READ THIS FIRST (The Easy
Start)
Dear ULTRA
user,
Thank you very much for your order!
As you may know, 2004
is a massive expansion phase for the ULTRA product of which we are in the early
stages. Every few weeks we’ll be
releasing downloadable version with new systems, data, and functions. Our plans are very exciting and I feel
positive that you will be very impressed.
We are documenting all
the ULTRA 8 additions at: http://www.ultrafs.com/u8sts.htm
For those of you who
are new or a bit rusty when it comes to ULTRA, we have an online guide designed
to get you up-to-speed as fast as possible at the New User Website at: http://www.ultrafs.com/newuser.htm
ULTRA can be a little
intimidating at first. The program is
really easy to use and will eventually save you enormous amounts of time. This document is designed to give a very
brief overview of some simple low-risk strategies to get you
started. We have kept this as short and
simple as possible. Keep in mind that
many of the details that we skip over quickly in this document are covered in
depth in the ULTRA User’s Guide. The idea behind this document is to just give
you a quick
glimpse of ULTRA’s power.
What follows in this
document are good
simple strategies.
However, the strategies we detail in ULTRA’s Recommended Strategies at the New User
Website are better and are exactly what we use to manage our
money. You will soon have the knowledge
to easily understand the
Indicators, Systems, Strategies, and Diversity
ULTRA is made up of systems and strategies. A System
is simply a mechanical formula that generates buy and sell signals based on
some input of data. This differs from an
Indicator which does not have
specific buy/sell criteria
A Strategy is made up
of one or more systems and the rules that dictate what the investor should do
upon a system buy or sell signal. (We
also refer to strategies as Composite
Strategies or simply Composites.)
Example of a simple Indicator:
Breadth Ratio = NYSE
Advancing Issues / NYSE Declining Issues.
(Notice that there are no buy/sell rules in an indicator.)
Example of a Simple System:
If the current month
is November, December, January, February, March, April, then BUY.
If the current month is May, June, July, August, September, October, then SELL.
This simple system above
is actually significantly better than buy and hold. However, just as you would never put all your
money in one stock, you would never
bet all your money on one system.
That system could go horribly wrong and you would be hurt badly.
Therefore, we advocate
Diversity
of Strategy. That is,
having multiple strategies each diverse in logic and each responsible for a
part of your investment capital. So if
one strategy goes badly hopefully the others will perform well and you’ll
profit overall. This important idea has
served ULTRA users very well for many years.
Some simple ULTRA Strategies
C_SMAY.TXT
This is the simplest
profitable strategy of which we are aware and is defined in the file,
C_SMAY.TXT in your ULTRA folder. It
consists of two systems, MONTH and SEAS2.
Both of these systems have parameters that the user can modify (you’ll
learn how to do this later). In this
strategy we have the systems configured as:
MONTH
·
If the current month is November,
December, January, February, March, April, then BUY.
·
If the current month is May, June, July,
August, September, October, then SELL.
SEAS2
·
Buy at the close on the 2nd to
last trading day of October. Sell at the
close on the 3rd trading day of November.
·
Buy at the close on the 2nd to
last trading day of April. Sell at the close on the 3rd trading day of
May.
(Both
of the SEAS2 components are invested five days.)
The strategy (C_SMAY)
will buy the SP500 if either of
Historically
·
Returned 10.3% annually while the SP500
has returned 8.0% annually.
·
Had a maximum temporary loss (maximum
drawdown or MDD) of -26% in 1974 compared to the SP500 which suffered a -49%
drawdown in 2002.
Because the annual
gain is higher and the maximum drawdown is much lower than the SP500, this simple strategy has drastically
outperformed the SP500 on a risk-adjusted basis.
Since we would
C_COT1.TXT
This strategy uses the
very simple COT1 system. You can inspect the formula for this system
via ULTRA’s Systems/Formulae menu
item. The strategy C_COT1 also has a
seasonal component using a variation of ULTRA’s MONTH and SEAS2
systems. This sum of
these three systems result in:
BUY
the SP500 if the COT1 system is on a buy signal and we are not in the period
beginning on August 1st and ending on the 2nd to last day
of October. Otherwise SELL.
Historically from
·
Returned
+17.3% annually.
(Compared to 9.5% for the SP500)
·
Had a maximum drawdown of only 10.2% back in 1990.(Compared to -49% for
the SP500 in 2002)
·
Has had an unbelievable 92% winning
trades.
Imagine if you were to
trade C_COT1 with a leveraged index fund such as Rydex
Nova which seeks to return 1.5 times the SP500.
Your annual gain rises to +25%. At 25% annually, $10,000 turns into over $400,000
in just 17 years.
C_SEASP.TXT
This strategy uses
seasonal systems and two other systems YROC
and PENT. (Formulae available at ULTRA’s System / Formula menu item. This strategy is a bit more complicated and
is defined in C_SEASP.TXT which you can open via ULTRA’s
File/Open/Composite Definition (C_*.txt). C_SEASP.TXT contains:
@sys
hday,2 *ND *O J1=0,B1=4,S1=2,
PD=0,B2=4,S2=1, EA=1,B3=4,S3=3, ...
MD=1,B4=2,S4=1, J4=1,B5=3,S5=2,
LD=1,B6=2,S6=1, ...
HA=0,B7=2,S7=1, VD=0,B8=2,S9=2,
TG=0,B9=2,S9=2, ...
CH=0,B10=2,S10=5,ODE=1
seas2,2 *ND *O M1=0,B1=1,S1=3,
M2=1,B2=2,S2=3, M3=0,B3=1,S3=3, M4=1,B4=2,S4=3,...
M5=0,B5=1,S5=3, M6=1,B6=2,S6=3,
M7=0,B7=1,S7=3, M8=0,B8=1,S8=3,...
M9=0,B9=1,S9=3,
M10=1,B10=2,S10=3, M11=0,B11=1,S11=3,...
M12=0,B12=1,S12=3,
TG=1,TS=3, ODE=1
period,2 *ND *O P1=1,M1=1,D1=13,H1=4,
P2=1,M2=3,D2=13,H2=3, P3=1,M3=7,D3=6,H3=4,...
P4=1,M4=11,D4=19,H4=4,
P5=1,M5=12,D5=27,H5=7,ODE=1
yroc,1 *ND *OY2=1
pent,1 *ND
@ALL
0,0
1,0
2,100
3,100
@end
Obviously there’s no
way you can understand what all the above means at this point. But briefly, the @SYS section specifies the systems, their weights, and their
optional parameters. The @ALL section details the positions to
be taken based on how many systems are on buy signals. (0=0%
long and 100=100% long). This is
covered in detail in the ULTRA User’s
Guide on Page 11 and you’ll eventually find it easy to understand.
The
Historically from
Returned +15% annually
with a maximum drawdown of only 12.8% in
1990. Over the
same period, the SP500 gained 8% annually and suffered a 49% drawdown in 2002.
Interesting
Characteristics of These Three Strategies
With these strategies,
we limited ourselves to:
1.
Systems that have been in real-time use for many years.
2.
Systems that are
either purely calendar-based or weekly. (Weekly systems are always analyzed over the
weekend and traded at Monday’s close).
Therefore, these
strategies can be easily operated by downloading data over the weekend and
running the systems. That is a time
commitment of about one minute per
week.
Again, this is just a
brief Introduction…
Don’t worry about
trying to understand every detail in this document. It will become clear as you follow the
tutorial style of the ULTRA User’s Guide.
Getting the Recommendations of These Strategies in Seconds
ULTRA can run systems
and strategies in every way you can imagine, historically, graphically, etc
(All detailed in the ULTRA User’s Guide). But the fastest way to get the
recommendations of your strategies is via ULTRA’s Timing/Run All Composite Strategies menu item.
You can run all three
of these Strategies very quickly using the definition contained in the file
CA_EASY.TXT which simply consists of:
c_smay.txt,1
c_seasp.txt,1
c_cot1.txt,1
Using the Timing/Run All Composite Strategies
menu item our computer took 20 seconds
to generate the report below.
------------------------------------------------------
Run All
Composites (C:\U7-16\CA_EASY.TXT) (
------------------------------------------------------
YTD
Performance
-------------------------------------------------------------------
Composite POS Gain
MDD IDX Gain
MDD
(YTD) (YTD) (YTD) (YTD)
-------------------------------------------------------------------
c_smay.txt,1 +0% 0.9%
-5.7% SP500 -1.3%
-6.1%
c_seasp.txt,1 +0% 0.9%
-5.7% SP500 -1.3%
-6.1%
c_cot1.txt,1 +0% 6.3%
-1.2% SP500 -1.3%
-6.1%
-------------------------------------------------------------------
AVERAGES +0% 2.7%
-4.2% -1.3% -6.1%
-------------------------------------------------------------------
2003
Performance
-------------------------------------------------------------------
Composite Gain MDD
IDX Gain MDD
(YTD) (YTD) (YTD) (YTD)
-------------------------------------------------------------------
c_smay.txt,1
12.3% -14.1% SP500 26.4%
-14.1%
c_seasp.txt,1
29.4% -5.1% SP500
26.4% -14.1%
c_cot1.txt,1
19.4% -3.7% SP500
26.4% -14.1%
-------------------------------------------------------------------
AVERAGES 20.4% -7.6% 26.4% -14.1%
-------------------------------------------------------------------
There is much
information in this report (covered on Page
19 In the ULTRA User’s Guide). Briefly,
·
In the YTD Performance section, the POS
column is the position that each
strategy is recommending. As you can see
all three are 0% long.
In other words, they are 100% cash earning risk-free interest.
·
The next column is the Year-to-date (YTD) Gain for the strategy followed by the Maximum Drawdown (MDD) for
the strategy.
·
The IDX
column is the vehicle that is being traded (SP500) and the next two columns are
the SP500’s YTD results for comparision.
Now imagine:
Multiple
strategies each trading different assets such as the SP500, NDX, RUT, XAU,
Bonds, and being able to access the recommendations of those strategies in just
seconds. That is
the power that ULTRA can offer you.
Good luck and Thanks again!
Your time learning ULTRA will be an investment and time well spent.
Sincerely,
Steve Hunter, ULTRA Financial Systems Inc.