Ok, here's an objective update on Oscar. I gave a summary of his results in previous posts so this is in addition to those. To catch everyone up, I'm in the S&P markets everday and I trade my own system (taught by a retired floor trader) blah, blah, blah. However, a little over a month ago I called Oscar and asked him about what system he was using. He would not tell me (which I think is just fine, I didn't expect him too). However, he told me his system was doing well (I posted earlier that from Jan thru April 30 he's up about 70-80 points on the S&P's). I told him I was interested in his system but wasn't fond of black box systems (he agreed and said that he wouldn't be able to trade a black box system either). Again he told me his system was doing well. I agreed and told him I'd wait to trade his system after a nice draw down. He kind of chuckled and said I better not wait for it. (Ok, for those of you who actually do trade...this statement is a little over the top). So, I thought...what the heck, I'm curious at this guys confidence thus I'll throw $10,000 at his system and trade it for a month that way I'll see what he's doing and be able to report my thoughts after using real money. (ok, you can call me an idiot for doing this, but before you do, I have no problem throwing $10,000 at something to try it out, I do it all the time in the businesses I run, and I never trade any amount of money I'm not prepared to lose!). Anyway, the month is over and I'm down about 10-15 points (probably would have been down a little more but there were a few things he did that I couldn't manage to follow and I saved a little money). Everything he is doing seems pretty normal except two things (I'll get to them). However, he's up 70-80 points in 4 months (jan-april). That seems normal for a system that's hot (I had a 6 week stretch that got to 83 points profit per contract). His trading in the last month is probably a 10-20 point loss (remember, this is only the S&P's I'm talking about). This seems normal, I have NEVER seen a futures system that made a good profit every month. (The system I run had a 36 point drawdown this year during a 5 week period, but it's been profitable for the last 5 years...at the end of the year).
Now, what's he doing? Well, he primarily sells into rallies and buys into dips that hit pivot point areas. His profit targets are 2 pivots away (but he'll take profits early at the 1st pivot quite often) and his stops are 1 pivot away. His directional index seems to be a combination of technical analysis and price patterns. However, it seems that price patterns are more important (check out Linda Raschke and Toby Crabel's work for direction of price patterns when swing trading) because there are times when he definitely would override obvious technical analysis. However, he would say things like after 3 up days there's a high probability of a down day next (this is similar to Raschke and Crabel's work) and he would mention certain days of the month and holidays being bullish or bearish (via Larry Williams). Overall, it is possible that this is a profitable system if backtested, however, no backtest results have been disclosed (which is obviously a concern). I personally cannot have enough confidence in a system to trade it unless it's been backtested in different market environments because I always assume the system is going to blow-up when the dynamics of the market changes (and the market of course will change the day I start trading it!!!!!!!!...just the way my luck would work).
Ok, now for the two things that do not seem normal.
Number 1: This is a minor issue but would be difficult for many. He buys dips and sells rallies but uses no technique to help confirm a reversal (for instance, a period of consolidation or a breakout of a 1 or 5 minute bar etc.) Thus, he has a tendency to buy daggers which could be difficult for most traders to deal with, especially new traders.
Number 2: This is a major issue (in my opinion). His stops can be as large as 10-12 points. Now before you guys totally freak out. It's important to know that MOST of the time he moves his stops relatively quickly, when the move starts back in his direction. However, when the move never reverses at the pivot area the stop is hit. For instance, this happened on the morning of June 6 (when he went long) at 2 or 3 in the morning (and as you know the market did not reverse...and still hasn't). SO...for new traders please be careful. It is VERY possible that Oscar will someday have 4 to 5 losers in a row. It happens to the best of us. However, with a 10 point stop even 3 to 4 losers in a row will cause a margin call on a $5,000 account. (I know...I can't believe anyone would have such a small account but some people do, especially if they are new and are not use to real drawdowns yet). Most money management principles beg you not to risk more than 1-2.5% of your capital on a given trade (I'm not going to quote all the sources on this statistic..simply read any book about trading and you'll get it). Thus, even if you use the high end 2.5% risk that means you need a $20,000 account per contract if you want to use 10 point stops ($20,000 x 2.5% = $500 which equals a 10 point stop). So, please consider having a $20,000 account to trade the Oscar system. However, keep in mind that this will cut your annual returns in half vs. a system that has a maximum stop of 5 points where you could trade 1 contract per every $10,000. (I'm writing this for new traders, I realize all experienced traders can do all this analysis in their heads).
Well, my month is over, my curiosity is satfisfied, I will not take any more trades. I will continue to follow my own system that I've backtested by hand and with a computer for a number of years and fits my personality and would encourage everyone else to consider doing the same. In fairness to Oscar, he suggests you make your own decisions, but I'm not sure what he means by that when he gives specific trades everyday and says he takes them. (Of course the normal reaction is for a new trader to take the trade signals the day after Oscar has a winner and not take the trade the day after he has a loser, and you can imagine what this does). In summary, I have nothing against Oscar, he has the right to do what he's doing and traders also have the right to be careful and make their own choices. Oh, by the way, I also have nothing against Stealth (ok, he's a "little" rude), but I remember about 10-15 years ago I almost got suckered into investing $50,000 into a black box that a well known trader (I'm sure all of you have heard of, but I will not slander) had created (before I knew anything about trading). After I decided NOT to put the $50,000 into the account I called the broker 6 months later to ask how the system was doing. The broker told me the investors lost all their money. You see, I can respect Oscar (I was a startup entrepreneur too a couple decades ago). However, I can also respect Stealth's concerns (of course not all his methods of communication) because I was once almost duped out of $50,000. I hope this post is of some benefit to anyone truly interested in an unbiased opinion on Oscar.
P.S. Based on the posts I've read in this thread I'm totally prepared to be bashed by people who both "love and hate" Oscar. However, rest assured it will not bother me either way, this is only one guys humble opinion, and anyways......"My stops are in and Emotions are OUT!" LOL..................
GOOD LUCK TRADING TO ALL
