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Soaring Silver And A Systematic Plan

03/25/11 08:44:12 AM
by Donald W. Pendergast, Jr.

Not many markets are as hot as the silver market is right now, but regardless of a given market's temperature, you still need a logical, systematic way to trade it.

Security:   SI
Position:   N/A

On Thursday, front-month silver futures reached an intraday high of $38.15, proving once again that a trend in motion should never be second-guessed. The Agent Argent silver futures trading system managed to grab a nice portion of the recent thrust higher from the mid-$36 area, with one of its real-world subscribers netting more than $5,000 per contract (before commissions and slippage) on the trade. See Figure 1.

FIGURE 1: SILVER. Hypothetical, walkforward trade results can be impressive, but the big question for serious traders is this: Can you maintain the personal level of commitment necessary to trade a mechanical, fully automated trading system, without letting your emotions get in the way?
Graphic provided by: TradeStation.
The system was trained on data from portions of 2009 and 2010 and the trade shown was made using unseen data that the system had never been exposed to before. As you already know, the walkforward results of a trading system are what counts, as that is the only trading result that matters. If the system performs well in real life, with real money deployed, well, that's the goal that all of your back-and-forward testing has been focused on all along. Sometimes a system doesn't really gain traction when let loose to trade on virgin data, but if the system logic is sound, if it can adapt to unexpected market conditions and if you can manage to faithfully take every trade signal, you may find it to prove out according to your expectations.

As far as helping a trader stay disciplined and focused, a trading system (one that makes money in the real world, that is) can be one of the most important allies that a serious trader can ever hope to have. You'll have the comfort of knowing that your system is statistically viable and that it will have a strong probability of generating profits over the long haul, despite periods of drawdown and discomfort. Done consistently, you may also find that systematic trading will ease (if not eliminate) the stress levels normally associated with discretionary or "shoot from the hip" kinds of trading activity. And while there is absolutely, positively no way anyone can guarantee that Agent Argent can or will ever meet or exceed such profitable results going forward, at least it's reassuring to know that it's a real-world system that is live and not just a visual depiction of a computer simulation or game that is meaningless when it comes to the serious business of taking real trades in the never-ending quest for real profits.

Donald W. Pendergast, Jr.

Donald W. Pendergast is a financial markets consultant who offers specialized services to stock brokers and high net worth individuals who seek a better bottom line for their portfolios.

Title: Writer, market consultant
Company: Linear Trading Systems LLC
Jacksonville, FL 32217
Phone # for sales: 904-239-9564
E-mail address:

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