LeBEAU
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Big Dipper Bond Trading System
by Charles LeBeau and Terence Tan

$2,169 AVG. WINNING TRADE - 88% WINNERS - LONG

Trade By Trade Report

Background: This system is a long only system that was designed to trade during a period of rising bond prices. Rather than waiting for breakouts above already high prices, we felt we would be more comfortable trading systems designed to buy only on dips. There are already many trend following systems that will buy breakouts and we didn't feel that we needed another one.) Hence the "25 x 25", "Big Dipper" and "Little Dipper" bond trading strategies were designed to buy on weakness rather than strength. The "Big Dipper" entry strategy is similar in logic to the "25 x 25" system in that both are intended to enter in the direction of a strong trend during a minor correction. The "Big Dipper" trading system uses an entirely different set of trend indicators and a different entry trigger that is much more sensitive than the "25 x 25" system. Although the system enters on dips, it is a trend following system that lets profits run to high levels as evidenced by the fact that the average winning trade is more than $2,000. (The average losing trade is $1712.50.) The average bars (days) in winning trades is 28 while the average bars in the losing trades is 14.

Strengths of the system:Most trend following systems lack accuracy with only 30 to 40% winning trades. This low winning percentage is usually due to whipsaws and letting open profits turn into losses due to an inefficient exit strategy. We have discovered several effective methods that overcome many of the typical exit problems. These strategies allow profits to run while maintaining a very high percentage of winning trades. The "Big Dipper" system we are offering is a trend following system with test results that show 88% accuracy over the last ten years. (Only 85% over the last 15 years.) We believe the superb exit strategy is a key ingredient and is one that can be applied to many other markets as well as bonds. The "Big Dipper" exit strategy is significantly different than the "25 x 25" exit strategy. It incorporates a breakeven strategy and other protective measures that give us a great deal of comfort. Over the last 15 years the hypothetical test results produced over $110,000 in profits with a maximum intraday drawdown of only $4,700.

Weaknesses of the system: This is a long only, bull market system that never goes short. It has a built in long term trend filter that clearly defines bull markets so it won't trade often (if ever) when the trend is down. However, the system should   generate about three to five trades per year in a bull market. With such a high percentage of winners we wish we could make it trade more often but the entry is very selective and the exit strategy tends to hold big winning trades for a long time.

Summary: We believe this will be an excellent trend following system for bull markets. The test results show unusually high accuracy, a very high average trade and a low drawdown. It should be a good system to run concurrently with the "25/25" system and the "Little Dipper" system. We would suggest a starting capital of about $7,000 per contract. The strategies revealed in this system have application in many other markets and we believe the knowledge incorporated in this system is worth much more than the price.