John F. Ehlers
President of Mesa Software, Inc.
Program(s) Developed: eMiniZ Alerts System
Interview Date: November, 2006
Interviewed by John F. Gallwas, Founder of Striker Securities, Inc.
John Ehlers, President of Mesa Software, Inc. pioneered the Mesa method of market cycles; Ric Way, the CTO for the TAOS (Technical Analysis Object System) Group, is a system software engineer, and Marty Johnson is President of Beacon Solutions, Inc , a software development and integrations company. Ehlers, Way, and Johnson have developed the eMiniZ ™ trading system for the e-mini index markets.
By way of introduction, John Ehlers, an Electrical Engineer with BSEE and MSEE degrees from the University of Missouri, and who did his doctoral studies at George Washington University, has been a private trader since 1976. The work he did as a Senior Engineering Fellow at Raytheon provided the base for his discovery of the Maximum Entropy Spectrum Analysis in 1978, which led to the development of his first computerized trading system.
John Gallwas: John, you hardly need any introduction to our readers, but who are Rick Way of TAOS Group and Marty Johnson of Beacon Solutions?
John Ehlers: We form a synergistic team of complimentary talents required to provide a quality trading service over the internet. I am the scientist who developed the algorithms for the trading system. Ric is an accomplished programmer who developed one of the first Terminate and Stay Resident programs (remember SideKick?). Ric is now an expert at programming in dot-net technology, a mandatory skill for a dynamic website like www.eMiniZ.com. Marty has charge of all the day-to-day operations of the website and customer service.
John Gallwas: What is their contribution to eMiniZ ™ programs?
John Ehlers: It probably comes as no surprise that the trading signals provided by eMiniZ are based on the cycles measured in the index futures. I developed the algorithms to sense when a cycle peak or valley is reached, and then provide the trading signal based on the anticipation of reversion to the mean. Ric has implemented these algorithms in his TAOS middleware and fully automated the eMiniZ to not only provide the signals on the website but also to automatically send out email notifications of those signals. He has also programmed the automatic generation of the historical bar charts, system performance and statistics, and a Monte Carlo analysis of profit and drawdown. Marty runs our customer support department. I am constantly amazed at the wide range of questions that knowledgeable traders can have, and Mary is able to give these questions the attention they deserve.
John Gallwas: How would you classify the eMiniZ ™ trading systems and what should our readers know about their operation?
John Ehlers: I don’t like the term, but most traders would recognize eMiniZ as a swing trading system. The system is always in the market, both long and short. When the bottom of a cycle is reached the trading position is reversed from short to long. Similarly, when the peak of the cycle is reached the trading position is reversed from long to short. Historically, eMiniZ trades about once every two weeks. I feel that trading systems should be analyzed with statistics similar to those used in gaming. The ratio of gross winnings to gross losses is Profit Factor, and this is similar to the payout. Percent Winners is self explanatory. These two parameters – Profit Factor and Percent Winners are the measures from which a wide variety of other statistical descriptors can be derived. eMiniZ typically has a high Profit Factor – in excess of 2:1 – and typically has greater than 60% winning trades. These metrics lead to robust and consistent performance.
John Gallwas: Although the eMiniZ ™ programs have a relative short operational history, what are your risk / reward expectations for the E-mini S&P 500 index? John Ehlers: I think the best descriptor of reward and risk are contained in our Monte Carlo analysis. In this analysis we take the actual (but hypothetical) trades over the last four years because these conditions are the most relevant to current market conditions. We put these trades into the proverbial hat and draw them from the hat until we reach a year’s worth of trades. We then put those trades back in the hat and repeat the process 10,000 times. This way we simulate 10,000 years of statistical history. The result is a statistical display of annual profit that has nearly a Gaussian probability distribution and a drawdown display of the maximum annual drawdown that has nearly a Rayleigh probability distribution. This analysis enables the traders to assess not only the most likely profit and drawdown, but also the statistics of the risk. For example, if the trader wants a 2% chance of a margin call he should have the dollar amount of the 2 Sigma drawdown in his account.
John Gallwas: Where can our readers find information on the systems and the pricing matrix?
John Ehlers: First let me say we offer a free 30 day trial at www.eMiniZ.com. When traders sign up for this trial they will receive a 20% discount off our standard price if they enter promo code XYZ1234. This discount is courtesy of Striker Securities, Inc. To answer your question directly, traders can click on the “Membership” section of the toolbar at the top of the home page, and click again on “Membership Benefits” on the dropdown menu. They will then be taken to a page that explains our benefits and pricing.
John Gallwas: Do you and any of your associates personally trade any of the eMiniZ ™ programs?
John Ehlers: Yes, of course, I trade eMiniZ in my own account at Striker. I find it interesting that Ric, who has never been a futures trader, has become a convert after seeing the performance both hypothetically and in real time. He is now in the process of opening his own account.
John Gallwas: Is there anything in your “What’s New” file you can share with us?
John Ehlers: I have traded futures for about 30 years, and love the opportunities afforded by the leverage and fast execution in liquid markets. eMiniZ has been so successful in futures that we are just weeks away from having a similar subscription service for traders who want to trade the index ETFs – SPY, DIA, QQQQ, MDY, and IWM. We also have plans to provide signals for trading the options on these ETFs. Further down the road, we see opportunities to provide signals to folks who want to trade in their IRA, but are constrained from trading futures or selling short in their IRA accounts.
This interview is for informational purposes only and is not intended to be
a solicitation of any kind. Trade only with risk capital. The risk of
trading can be substantial and each investor and/or trader must consider
whether trading systems are a suitable investment.
There is a risk of loss in trading. It is the nature of commodity and securities trading that where there is the opportunity for profit, there is also the risk of loss. Commodity trading involves a certain degree of risk, and may not be suitable for all investors. Derivative transactions, including futures, are complex and carry the risk of substantial losses. Past performance is not necessarily indicative of future results. Please read additional risk matters on our web site, www.striker.com. It is important you understand all the risks involved with trading, and you should only trade with risk capital. This communication is intended for the sole use of the intended recipient.
About this report The information and links on this website are for informational purposes. The risk of trading can be substantial and each investor and/or trader must consider whether this is a suitable investment. Past performance, whether actual or indicated by simulated historical tests of strategies, is not indicative of future results. Striker is a member of the National Futures Association ("NFA"), the Managed Funds Association ("MFA"), and the National Introducing Broker Association ("NIBA"). Striker is registered with the Commodity Futures Trading Commission ("CFTC"), and was formerly registered with the Securities Exchange Commission ("SEC"). Additionally, Striker is a former member of the Financial Industry Regulatory Authority ("FINRA"), and the Securities Investor Protection Corporation ("SIPC"). FINRA is the largest non-governmental regulator for all securities business in the United States. Please read Striker Disclosure Statement for the additional disclosure.
The trading performance cited throughout our web site is based on actual trading history, unless otherwise noted. The starting account balance is based on the system developer recommendation. Striker tracks actual performance by recording and maintaining each trade ticket for each system generated. The performance information assumes that no additions or withdrawals have been made. The rate of return for all systems disclosed in the Striker Report is cumulative from the day the system actually started trading at Striker. We maintain a "life" track for all 3rd party systems. We do not necessarily base our records on any particular client account. No one particular customer has achieved these results. The percentage returns reflect inclusion of commissions and fees.The actual percentage gains/losses experienced by investors will vary depending on many factors, including, but not limited to: starting account balances, market behavior, the duration and extent of investor participation (whether or not a client takes all signals for a system) in the specified system and money management techniques.
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