Index, Forex and Diversified Trading

using simple mechancial solutions

Brent Penfold trading since 1983
and helping others since 2001!

International Best Seller! Now translated into;
German, Polish, Japanese, Korean and Simplified Chinese.

Frequently Asked Questions
Can you explain the difference between IndexTrader and SpiTrader?
IndexTrader is SpiTrader renamed with four patterns removed, a slight twist to the trade plan and it trades global indices. Also you'll notice allot of the information  on my web for both SpiTrader and IndexTrader (including this page) is similar/identical ...and its because they are basically the same model. Please have a look at the background to both models.

Background to IndexTrader

I'm interested in purchasing IndexTrader and would like to check this out further. Can you supply me with names of 2 or 3 people who have purchased IndexTrader and could you also supply me with some professional references such as your broker?
No problems and you're more than welcome to contact my broker Matt Andronicus from MF Global.  

Do you trade IndexTrader yourself?
Yes I do. I commenced trading the SPI and HANG SENG in November 2002. As my account grew I starting trading more markets. I added the FTSE in October 2003, the NIKKEI in March 2004, the TAIWAN in June 2004, the E-MINI SP500 in April 2005 and the DAX in March 2006.

I have a couple of questions: Does index trader trade the same indices that IndexAlert trades? What is involved in working the system & what time commitment is required each day?? (I’m trying to get a measure of what’s involved). Could I use say a spreadsheet to determine if the orders are triggered (so I can update the Euro orders during my lunch break)? Could the data on say be used to determine if an order needs to be placed? Or do you use a particular data vendor? Btw I’m a private trader & currently an IndexAlert subscriber.
IndexTrader trades the same indices. Once you’re up and running I’d say it would take 15  minutes to collect your end of day data off the internet… either from FutureSource or directly from the Exchanges web site…which I prefer. Then it’s a matter of looking at each daily chart to locate the patterns and then prepare your orders. It only takes me 30 minutes a day (and I do it before I start my IndexALERT newsletter) but I’ve been doing it for years. Yes you could setup up a spreadsheet to hold your data and then have formulas that identify if a pattern exists. I prefer using the direct Exchanges and I give owners the links…but you could use FutureSource.

I have a few questions regarding your BBTT book. What is the main difference in methodology between BBTT and say your other models – IndexTrader, SpiTrader.
The main difference would be timeframe and style since they’re all 100% price pattern based trading methodologies. All the set-ups across SpiTrader, IndexTrader, BBTT, Key Level, IndexALERT and ForexALERT are based on 100% price alone. So the difference would be their timeframe and style. SpiTrader and IndexTrader are short-term systems where trades last between 1 to 3 days. BBTT and Key Level are medium-term trend trading approaches where trades last on average between 10 to 12 days. Although SpiTrader and IndexTrader do have continuation trend patterns they are predominantly counter-trend or swing trading patterns. BBTT and Key Level are trend trading methodology with a low 30% accuracy.

I have been looking at purchasing IndexTrader but then yesterday I looked at the section on your new Back to Basics book and I wondered why should I get IndexTrader over the book? To set the scene somewhat I am a complete newbie at futures trading, in fact any form of trading other than direct shares. However, I'd like to branch out into some other markets now, hence my initial interest in IndexTrader. I currently work full-time, with limited Internet access so a system that can be researched and implemented out of trading hours would work best for me. Given this scenario, should I continue with IndexTrader or would purchasing the book be a better option for me?
It’s a good question and the answer will depend on a number of factors. Firstly they are two different approaches. IndexTrader is a short-term system with a combination of swing and trend continuation patterns, with trades lasting between 1-3 days with an accuracy around 50%. BBTT is a medium-term trend trading methodology with trades lasting on average around 12 days with a low accuracy of around 33%. BBTT is best when you can afford to trade at least 10 markets…since with trend trading not all markets make money every year…so you have to have a portfolio approach to capture that market that has a good trending year. IndexTrader can be traded on 1 to 3 markets to begin with and therefore can be traded with a smaller account and with its shorter average trade length of between 1-3 days and higher accuracy…it is easier to trade. However IndexTrader is more expensive then one of my Back to Basics Trading books (BBTT or Key Level).

It’s not an easy decision. Although IndexTrader is better suited to the newer trader as it is easier to trade I’m reluctant to recommend it to you  as it costs (AUD4,500) a lot more. And I should say it costs more since it’s my oldest methodology that I make available to the public since I launched it 2001 and it's still going as strong as ever (which I believe BBTT will also demonstrate in time)! But then IndexTrader's continuing good performance is not surprising to me as I’m a trader first and foremost and not a dodgy system vendor or educator masquerading as a trader.

Anyway I hope this makes sense.

Performance of 13% return from Nov 03-Nov 04 (Index Trader).  Is there any correlation that you have found between the ASX markets performance and IndexTrader?  Considering over the same timeframe achieving 13% on the share market would have been criminal. (NOTE: this was sent to me at the end of 2004).
I haven't done any statistical correlation analysis however I hope my stuff is not correlated to any Share Market. My objective is to make absolute positive returns per month regardless of market direction. If you look at the following link you'll see IndexTrader's hypothetical equity curve continue to build while all equity markets dived after 2000!

And I'm very happy with my returns. 13% from Nov03-Nov04 is less than the ASX's 21% but then we've been in a very strong market since March 2003 .... for example Dec 04 completed the 7th consecutive higher quarterly high. Since 1982 (even before the 1987 crash) there has not been such a strong streak of consecutive higher quarterly periods. Since the account started to Nov 04 my results are +66% while the ASX over the same time has only managed +30%... in one of the strongest bull markets we have since in I'm happy. Will my good results continue? I don't know... but while my stuff keeps my wins on average greater then my losses I'll keep taking the signals.

How do your own results compare to what the system says should be achieved?
I started trading the SPI and Hang Seng in late November 2002 and my results are slightly better than the model as I avoided a number of losing trades (pure luck) as I stopped trading in February 2003 when I switched brokers and then during late March and early April 2003 when I got married and went on my honeymoon. At times I've had to switch the DAX signals on and off as my account balance has dipped below AUD50,000 and this has made it hard at times. I’ll send you a copy of my real time results.

How long have you been trading it privately?
I've been trading IndexTrader on the SPI and Hang Seng since late November 2002.

What sort of slippage do you experience on the local SPI contract?
I rarely get much slippage on the SPI and this is mainly due to IndexTrader's entry and exit techniques…...however I have at times experienced slippage when being stopped out and it is usually around 1 point...however the Hang Seng does give me more slippage when being stopped out.....usually 5 points and on some occasions +30 points!

Can you explain why you bother to sell IndexTrader when your hypothetical curves with money management show such impressive potential profit?
Good question. There were two reasons behind why I decided to release IndexTrader to the public.

Firstly, my initial motivation was to make available a robust methodology to private traders. 

As experienced traders know private traders have been, and still are being taken advantage of by slick promoters peddling trading courses/systems/software that has little value. 

The catalyst for me to release a system was a very public run-in I had with a well known Australian trading educator and purported professional trader in the later 90's. This person had previously been the General Manager of Australia's largest trader education company and in his bio he'd would always boast about having personally trained over 10,000 traders! Anyway this clash occurred on the WaveTraders forum and was very public. This person was, in my opinion, talking up a well publicised methodology which had no practical value except to sell books and trading courses. I took exception to this in that his spin had probably sent all the "newbie's" on the forum off on a wild goose chase when I felt this person also knew it had little value and in all probability did not use it himself in his own trading (if in actual fact he traded at all?). The only benefit I could see that he gained from the spin was to promote himself as being knowledgeable to the less knowledgeable members. 

I was so fired up that I declared on WaveTraders that I would go off and get myself licensed by ASIC, make available to the public a trading methodology (which was SpiTrader before its name change to IndexTrader), trade it myself and make available my real time results. By doing so I hoped, and still do, that it will encourage all other genuine promoters of trading courses/systems/software to become licensed by ASIC and actually follow/trade/use/implement what they push...i.e. walk their talk.

The second reason why I sell IndexTrader is the same reason as to why I trade…..and that is to make money. By selling IndexTrader I hope to build my capital faster so I can shorten the time it will take me to really begin to enjoy the power of money management.

In addition IndexTrader doesn't represent every system I trade so I'm not giving away everything I do. IndexTrader only represents a handful of the patterns I trade.

You said "By selling IndexTrader I hope to build my capital faster so I can shorten the  time it will take me to really begin to enjoy the power of money management."  I must be missing something about money management. I'm a bit confused as to why you would demonstrate trading without the money management. Wouldn't that be more of an enticement to prospective buyers given the improvement you document in your Money Management section? I thought money management was basically the deployment of stop-loss orders to ensure profits were protected and losses minimised (as much as stop-loss can offer). Your equity curve on one of your pages shows hypothetical results using money management. Somewhere on your site you mention that the methodology has a choice of conservative or aggressive stop-loss management. Why can't you "enjoy the power of money management" with whatever capital you have?
Money Management is indirectly linked to stop placement, but is not driven by stops.

I think you may be confused. 

When we trade we hope to do so with a robust methodology. 

Our methodology, if we hope to survive the markets should have 3 important elements. 

1. A set-up - what is our view of the market, should we be looking to get long or short? 

2. A Trade Plan - how do we articulate our view on the market eg.

  1. Ø      Where do I enter...where do I buy/sell?
  2. Ø      Where do I get out if the market proves me wrong eg my stop placement?
  3. Ø       If I'm right, where should I take profits .. my exit level?

 3. Money Management - given my account size and the amount of money per contract I'm risking on my trade, how many contracts can I afford to trade?

You see, stops are all about a methodology's "risk management", not money management. Money management tells us how many contracts we can afford to trade given our account balance. The greater our account balance the more contracts we should be able to trade. You will notice the Money Management charts start off flat and then arch upwards near the end. The reason for this is that is takes time for an account to grow trading 1 contract.  Once your account balance grows and you can then, according to your money management rules, trade more contracts, your account grows at a much faster rate.  So stop placement refers to a system’s "risk management", how much money will you risk per contract.

IndexTrader always trades with a stop.

Until my IndexTrader account balance grows I am restricted to just trading 1 contract. Once I step-up to two contracts then I’ll expect my account to grow at a faster pace with Money Management. And I must say I am actually using Money Management at the moment because according to my Money Management rules I can't afford to trade more than 1 contract.

As you say people will learn two Money Management approaches - one aggressive and one conservative. But these are money management techniques...not stop techniques.

Thanks for clearing up the difference between risk and money management. I’m keen to understand what was involved in the example money management equity curve. If your capital permits 2 contracts, does it mean that the same order is placed but with a quantity of 2 contracts?
Yes …. when your money management rules allow you to trade 2 contracts you trade 2 contracts per signal.

Am I right in saying that 2002 was a pretty bad year for IndexTrader on the SPI?
2002 was a difficult year for IndexTrader trading the SPI. Since reaching an equity high in February 2002 it suffered as the ASX200 was pushed lower. The results are disappointing on the SPI however you never know when a system will go into a drawdown for an individual market….. it can happen at any time...and it illustrates the importance of diversification through trading more than one market. Trading is more about following the process (e.g. the trade plan). If you can achieve this then the money should look after itself assuming the methodology doesn’t fall apart.

Thanks for your clear, honest answers.  Another IndexTrader question to help me understand what I would be purchasing. You mentioned that the methodology contains patterns. If an account permits 1 or 2 trades, do all patterns generate signals, or does one pick a pattern and use it exclusively ?
IndexTrader consists of a collection of patterns that produce on average 2 signals per market per month. IndexTrader is not interested in quantity but rather quality of trade potential. Each signal is taken unless two patterns generate a signal for the same day in the same market in which case only the highest ranked pattern’s signal will be traded. IndexTrader only allows you to trade one signal a day.

On the money management issue, I have another question. Does your methodology include a unique management scheme/approach? I mean, is that one of the reasons to buy IndexTrader? Or does one buy it primarily for the patterns? I'm in a bit of knowledge vacuum as to what it takes to get the curve going up exponentially steeper.
IndexTrader doesn't disclose a "unique" approach to money management. The approaches I discuss are the ones regarded as the preferred approaches by  professional money managers (the conservative approach) and the other by private traders (the aggressive one).

I believe the reason to buy IndexTrader is that it provides a complete approach to  trading. IndexTrader provides high probability set-ups (patterns) combined with a robust trade plan (entry/stop/take profits), money management and an original approach to trading psychology.

In addition IndexTrader has an historical statistical positive expectancy of over 30% for all markets combined. And lastly, but not least, another reason why I believe people purchase IndexTrader is that the developer (me) also trades his own system  ..... which is very unusual  in this business!

No doubt some of the owners have customised IndexTrader to make it their own or have just bought it for the patterns or trade plan or money management or trading psychology. However overall I believe people have purchased IndexTrader for its complete methodology.

I've been trading now for 20years having begun in 1983 when I joined Bank America as a trainee dealer. I can't say (although it does feel like it) that I have seen and tried just about every methodology there is to trading, however if I had access to the knowledge I have now, or a complete methodology like IndexTrader, then I wouldn't have received all the bumps and bruises that I’ve collected over the  years!

However, rather than hearing me blowing my own trumpet its probably better you contact some IndexTrader owners and ask them what they think.

The maths behind Money Management is really just means you trade more contracts as your balance increases and you decrease the number of contracts to trade as your balance falls from loses. It is essentially about momentum. The trick with money management is to stay in the game long enough so you can get your account up enough to take advantage of multiple contracts.

I can recommend my Trading The SPI book which has an excellent chapter on money management. It would definitely be worth your expense to purchase it. I hope this helps.

Thanks Brent. I won't bother you with any more questions until I've read it all. 3 of the 6 contacts you gave me have responded with positive things to say about you and your methodology while the other 3 haven’t responded as yet.
Pleasure and I'm glad you're enjoying it and once again don't hesitate to contact me if you have any questions.

Ok, I will bother you with one or two. If I wanted to check IndexTrader and back test it myself on the SPI, where would I get the  data ?
I send owners of IndexTrader a copy of my own data.

In the manual I strongly recommend owners to complete their own back testing to validate IndexTrader's trading results before they consider trading the signals. I encourage people to do this as they firstly need to prove to themselves that what they see on the web site regarding IndexTrader's historical performance is correct, and secondly, and more importantly, they need to develop their own belief system that IndexTrader has an edge. If people do their own testing and validate IndexTrader then they'll have more confidence in continuing to trade the system when they're in a drawdown.

Also what concepts are inherent in your patterns?
IndexTrader's patterns capture recurring "crowd behaviour". Although markets change over time peoples’ reaction to fear, hope and greed has not, and this is what IndexTrader's patterns try to capture.

You mentioned in your system description that the setups are based on patterns derived from end-of-day data. I've previously spent some time looking at such systems, and found that if you look at enough patterns, some combinations seems to work by sheer chance. My two questions are: 1) How can you be confident that these patterns are statistically robust and are not a fluke in the data? 2) Do you use symmetrical setups for longs/shorts, or are your rules for shorts different from your rules for longs? Thanks.
Concerning your first question I suppose, as you know, there are no guarantees any pattern will continue to perform into the future as well as they have in the past. That’s an unfortunate fact. However, if we are fortunate enough our patterns will maintain their edge going forward.

Concerning my patterns your question is a good one. How do I know they haven’t been a fluke? There are a number of reasons why I feel comfortable trading my own patterns. 

1. Accidental use of out-of-sample data
I’m not sure whether you have read the page discussing the background to IndexTrader? To cut it short, IndexTrader was originally called SpiTrader, had 8 patterns, and just traded the SPI (our Aussie Index contract). After a couple of years of people asking me whether it worked on other indices I finally collected the data and ran it over the major index contracts and was surprised and thrilled it made money on these foreign and out-of-sample data sets. On a closer scrutiny of the results I saw that half the patterns were marginal while the other 4 patterns were very profitable. I decided to remove the 4 poor patterns, keep the more robust patterns and added the foreign indices. So, by fluke, IndexTrader has shown to be robust by working on out-of-sample data. 

2. They work
I’ve found over the years an idea (trading approach) will either work or it won’t. IndexTrader works and makes me money. Will it continue to do so tomorrow? I don’t know, but while I continue to have a positive financial experience (money in the bank) I’ll continue to trade it. Also you will see IndexTrader has had a positive equity curve since its release in 2001 against a very nasty back drop of world equity markets being hammered. Many index systems fall apart in bear markets …but not IndexTrader.

Concerning your second question of whether I use symmetrical set-ups for longs/short the answer is yes and no. Of the 4 patterns there are 2 buy patterns and 2 sell patters. Two of the patterns are symmetrical (a buy and sell) while the other two are not (one buy and one sell).

I've read Van Tharp's book and according to him it would seem that 30  cents for every dollar is a little low for a system that only trades 2 or 3 times a month per market. Is that an incorrect view? Is the objective high-R trades? Is the system looking for the long trend or shorter term swings?
I believe IndexTrader's 30% positive expectancy is good.

In a perfect world it would be ideal to trade a system that generates a signal each day (per market) which would produce 20 odd signals per month.

Unfortunately IndexTrader is unable to do this.

In general terms if you have two systems with a similar expectancy, say 30% then the system which produces more signals (or opportunities) per month would be superior.

Although IndexTrader only produces on average 2 signals per month per market its still enough to allow people to build their account (assuming the methodology remains robust ... please refer to my real time results).

I believe the objective of trading is to manage your capital, not to be right or wrong in your analysis. To do this you do need a methodology that produces a positive expectancy. It's also preferable to have a simpler methodology over a complex methodology to avoid "curve fitting".

Now a system's expectancy is made up of it's accuracy and average win to loss ratio (or "R" multiples as Van Tharp puts it).

Since there are two variables...accuracy and average win to loss ratio...I would say neither is more important than the its their combination that creates the positive expectancy.

However, having said that, we traders are different from one another.

So one trader may prefer a high accuracy system with a small average win to loss ratio, while another trader may prefer a high average win to loss ratio (“R” multiple) while sacrificing accuracy.

So its difficult to say the objective is high "R" trades.

Although, once again in a perfect world, we would all like a robust methodology that had both a high accuracy rate and a high average profit to loss ratio (or "R" multiple).  I hope this makes sense?

IndexTrader is a short term trading system that can stay in a trade from between 1 to 5 days, with the average being 1 day.

To give me a little more feel for your system, could you overview say your stop  strategy. Is it based on equity%, volatility or combinations of things?
Unfortunately I can't tell you too much about IndexTrader because of its simplicity, if I did tell you a little then you'd know the whole methodology!

What I can say is that IndexTrader does not use a fix type stop. Markets are continually changing as their volatility jumps around the place. IndexTrader uses a dynamic stop that is a function of the market and not your equity account balance.

Can you give one liners to describe your 2 money management systems? Also, what's your basic strategy if you have positions in the spot period and rollover approaches.
I've already discussed a little about the Money Management, the only thing I can add is that its ultimately linked to the amount of money you have in your trading account and that you should reduce the number of contracts you trade as you lose, and  increase the number of contracts as you win.

IndexTrader’s™ manual specifically discusses issues surrounding contract roll-overs and what to do.

Do you offer money back if I don’t like your system?
Unfortunately I don't offer a money back guarantee. This is because once people have seen the model’s simple methodology it'll be permanently imprinted in their heads. Although they may be able to return the manual, they'll never be able to erase IndexTrader’s™ simple rules from their it's almost impossible for people to truly "give back" their purchase for a refund. I wish this could be otherwise but unfortunately its not the case.

Can you explain the difference between IndexTrader and SpiTrader?
IndexTrader is SpiTrader renamed with four patterns removed and four markets added.

I read through your web page and was fairly impressed with your trading model, but the price is quite expensive.  I would like to ask you a few questions if you don't mind regarding your system.
No problems.

Is the system provided in TS2000i code and is this code open?
Purchasers of the system receive IndexTrader's manual which fully discloses the model's simple methodology. Although I own TS4 I do all my own programming in VBA (Visual Basic for Applications) and so I don't have any TS code. Although code is not provided I'm confident in saying that IndexTrader's patterns would be easily programmable in Easy Language. If you have any trouble I'm sure I'd be able to assist you.

The performance statistics seem to suggest its only in a position for 1 day? 
This is correct, being a short term system IndexTrader, if its not stopped out immediately, is usually out of the market with its money within one day. The benefit of this is that traders don't have to be "in the market" all the time reducing their exposure to markets which are basically random and thus unpredictable in nature.

It seems hard to believe that holding the position for only 1 day that you could achieve about 50% wins and almost 2/1 avg profit/loss  ratio? Almost no system can maintain this sort of result.  Can you suggest as to credibility of these numbers and your belief into their sustainability in light of the fact so few systems are able to?
Good question. I can't give any creditability to IndexTrader's performance except to say that I trade the model, I make money and I make my real time results available. I believe the results I see. IndexTrader  continues to do well during both bull market and bear market conditions since its release. I believe the results I see.

With markets and systems there are no certainties that both will continue to behave in the future as they have in the past. I always believe my worst, and therefore IndexTrader's worst draw down, is just around the corner. 

Your question I suppose cuts straight to the robustness of IndexTrader's methodology. Although I can't say whether IndexTrader will continue to have an edge in global indices going forward (as no one with any experience in trading and systems can say that about any model) I can say that IndexTrader's ability to continue to extract profits from global indices when it was originally designed to trade the SPI speaks volumes for it's simple trading methodology. 

In addition when I originally designed IndexTrader in 2000 it was during a period of unprecedented bullishness. 

Global equities had been in a bull market since the earlier 1980s without a sign of slowing down. 

By perfect timing (NOT) I released IndexTrader just after the global indices had topped out in 2000 and since then equity markets have been slaughtered.

The SP500 was down over 50%, the SPI 20%, the Hang Seng 50%, the FTSE 50% and the DAX 75%. 

During this incredible BEAR period over the last couple of years IndexTrader, which was designed during a BULL market to originally trade the Australian SPI contract, has out-performed world equity markets with a rising equity curve

As I've said there are no guarantees that IndexTrader will continue to perform in the future however I believe it's ability to extract profits from out-of-sample global indices during a bear market speaks volume for its simple trading methodology. 

Can IndexTrader be back tested by the purchaser and get the same results as you show?
Yes. In addition to purchasers receiving full disclosure of the model they also receive a copy of my data to help them validate the historical results.

How many people trade IndexTrader and how does it change the results?
I’d like to keep to myself how many people trade IndexTrader. To date I have not experienced any problems with people trading my models. If you would like to receive a copy of my real time results let me know and I’ll send you a copy.

Can you provide a list of the trades that you have taken on the SPI?
Unfortunately I don't and the reason for this is that it wouldn't take much effort for someone to reverse engineer IndexTrader's simple methodology from its trading signals. I hope you can understand my reluctance. However I can say that purchasers of IndexTrader do receive an excel file containing all trade signals. If you wish I'd be happy to give you names of owners of IndexTrader who you could contact about the model.

You don't show any numbers for just the SPI beyond Mar 2001 when you say you released the system to the public. Is there any reason for this? 
No, that was the time I released IndexTrader to the public.

Can you supply the statistics for the Mar01-Apr03 period please?
No worries, I'll send IndexTrader’s™ latest performance statistics in a separate excel file.

You mention it is pattern based.  Is it also a breakout type system?
IndexTrader's methodology is broken down into set-ups and a trade plan. The set-ups are purely pattern based (with no parameters) and identify possible buy or sell opportunities. The trade plan provides clear and precise entry and exit rules. The set-ups are purely pattern based.

Does the system actually have no optimiseable parameters?
The set-ups are purely pattern based with no parameters. IndexTrader doesn't use indicators of any sort so there aren't any parameters to "tweak".

Have you had a lot of experience at designing and implementing trading models?
I first traded the SPI in 1986 and only started to make money (and lose less money) since I became totally mechanical in 1998. I wouldn't call myself an expert system designer (and would be suspicious of anyone who did…since in this game you’re continually learning) however I've collected enough knocks and battle scars over my 20 years in trading to know what certainly does NOT work, and what does have a small edge.

As your method is very short term, do you believe its performance will be adversely affected (SPI only here) by others following your rules?
I'm not sure. In theory if every trader wanted to enter where IndexTrader did then we wouldn't have a market (since everyone would want to buy/sell at the same level) and therefore the model would not work. So far, since I have restricted IndexTrader to private traders, it hasn't been a problem.

Is your method based on just day only session of the SPI?
Yes, all the patterns' set-ups are based on day only session prices represented by the Open, High, Low and Close.

I hope you don't feel flooded by so many questions :-) I don't mean to grill you, but as your selling price is so high I feel I must do due diligence to justify the price. I would much appreciate if you could take a few moments and respond to my enquiries as best you can.  I may have other questions following your reply but I think I have covered most things here for now?
No problems. I hope this answers your questions and please do not hesitate to contact me again if you have any further questions.  

I am interested in your system but am worried for several reasons. How many have you sold and how many more do you intend to sell? Personal questions, I know but relevant since you are asking a 'not small' investment for this pattern.
Good question. I've been asked this question a number of times and is one I'd prefer not to answer because as you say, its a personal question. However your question does address an important concern for people considering IndexTrader.

Will the model maintain its edge as it becomes popular among private index traders?

As you know I can’t give you any guarantees that IndexTrader will continue to perform in the future as well as it has in the past, however I can share with you my thoughts.

Straight off its my intention to remove IndexTrader from public sale once;

  1. 1.      I believe too many people are entering at my levels and causing me too much slippage or,
  2. 2.      The patterns appear to be losing their edge due to too many people being on my side of the trade.

As I trade IndexTrader its not in my interest to let too many people trade at my levels and this is why I restrict IndexTrader to only private traders.

I actually had CTAs order copies IndexTrader and I have refused them as I didn't want to risk the possibility of being trampled by an "elephant", even though I believe it would have only been a remote possibility due to IndexTrader’s simple, yet robust, methodology.

How many sales of IndexTrader will this take before too many people will cause me too much slippage and reduce IndexTrader’s edge?

I don’t know.

However I believe it may not become a problem for a number of reasons; 

  1. Liquidity of entry and exit levels. There are certain points in market structure that are more liquid than others, where for less liquid points slippage can be a problem. IndexTrader's simple methodology has identified entry and exit levels which are very liquid spots in the market thereby minimising potential slippage.
  2. Multiple markets. As far as I’m aware current owners of IndexTrader don't trade all the indices. It appears to me traders stick to their local markets and if they venture off-shore they won’t go far. For instance I started with only trading the SPI and Hang Seng. So as IndexTrader becomes popular with private traders I don't believe there will be a heavy concentration of orders on any particular market as traders spread their interests across a few markets as they start to build their accounts.
  3. Personalised trade plans. Traders have a tendency to slightly modify systems to make them their own. Some traders may adjust IndexTrader’s entry and exit levels to be in either earlier or later, thereby removing activity around the trigger points. Alternatively some people may have their own Trade Plan and only purchase IndexTrader for its patterns.

Anyway these are just my thoughts and as I’ve said as soon as I feel I'm being disadvantaged on my fills or the patterns appear to be losing their edge I'll remove IndexTrader from public sale.

Honestly there are a few simple pattern systems around that are well known. I hope this is not a pivot system OR a Donchian/Turtle style buy the 21 bar high/low system.
I can assure you that IndexTrader is not a Support and Resistant Pivot system or a Channel Breakout System like the Turtle 4 week (20 day) breakout model.

IndexTrader’s patterns are surprisingly simple and only contain daily bars with the Open, High, Low and Close. IndexTrader's patterns will jump off the charts once you start looking for them.

Disclaimer: Active trading carries a high level of risk and may not be suitable for all people. The high degree of leverage provided by futures can work against you as well as work for you. Before deciding to trade you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your risk capital and therefore you should not trade money that you cannot afford to lose. You should be aware of all the risks associated with active trading and seek advice from an independent financial adviser if you have any doubts. Past performance is no assurance of future performance.

Under Chapters 6D and 7 of Australia’s Corporations Act 2001 I am authorised to carry on a financial services business to provide general advice on futures to Australian wholesale clients. Accordingly any opinions, conclusions and or other information expressed by myself do not contain personal advice. Visitors will need to with, or without the assistant of a person licensed to give personal advice, to determine whether any general advice expressed by myself is appropriate for them given their particular needs, financial situation and investment objectives.