The Striker Report

John Gallwas: Futures "day-trading" is generally defined as entering the market with either a long or short position and liquidating that position before the market closes for the day. Whereas "swing-trading" is where position may be held for days, weeks, or even months. What led you to focus exclusively on the development on day-trading systems?

David Flores: Basically I got tired of watching positions that ended the day green only to find them (shockingly) red in the morning. Not a great way to start a day. A lot can happen during the overnight session. The world is interconnected like never before and news travels so fast that unforeseeable events can have detrimental effects on your account. Sure, an overnight event can be a positive thing if you're positioned right, but the name of the game is to focus more on risk than on profit! There is no solace if your great trading system that performs well most of the time loses half of your account in one day! Another benefit of day-trading is the fact that your system generates more trades during the same timeframe than a swing-trading system does. A larger number of trades allows me to gain more confidence in my system as I have a larger pool of data that I can use in my testing process which includes walk-forward testing and unique methods of optimization that attempts to eliminate curve-fitting as much as possible.

John Gallwas: Tell us about the 25 year road that led you to becoming a successful trading system developer?

David Flores: I was first fascinated with the markets back in October of 1987 a.k.a. "Black Monday". Believe it or not, it was my FIRST day as an employee of the IBM corporation. I don't remember how much IBM shares lost that day, but in the back of my mind I wondered if this was some kind of omen. It took me a long time to tell people that maybe, somehow I was the reason IBM had taken such a dive on that ignominious day! I had a great career at IBM, I loved software development! It's a great career for anyone that loves interesting problem/puzzle/spatial challenges (probably one of the reasons I've been addicted to chess since I was 6 years old). Needless to say, my answer to your question can be summed up as follows: software developer + interest in the markets = trading system developer. The rest is history!

John Gallwas: Many of our readers like the "action" of day-trading and the fact that there is no "overnight" exposure. As a trader who personally trades his own systems, please tell us the pros and cons they should consider before getting started.

David Flores: I love action too! That's something I didn't mention in my previous answer. I really do hate waiting around for trades. I'm just too impatient to watch a system that trades once a month. Worse yet, those types of systems usually have very wide stops so you obviously have to have a larger account to trade them with. Secondly, you have to evaluate the efficacy of that type of system with only a handful of trades. I have more confidence in a system that generates more trades than one that generates less assuming, of course, that the proper testing of the results has been performed and anticipated costs of trading have been accounted for (i.e. slippage and commission). Because of the higher frequency of trades, a day-trade system must overcome more of these costs than a swing-trade system. I love day-trading! I want to see the results of my efforts. The sooner the better!

John Gallwas: Describe the computerized futures day-trading systems you currently offer and what our readers should know about each?

David Flores: First of all I want to state that all of the systems I provide to the public are traded in my own personal accounts. I vehemently believe that as a vendor, you must trade your systems in your own accounts. Otherwise, you're more focused on "making-money-selling-trading-systems" than "making-money-trading!" I currently offer the Passion ES system at Striker and its performance is tracked in my personal account. The Passion ES system was aptly named as I saw trading as the ultimate problem-solving challenge. I live every day thinking of ways I can improve my trading systems. Hence the name "Passion". Passion ES is a day-trading system that opens and closes trades during regular open session hours (8:30 AM - 3:00 PM CST). It calculates targets and stop losses dynamically but the maximum loss on a single trade is limited to $500 (which I just recently incorporated and does not hurt performance). It is an active system and is possibly a great addition to a portfolio of systems that trade longer term. The basic premise of the system is to catch the start of a trend using several filters and an indication of directional movement. The directional movement indication is unique and the most important aspect of this system. What started out as a very good idea has grown into a solid trading system. I've made about 28 revisions to this system since its inception in 2006. Most are very minor but some have provided significant improvements. And by revisions, I don't mean changes to the code necessarily, but also changes to my testing process, my optimization process, and procedures that reduce curve-fitting. Other systems I offer include Passion TF, Passion CL, Passion EC, Passion GC.

John Gallwas: Do your systems require periodic updating and if so is it scheduled or event driven?

David Flores: I optimize my systems periodically and do not optimize based on event-driven data. I believe that reoptimizing based on event-driven data ends up introducing the curve-fitting effect I try to avoid. I have separate optimization cycles for each of my systems that are influenced by the number of trades each system generates. If the market "seems to be changing" I don't optimize. Instead, I allow my systems to continue trading as I believe I've built enough robustness into my systems to perform well in dynamic settings.

John Gallwas: Is there anything in "what's new" you can share with us now?

David Flores: I have recently provided Striker my Passion TF day-trading system that trades the Russell 2000 futures contract. It is based on the same successful premise as my Passion ES system. I do have other systems I've traded for years and am very excited about providing them to Striker as well. These include Passion CL which is a crude-oil day-trading system and Passion GC which day-trades the gold contract and Passion EC which day-trades the Euro. What isn't "new", is the passion I have for day-trading, it will be with me forever!