STC Katsu Trading System

Two Systems in One - Counter-trend and Trend-following - 66% Winning Trades

Background: "KATSU" is the Japanese word for VICTORY. We consider the Katsu Yen system to be a victory in our search for a counter-trend system that will make money while our trend-following systems may be temporarily losing money or out of the market. This highly adaptable system is also capable of being an excellent trend-following system that buys dips in an uptrend and sells rallies in a downtrend. The Katsu Yen system is strong enough to be used as a stand alone system or it can be used in conjunction with the 7-11 and First Sword Yen systems as part of a multiple system strategy.

Strengths of the system: The Katsu system does not require trends to trade profitably. It has been designed to trade back and forth within a broad trading range by selling near the top of the range and buying near the lows. However the system is highly adaptable and during trending periods the system quickly adjusts to become an excellent trend-following system. The system is reasonably accurate with 66 percent winning trades (78 winners out of 119 trades), with the winning trades clearly larger than the losing trades by a factor of 1.81 to 1. The average trade (win and loss) was $1,029 which we believe is a very acceptable number. Trading one contract since 10/17/88 would have resulted in a hypothetical gain of $122,550 with a maximum drawdown of $8,700. Although it is unlikely to be repeated, this system demonstrated a remarkable ratio of consecutive winning and losing trades. During our test data the Katsu system showed 17 consecutive winners with only 4 consecutive losers. The profit factor overall (gains divided by losses) was a healthy 3.45.

Weaknesses of the system: The Katsu system has a relatively large historical drawdown of $8,700 which could foreseeably be exceeded in actual trading. The system was designed to be traded in the day session futures market in Chicago. The Yen trades actively in the cash market on a 24 hour basis so much of the important price activity is taking place while the Chicago futures markets are closed. Therefore the Yen futures market is often prone to wide opening price gaps and sudden surges in volatility. Because the Katsu system will sometimes become a trend-following system there is some possible duplication or overlap with our other Yen systems . The good news is that when the Yen is trending strongly, having three well-designed trend-following systems in operation can be extremely profitable. The bad news is that having multiple positions in the same direction would create a great deal of risk if the market were to change directions abruptly.

Summary: The Katsu Yen system was specifically designed to enhance and complement the 7-11 and First Sword Yen systems and it is particularly noteworthy in terms of its special ability to trade profitably in non-trending periods. However the system also displays excellent trend-following characteristics which make it a highly profitable dual-purpose system that could easily serve as an excellent stand-alone system. We think the simple logic of the entries and exits is very sound.

Performance Summary: 010/17/88 to 06/30/99
Includes $100.00 per trade deducted for slippage and Commissions
Total Net Profit	$122,550.00	Open Position P/L	$600.00
Gross Profit	$172,537.00	Gross Loss	$-49,987.50

Total # of Trades	120	Percent Profitable	66%
# Winning Trades	78	Number Losing Trades	41

Largest Winning Trade	$14,075.00	Largest Losing Trade	$-2,875.00
Average Winning Trade	$2,212.02	Average Losing Trade	$1,219.21
Ratio avg Win/ avg Loss	1.81	Avg Trade( Win & Loss)	$1029.83

Max Consec. Winners	17	Max Consec. Losers	4
Avg Bars in Winners	10	Avg # bars in Losers	5

Max Intraday Drawdown	$-8,700.00
Profit Factor	3.45	Max Contracts Held	1
Account Size Required	$8,700.00	Return on Account	1409%

Performance Summary: Long Trades 10/17/88 to 06/30/99
Includes $100.00 per trade deducted for slippage and Commissions
Total Net Profit	$38,287.50	Open Position P/L	$0.00
Gross Profit	$61,500.00	Gross Loss	$-23,212.50

Total # of Trades	46	Percent Profitable	59%
# Winning Trades	27	Number Losing Trades	19

Largest Winning Trade	$14,075.00	Largest Losing Trade	$-2,875.00
Average Winning Trade	$2,277.78	Average Losing Trade	$-1,221.71
Ratio avg Win/ avg Loss	1.86	Avg Trade( Win & Loss)	$832.34

Max Consec. Winners	5	Max Consec. Losers	2
Avg Bars in Winners	8	Avg # bars in Losers	5

Max Intraday Drawdown	$-5,675.00
Profit Factor	2.65	Max Contracts Held	1
Account Size Required	$5,675.00	Return on Account	675%

Performance Summary: Short Trades 10/17/88 to 06/30/99
Includes $100.00 per trade deducted for slippage and Commissions
Total Net Profit	$84,262.50	Open Position P/L	$600.00
Gross Profit	$110,037.50	Gross Loss	$-26,775.00

Total # of Trades	73	Percent Profitable	70%
# Winning Trades	51	Number Losing Trades	22

Largest Winning Trade	$12,550.00	Largest Losing Trade	$-2,762.50
Average Winning Trade	$2,177.21	Average Losing Trade	$-1,217.05
Ratio avg Win/ avg Loss	1.79	Avg Trade( Win & Loss)	$1,154.28

Max Consec. Winners	17	Max Consec. Losers	3
Avg Bars in Winners	11	Avg # bars in Losers	5

Max Intraday Drawdown	$-4,825.00
Profit Factor	4.15	Max Contracts Held	1
Account Size Required	$4,825.00	Return on Account	1746%

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