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Technical Approach
The Tactical Trading System has managed all of the Tactical Commodity Trading Program's
futures funds and accounts since its 1981 inception. It is the result of
over 29 years of ongoing research, evolving very slowly over time.
It uses a quantitative, technical approach described in detail in
our Disclosure Document. Its continuous performance since 1981 is reflected in the Tactical
Commodity Trading Program table and graph.
Projected Source of
Profits
Hedgers trade futures to transfer business risk and receive insurance
against adverse price moves. Tactical believes that hedgers must
therefore be net losers in futures over the long run, effectively
paying an insurance premium for the risk reduction they receive,
the "risk premium."
The Tactical Trading System
is based on capturing this risk premium. By attempting to fade hedgers
at technically determined price levels the System buys strength
and sells weakness, the opposite of hedging behavior, actually losing
money on the majority of trades. The winning trades, less frequent
but larger on average, occur when prices strengthen or weaken well
beyond expectations, forming trends.
Trend-following
a Natural Result
By fading hedgers, the System becomes
a trend-follower by default, but not by design. This is in contrast
to trading systems that are specifically designed to capture trends.
Our Trading System targets extra long-term price movements, not
uncommonly holding positions (with rolls) for over a year. This
frequently requires riding out significant counter-trends, contributing
to volatility in returns.
Portfolio Composition
The Tactical Trading System trades an
extremely well balanced and diversified portfolio of commodities
and currencies with low correlation to stocks and bonds. Markets
are selected to be as distinctly different from each other as possible.
Physical commodities such as grain, food, metal and petroleum futures
make up a little over half of the portfolio. Financial commodities
such as currency and interest rate futures make up the rest.
Money Management
The System uses proprietary money management
and risk control strategies designed to cut losses short and let
profits ride. Individual market risk and overall portfolio risk
are constantly reassessed. The initial risk on any given trade is
kept small, averaging about 0.5% of account equity. Statistical
boundary limits are established as stop-loss protection for the
overall trading program.
Aggressive Posture
The System adopts an aggressive investment
posture. It is volatile near-term in attempts to make above average
long-term gains. There is no guarantee that the System will make
money despite its successful historical performance. An investor
could lose a great deal of money. A Tactical investment is not for
everyone.
Robust Strategies
Our Trading System uses only robust trading
strategies. These are techniques based on general, successful trading
principles. They are not optimized and rarely exactly fit any specific
market situation. The system parameters are elegantly small in number
and identical across all markets. Robust strategies enhance potential
long-term success but at the cost of near-term volatility of returns.
From Tactical's standpoint, that is a great trade.
Investing with Tactical is
designed for sophisticated investors who are able to bear a substantial
or entire loss of their investment. Before seeking this advisor's
services read and examine thoroughly the Disclosure Document.
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