Strategy Spotlight: EF Futures
Any results mentioned or shown are based on simulated or hypothetical performance that have certain limitations. Please read the bottom of this post for full disclosure and important warnings. Past results are not necessarily indicative of future results. Most people lose money when trading. These results are based on statistics that were current as of August 14, 2018, when this interview and article were edited.
This week we spoke to Collective2 Trade Leader Emanuele Frisa about his S&P Emini Futures strategy EF Futures. In order to highlight more strategies, and actually have a chance at honoring the weekly part of this series, we have switched to publishing the pieces in a straight-forward interview format.
Emanuele Frisa gets to do what he loves.
Tell me about your strategy. Is it algorithmic, or discretionary?
“Most of my strategies are algorithmic. On Collective2, I run one strategy that is partially discretionary, but even in that case, all of its trading decisions begin with an algorithm-generated signal. So there’s a bit of human discretion, but at its core it’s mechanical.
Most of my strategies make fewer than 100 trades per year. Sometimes, depending on volatility and overall market conditions, I can trade up to 20 times per month, but that is not common.
As far as what I trade, I’m a huge fan of the S&P500 “E-Mini” futures contract.”
Why the E-Mini?
“Because it offers great liquidity, and excellent fills. One thing that beginning traders overlook is how important slippage and commissions are, over time. Choosing the right instrument to trade, and the right broker to trade it, is half the battle of creating a winning strategy. That’s why I stay away from brokers offering CFDs and similar contracts. Even though they are allowed in Europe, why play games trading some make-believe unregulated contract with high trading costs? I’d rather trade the most liquid instruments in the most well-regulated market.”
My mentors were much more aggressive traders than I am today. That’s okay, of course; everyone’s style is different. Personally, I prefer a more risk-averse approach. The point is: learn what you can from really smart people, and then — once you understand and internalize what they’ve taught you — adapt it to fit your own personality and trading style.
Have you ever considered trading stocks or ETFs?
“Yes, I have been working on some strategies which will trade these instruments. I hope to begin offering them on Collective2 soon.”
One ongoing debate at C2 regards the use of stop-losses. Do you believe in using them?
“I always use stop losses. But how “tight” they are varies. It depends on current market volatility. I generally use ATR (Average True Range) as the basis for my stops. They are really effective, in my opinion. ” (Editor’s note: stop losses may not limit losses in all market conditions.)
This chart is based on simulated or hypothetical performance that have certain limitations.
See bottom of this post for full disclosure and important warnings.
Tell us your story.
“Oh my, that is a very broad question. Okay. I was born in northern Italy, near the Swiss border.
In high school I first learned programming. I learned Cobol at school — that’s how long I’ve been doing this!
Anyway, I continued my studies in computer science before going to Milan, where I joined the large American consulting firm Accenture.
At Accenture I worked on computer systems for big insurance and banking firms. That was my first real exposure to the markets, and to trading, and I was immediately hooked.
By the way, it took me years to become a professional trader (assuming I am one now!) You need to learn a lot. The psychological component of trading is very important, and one that is most difficult to learn.
I happened to be very lucky. In 2011, I had the opportunity to follow three American traders. They helped me to learn professional techniques and approaches; it’s surely thanks to them that I’ve become a profitable trader. I adapted what they taught me to my own personal style and approach. For example, my mentors were much more aggressive traders than I am today. That’s okay, of course; everyone’s style is different. Personally, I prefer a more risk-averse approach. The point is: learn what you can from really smart people, and then — once you understand and internalize what they’ve taught you — adapt it to fit your own personality and trading style.”
What is your typical day like?
“I still live in northern Italy. I commute between Milan and my birthplace (which is not too far away). My days are divided between my entrepreneurial activity and my trading. As an entrepreneur, I focus on the tourism industry. As you probably know, tourism is a huge “export” for Italy. But over time, trading has taken up more and more of my day. Which is a good thing, of course, because I love it so much.”
What do you love about it?
“I love the nature of trading. It’s a continuous challenge. It’s you versus the markets. But it’s also you versus you. Trading can be a lonely activity, and can inspire self-doubt. But it can also inspire a large ego. The secret is to understand yourself, and to use both of these emotions to improve.”
How did you discover Collective2?
“I was working in Milan and a colleague showed me Collective2. It was love at first sight!
Over the years I’ve had the chance to see the C2 platform grow and evolve. I think the C2 team has done a great job. There is nothing else like it on the web.”
Any closing thoughts?
“Well, I just want to say something about these times in which we live. I think about this a lot: I have a computer in a data center near Chicago, which sends orders to the CME futures exchange, and also is connected to Collective2 in New York, which in turn shares my trading talents with people located all over the world. And I’m living and working in Italy. It’s an amazing time to be alive!”
Interactive Brokers LLC is a registered Broker-Dealer, Futures Commission Merchant and Forex Dealer Member, regulated by the U.S. Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC) and the National Futures Association (NFA), and is a member of the Financial Industry Regulatory Authority (FINRA) and several other self-regulatory organizations. Interactive Brokers does not endorse or recommend any introducing brokers, third-party financial advisors, hedge funds or Auto Trading Service Providers, including Collective2. Interactive Brokers provides execution and clearing services to customers. None of the information contained herein constitutes a recommendation, offer, or solicitation of an offer by Interactive Brokers to buy, sell or hold any security, financial product or instrument or to engage in any specific investment strategy. Interactive Brokers makes no representation, and assumes no liability to the accuracy or completeness of the information provided on this website.
For more information regarding Interactive Brokers, please visit www.interactivebrokers.com.
Past results are not necessarily indicative of future results.
These results are based on simulated or hypothetical performance results that have certain inherent limitations. Unlike the results shown in an actual performance record, these results do not represent actual trading. Also, because these trades have not actually been executed, these results may have under-or over-compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated or hypothetical trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profits or losses similar to these being shown.
In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk in actual trading. For example, the ability to withstand losses or to adhere to a particular trading program in spite of trading losses are material points which can also adversely affect actual trading results. There are numerous other factors related to the markets in general or to the implementation of any specific trading program, which cannot be fully accounted for in the preparation of hypothetical performance results and all of which can adversely affect actual trading results.
Material assumptions and methods used when calculating results
The following are material assumptions used when calculating any hypothetical monthly results that appear on our web site.
- Profits are reinvested. We assume profits (when there are profits) are reinvested in the trading strategy.
- Starting investment size. For any trading strategy on our site, hypothetical results are based on the assumption that you invested the starting amount shown on the strategy’s performance chart. In some cases, nominal dollar amounts on the equity chart have been re-scaled downward to make current go-forward trading sizes more manageable. In these cases, it may not have been possible to trade the strategy historically at the equity levels shown on the chart, and a higher minimum capital was required in the past.
- All fees are included. When calculating cumulative returns, we try to estimate and include all the fees a typical trader incurs when AutoTrading using AutoTrade technology. This includes the subscription cost of the strategy, plus any per-trade AutoTrade fees, plus estimated broker commissions if any.
- “Max Drawdown” Calculation Method. We calculate the Max Drawdown statistic as follows. Our computer software looks at the equity chart of the system in question and finds the largest percentage amount that the equity chart ever declines from a local “peak” to a subsequent point in time (thus this is formally called “Maximum Peak to Valley Drawdown.”) While this is useful information when evaluating trading systems, you should keep in mind that past performance does not guarantee future results. Therefore, future drawdowns may be larger than the historical maximum drawdowns you see here.
Trading is risky
There is a substantial risk of loss in futures and forex trading. Online trading of stocks and options is extremely risky. Assume you will lose money. Don’t trade with money you cannot afford to lose.