Hey everyone! One of the coaches at Unger Academy here and welcome back to our usual chat about the strategies in our portfolio that have been performing the best over the last period.
Alright, so this week we’re going to be talking about two markets that are quite scalable and thus quite attractive even for those who have little capital. I’m talking about Feeder Cattle and Lean Hogs.
They both belong to the so-called Meat market, which is among the oldest markets among futures, and they respond very well to trend-following strategies.
So let’s go and see the first strategy that I want to show you today, which is this one here. As for the entry conditions, we’re going to wait for the breakout of the high of the current session to go long. And as you can see, this breakout should occur within this time window here, which goes from 10:30 am until noon, so the system will basically only be able to trade in this hour and a half.
I also remind everyone that the Feeder Cattle future is only open for very few hours. Indeed, it opens at 08:30 am exchange time, so Chicago time, and closes at 1:05 pm. So, it’s certainly a pretty tight session.
Also, on this market I recommend that you use small timeframes and avoid opening positions during the first and last bars of the session, as usually they are quite volatile and very messy.
This strategy, as mentioned, will go short in the opposite situation, that is to say at the breakout of the low of the current session, also within our time window.
The historical data that I’ve loaded here start from 2017, while we developed this strategy in 2018. As you can see, after a very good initial phase, it went through a year and a half in drawdown. However, then in 2020, and we can say to this day, it resumed working pretty well.
This trend-following strategy is one of the most profitable and effective ones when applied to the Meat markets, and Feeder Cattle is certainly no exception.
Now let’s move on to the next strategy. As I told you before, this strategy trades on Lean Hogs, which is the reference price for pork belly. I know some people may smile about this, but it’s a commodity that is widely consumed in Anglo-Saxon breakfasts and consequently, the reference price of this commodity is also decided and negotiated by the market.
This is also a trend-following strategy, so just like the previous one. However, in this case, we’ll go long at the breakout of the highest high, and go short at the breakout of the lowest low, of the last 12 bars. With bars being calculated at 5 minutes. So, basically, we’re going to identify a kind of channel over the last hour, and on breakout of this channel, we’ll enter. If we break to the upside, we’ll enter long. If we break the channel to the downside, we’ll try some short entries.
This strategy was developed in 2017 and since then it has virtually seen only positive years. So also in this market, it works very well indeed. As I was telling you before, these markets are pretty scalable and can be approached potentially with stop losses around, let’s say, $500 to $1,000, which is pretty scalable compared to other futures for example like Crude Oil or even Gold.
So, guys, be sure to go and give it a try!
If there is anyone among you who is interested in the world of systematic trading, I suggest that you go and click on the link in the description of this video. From there you’ll be able to watch a presentation by Andrea Unger or get our best-selling book by just covering the shipping costs, or even book a free call with a member of our team.
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Bye-bye for now everyone and I will see you soon!
