Among the markets suitable to be traded with little capital is Lean Hogs, a futures belonging to the Meat sector that can prove very useful to further diversify our portfolio. In this video, we’ll present two strategies that take advantage of the trend-following inclination of this market while taking into account its characteristics.

By watching the video, you’ll discover:
-The characteristics of Lean Hogs that you should know before trading this market (liquidity, session...)
-The rules of the two strategies
-The recent performance of the strategies (out-of-sample from 2017)

Enjoy! 😎

Transcription

Hello everyone, and welcome back to another one of our videos. One of the coaches at Unger Academy here and this is our usual chat about the strategies in our portfolio that have performed the best over the last period.

Alright, so this week, I want to talk to you about a slightly lesser-known market.

I'm talking about Lean Hogs, a futures that trades roughly 10,000-20,000 contracts daily. And that’s certainly a small number compared to other futures contracts, such as the SP 500, which has over a million contracts every day.

Lean Hogs futures are products that are only traded for just a few hours a day.

Again, unlike some of the larger and more liquid futures that are open 23 hours a day,

these futures have trading sessions that only last a few hours per day. The session of Lean Hogs, in particular, goes from 8:00 a.m. in the morning to 1:00 p.m.

So, basically, the session of these futures lasts just 5 hours.

That is why, for these products, we recommend using a fast time frame. In the two strategies that we are going to be looking at today, for example, we use just 5 minutes.

But let's go and see the first one of these strategies. It is based on a trend-following approach and enters on the breakout of a price channel made up of the last twelve bars.

Now, since we're going to be working on a 5-minute time frame, these twelve bars represent a price channel of the highest high and the lowest low of the last hour.

On an upside breakout of this channel, we’re going to buy, while on a downside breakout, we’ll sell a Lean Hogs contract.

This strategy has got a time window that starts at 9:00 a.m. in the morning, a few minutes after the session begins, and lasts until 11:00 a.m. in the morning, which means that it lasts about 2 hours.

The results of this strategy, which was developed in 2017, as you can see have been very positive.

We can see that this market continues to behave as it used to do in the past, namely in a very trend-following way.

Lean Hogs it's a market that tends to follow trends and it's also very scalable but, unfortunately, it also has its pitfalls… because as we mentioned earlier, it's not very liquid and this could lead to remarkably high slippages.

The average trade of this system isn’t very high because it makes many entries, but it’s still enough to cover what might be the commission and the slippage costs.

The annual results also show an excellent out-of-sample period, especially in 2021 and 2022.

Alright. Ok, let’s turn to the next strategy. It's somewhat similar to the strategy that we’ve just seen.

As it’s also a trend-following strategy and places orders on a price channel based on the last twelve bars, so the last trading hour of the market,

but in this case, it will limit trades to just one hour instead of two, as in the first strategy.

And again, we're going to be starting at 9:00 in the morning, which is 1 hour after the start of the session on this product.

This strategy doesn’t close the trades at the end of the session but at the end of the week.

So, when the last day of the trading week comes, so when Friday comes, all the positions of the strategy are closed, whether they are long or they're short.

This strategy was developed in 2017 as well. However, unlike the previous one, 2021 wasn’t such bright a year.

However, we can still see that it also performed pretty well in 2022.

If we take a look at the last 500 days, we can see that the equity line looks quite erratic and perhaps not so steady. However, the strategy does still produce some satisfactory profits.

Again, the average trade is quite small, although we can see that is a bit larger than that of the previous strategy. Anyway, also in this case, it is enough to cover the commission and slippage costs that come with trading in this market.

An interesting thing about Lean Hogs is that it's a product that can be traded even with stop losses that aren’t too large.

For example, the strategy that we’re looking at has a stop loss set at $550 and a take profit at $2,000.

So, you can definitely try it out as well! Although it's not a… you know, a popular market, Lean Hogs still can be very useful to diversify our portfolio.

If you are interested in systematic trading, remember that you can find a very handy link in the description of this video. From there, you can watch a free presentation by Andrea Unger, our founder and the only 4-time world trading champion, or you can get our best-selling book "The Unger Method" by just covering the shipping costs, or you can even book a free strategic consultation with a member of our team.

And please, if you like this video, leave us a Like! Subscribe to our channel and go and click on the notification bell so you can stay updated on all our new and upcoming videos.

And that is it for today! Thanks so much for watching and we'll see you soon in our next video! Bye bye!

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