This content introduces a futures trend-following trading system that has historically delivered significant returns (2,864% over 25 years) with a notable advantage during market crises, outperforming buy-and-hold strategies.
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Hey, hey. What's up, my friend? So, in
today's video, you will learn a trend
following system that has generated 2,864%
2,864%
over the last 25 years. This trading
system has about a 14% annual return and
a maximum draw down of 37%. In other
words, compared to a buy and hold on the
S&P 500, this system has higher returns
and lower risk. And the best part about
this trading system is that it makes a
killing during a crisis or a recession.
For example, during the docom bubble in
2000, the 2008 financial crisis, the
Russia Ukraine war. This periods like
this is where this trading system really
shine. This means you will make massive
profits while other traders are ah
losing their pants. So if you're
interested, right, then let's get to it
because I will explain to you the exact
trading rules, the entry, the exits, the
chart examples, and much more. So let's
get started. So trend following what is
it? So this is a trading strategy that
originated from the futures market. So
this is why it's called futures trend
following and it's used by
famous traders. You know the turtle
traders guess what they are trend
followers. Market wizards like ad sakakota
sakakota
and I don't know who who else I've read
a number of them right? They all are
trend followers as well. So this trading
strategy has been around for a long time
and it's
proven to work and there's a good chance
it will continue working for the
foreseeable future. So this is a
strategy that allows you to write trends
across different asset classes. You can
profit in bull and bare markets because
you will go long and short and you're
trading different asset classes like
indices, bonds, currency, metals, soft
commodities, etc. So this is actually
one of the secret source. Yeah. So let
me just walk you through the concepts
behind this strategy. So number one, you
want to be trading as many markets as
possible because it increases the odds
of you capturing a trend. So earlier
I've shared with you the different types
of markets we trade and of course I
shared with you over here
are the different types of markets like
currencies itself. It's not one market.
You can have multiple currency pairs.
Euro dollar, pound dollar, Aussie dollar
blah blah blah right? Maybe even 10 or
more. Same for metals, you have gold,
silver, copper, etc. So, you can see
that all these different asset classes
will give you many
markets to trade off.
And like I've said earlier, we are
pretty much going to buy markets that
are in an uptrend uptrend. We go long in
an uptrend and we go short in a
downtrend. And we'll write the trend
till it ends. And the reason or rather
the way we write the trend is using this
thing called TSL, a trailing stop-loss.
And again later on I'll share with you
the indicators that you can use on
trading view to execute it.
So let's talk about the trend following
system that you're about to learn. So as
mentioned we are trading across
different markets. So these are the
specific markets that I've put over here
that will be
used right for the back test later back
test later on. So currencies we have
pound dollar, dollar yen, Aussie dollar,
euro dollar, dollar against the Chinese
yen. So I'm going to go through them.
You can you can read it for for
yourself. time frame is the daily time
frame and our risk management is 2%. So
what this means is that when we put on a
trade and even if the trade goes against
us, we'll lose about 2% if it hits our
trailing stop loss. It's not guaranteed
2% because we are trading on a daily
time frame and waiting we are waiting
for the candle to close. So sometimes
the loss might be a little bit more like
2.2 2.3 2.4 2.5%. It is possible but
doesn't happen often. So these are the
the parameters that I'll be using for
back test later on. Now let's have a
look at the rules of this trading
system. It's really really complicated.
So brace yourself. You ready? Let's go.
Tada. That's it. Just two lines. Yeah.
So to go long, we will simply go long
when the price closes the highest over
the last 200 days. So simply put, right,
we're looking for the highest closing
price over the last 200 days. If the
market makes the highest closing price
over the last 200 days, we go long. And
we have a 6 ATR trailing stop loss. ATR
stands for average true range. This is a
volatility based trailing stop-loss.
And to show you how this looks like on
the chart, it will look something like
this. Let's say the market goes up,
comes down, and let's say this is the
highest price point over the last let's
say this the over the last 200 days. If
the market goes up and it breaks out, we
go long. Let's call it L. and we ride
the trend till it starts to reverse. And
then over here we sell thereby allowing
us to capture the meat of the move.
Let's call this m not mom but the meat
of the move. So that's the idea behind
trend following. And this is a long
example. A short example is just the
inverse. We go short on the breakdown.
When there's a lowest close over the
last 200 days. So something like this.
It closes below the lowest closing price
over the last 200 days. We go short. We
ride the trend down till it ends over
here. Let's say reverse. and we buy back
over here. So thereby allowing us to to
again capture the the meat of the move
over here. So this is in essence what
futures trend following is about.
And what about a trailing stop-loss? How
do we know when exactly to you know exit
the trade? So this is where I'm going to
walk you through a few examples so you
can see this in action. Now let's have a
look at some examples, shall we? So the
first one is a trading setup on coffee.
Okay. and couple of indicators that you
will find it useful. Let me show you the
first one. The first one over here you
can see is the donen channel. But this
one is actually modified to plot the
closing price. So where do you find
this? I actually developed this one
myself using a using an AI. So just look
for donen channel and this one is called
uh you can you should be able to find
this one bracket closing price. So
that's the one I'm using. Okay. And it
looks something like this. the settings
over here. Just change this to 200 and
you should have something that looks
something like this. So if I just they
should be quite donen channel closing.
Let's see what pops up. Oh, there you
have it. Right. Oh, my name here.
Anyway, yeah, so this is the one. Okay,
so I'm just going to remove the extra
one. There you have it. So feel free to
use that. And
And
next thing is Okay. So you look at it at
this point you can see that this market
coffee we're waiting for a setup and
entry trigger to go along. So when the
price touches this blue line so this
blue line over here demarket or
highlights the highest closing price
over the last 200 days. So if it closes
into this blue line over here it's an
entry trigger to go long. So what
happened next is kaput. There we have
it. this candle the market has closed
right is now at this point it's now
closed the highest over the last 200
days and since now it can only be
confirmed after the market has closed
you can't trade after the close unless
you want to do after market hours don't
recommend that wait for the next trading
day to open and then you trade it
so put right next day market open over
here and that's where you go long
right this opening price you go long now
the question is how do you then trail
your stop loss. So this where the second
indicator comes into play. This is a
chandelier exit. Okay. So if you want to
look for it, I think you can just go to
trading view.
I believe I use this one from this one
over chandelier exit. Yeah, this is the
one I used. Yeah, they have it looks
similar. I'll remove the duplicate. And
the settings are is over here 6 ATR and
20 period. Click okay. And there you
have it. You have this green line that
pops up at the bottom. So what you're
going to do is to trail your stop loss.
So when there when this market closes
let's say suddenly reverse and closes
below this green line okay you exit the
trade because your trailing stop loss is
hit it has hit 6 ATR trailing stop loss
okay so I I this one I have to be honest
I cherry picked this chart to show you
how it's like riding a trend looks easy
on a chart but remember this is a daily
time frame you have to endure all this e
and flow of the market, you know, you
can see it breaks out, it makes a
pullback, almost hitting your stop loss.
You still got to hold this trade, you
know, and then eventually breaks out
higher, makes another pullback, heads up higher
higher
again, almost hitting your trading stop
loss, and then go.
So that's the the nature of trend
following. There's a lot of uh
battle of your emotions if you ask me,
especially those of you who are new to
trading. This is a strategy that again
not most new traders is able to handle
honestly speaking. Okay, then you can
see over here. Let's see when it when
does it break below the trailing over
here. Finally on this candle over here,
the market breaks and close below your
trailing stop loss which is over here.
And since the market is closed, you
can't exit. So your earliest exit will
be on this candle over here at this
opening price. This is where you sell
this position for a nice profit. Okay,
so this is how the futures trend
following system look like. So and there
you have it, right? This is the idea
behind futures trend following. And now
since our rules are objective, we can
look at the results over the last 25
years. So you can see over here, this is
the equity curve I shared with you
earlier. And month on month, year on
year, this is where it's important. Have
a look. So you can see that as a trend
follower, you're not going to make money
every month or every year. I think same
goes for all trading strategies. Nothing
works all the time. But what's
remarkable about trend following in
particular futures trend following is
that during a crisis period during a
recession when the stock market is
taking a beating this strategy usually
does well. You can see in 2000 we have
the dotcom bubble up 22%. 2008 financial
crisis up 65% for this system. 2020 we
have COVID up 8%. No not huge. 2022
Russia Ukraine war up 25 or rather 56%.
So you can see that this is a system
that thrives during difficult market environment.
environment.
And if you look at the matrix
matrix
total return 2864 since 2000 so
annualized basis is about 14% annual
return. Your winning rate is about 45%.
You can see that it's less than half. So
you're actually losing more than half
the time or rather you're losing more
than half the time. Yeah, correct.
You're losing 54% of the time to be
exact. your payoff ratio is 1.74. So you
can see that on average your gains are larger
larger
pretty large right relative to your
average losses and your maximum draw
down in this system is pretty steep 37%
and it's not out of the norm right to
see draw down exceeding 40 50 or even
60%. So they are trend following hedge
funds they have maximum draw down of you
know in excess of 50% and that's really
the cost of being a trend follower. The
draw downs are not fun to go through.
It's painful. It will test your
emotions. It will test your resilience.
In fact, let me just go back to let's
see all I have all this data exported on
Excel. So, you can see over here this
all this data exported. You can see that
as a trend follower, there are periods
where you just have to kind of like suck
it up, right? You can see over here
since over here made a new high and then
kind of like, you know, draw down for
the next few years over here. Same thing
for this made a new high over here and
then you have to go for draw down for a
few years. It might look short on this
chart but this like a few years it's not
like few weeks or few months. So as a
trend follower your winning rate is low
as well as you know you have to be able
to endure this lengthy draw downs.
So pros and cons of future trend
following is future trend following is
number one there is no correlation to
the stock market. So this is a good
thing for those of you who are let's say
stock investors, stock traders, you want
a system or strategy that is
diversified. Futures trend following is
something worth considering because
later on I'll explain you know why this
is the case. This usually does well in a
bare market as you've seen earlier. The
downside to this is that this system
this strategy has a low winning rate.
Generally trend followers winning rate
are between 30 to 45% and it's difficult
for most traders psychology especially
if this is the only trading system that
you trade is really going to test your
your heart and soul. Okay. So but that's
it. There are things that you can do to
kind of alleviate this this pain
especially if you have multiple trading
systems or if let's say you are long the
stock market. You could be an investor
growth investor value investor. If the
stock market is bullish, your stock
investments are likely to make money and
trend following. Maybe the period
doesn't make or do it that well. Doesn't
matter. At least your stock investments
or stock trading is, you know, providing
cushion for it. At the same time, when
markets are bad, when your stock
investment portfolio take a hit, guess
what? Trend following will shine. And so
this means that your losses from your
stock investment will not be as painful
because you have trend following. Make
sense? Now, before you go, I'd like you
to get access to this free training. You
can get it at tradingwithra.com/go
or in the description or in the comment
section below this video. So in this
training you will discover three
rule-based trading strategies that work
and they're all backed by data. In fact
the strategy that you've just learned is
actually taken from this training. So
you will learn in other words two more
extra trading strategies and again I'll
walk you through the
trading rules the entries the exits the
risk management and chart examples so
you can quickly understand the concepts
of these strategies and that's not all
because I would also like to give you
the PDF slides of this training the
trading strategies cheat sheets so you
can quickly recap the rules of this
different trading system and the back
test report of all these different
trading systems. So you can see the
winning rate, the losing rate, what is
the payoff ratio, etc. All the back test
report given to you in this training for
free. So everything is free over here.
Just go down to tradingwithra.com/go
or I'll put the link somewhere in the
description below or in the comment
section below. Just click on it. You'll
come to this page and you can get
started immediately. So with that said,
I wish you good luck, good trading. I
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