wb3

You can see the classic cup and handle breakout on WB
wb

Furthermore depending on what type of trend following investor you could have added to your position. When pyramiding is only important to be prudent. Would not suggest adding more than 10% or possibly 20% on pullbacks…or return to test 50 day moving averages…or break out to new highs….

Patterns like WB happen all the time. We need to study charts in order to better learn trend following.

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The Presidential Election & Trend Following

A colleague sent me his update on his trading and included his views on the potential volatility with it’s impact on Trend following due to the US Elections…

PRESIDENTIAL ELECTION
This is probably the most interesting and unpredictable presidential election in our lifetime. It will come down to who will win Florida, Ohio, N. Carolina, & Pennsylvania.

Regardless of who wins – they’ll inherit a huge mess:

Unemployment of 9.7% (U6)
Over 45 million Americans now in Poverty
43 million American on food stamps
94 million who have dropped out of the labor force and no longer look for a job. This is why unemployment has dropped, it doesn’t count those who have stopped looking for work.
A 50 year low on the Labor Force participation rate of only 62.8%
Record low home ownership rate
Riots in the streets
Systemic Poverty. We have spent over $22 TRILLION on the ‘War on Poverty’. Apparently we’ve lost.
National debt has doubled in the last 8 years and is at $19 to $20 Trillion dollars. Much of this debt is short term and costs the Gov’t over $200 billion/yr of the budget. A spike in interest rates could easily double or triple the payment. Hence the Gov’t pressure to keep rates low into eternity.

What does all this mean for Alternative Investments & trend following? Stocks will eventually run low on buy backs and cost cutting, therefore the returns will shrink. Should Mr. Trump win, the 15% Corp tax rate he proposes would be a huge winner for the economy and could be a game changer. Hillary has said she’ll raise taxes including raising them on the middle class and continue with most of the current policies in place. Regardless of who wins volatility like we haven’t seen for years could manifest in a dramatic fashion.

What do you think?

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Trend Following Leading Stocks

In this recent example of a leading stock AHS for Trend Following

You will notice there are two entries at two occasions. The two entries are a W pattern and a Livermore shake out plus 3. The W pattern is a low and a lower low and look to buy the high of the first low as demonstrated. The Livermore Shakeout Plus 3.

ahs

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Hitting New Equity Highs and Then….

August has not bee overly kind to trend following CTAs, myself included.I finally after a long struggle was hitting new highs in equity. I told one of my potential investors, it does not mean anything as this is a long struggle and similar to a marathon. Trend following takes a very strong mindset based on determination and the will to continue regardless how tough it gets. As David Druz wrote in my book
The Bible of Trend Following

Trend Following is getting knocked down and getting back up…Sounds easy right, nope…After getting back up…getting knock down again, and guess what, Having it happen once again, getting knocked down!

This simple statement accentuates trend following. This is why when I teach, I stress the emotional aspect. Trend following in itself is rather simplistic. Prices go up and we buy…prices go down and we sell….however there are so many aspects such as risk per trade…correlation etc….

Bottom line of my ranting…Trend following takes a great deal of emotional fortitude as well as humbleness. The markets are unforgiving. Once you think you are getting out of a draw down…boom…your equity curve swings….

This is the reality of trend following. More so the last several years have been the toughest I have ever seen. No one rings a bell…however with all of this money printing at some point I personally believe we will see rampant inflation that most are not expecting.

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