P&L Report on Futures Truth's Universal System & Why Did Its
Performance Decline & A Simple System I Propose that May Not be
Doomed to Fail - Vern Nord
As I looked over the June/July issue of Futures Truth, I noticed they added Futures Truth Universal LT while still keeping the old Universal System. The Universal LT System is long-term and does not trade as often as the Universal System. The Universal LT System appears in both the Top 10 Since Release Date and the Top 10 for the Past 12 months.
I want to stop here and say that my comments are not made to criticize Future Truth, John Hill or John Fisher in any way. I merely want to point out general problems with all system testing.
In the December 92 issue of Technical Analysis of Stocks & Commodities, John Sweeney wrote a review of the original Universal System, he said "Well, who would know better how to put together a system? Futures Truth, headed by John Fisher, has seen the guts of many systems and monitored their performance for more than half a decade."
I personally would agree with this statement and Futures Truth tested this system on 22 different commodities over a 9-year period. John Sweeney said that results for all 17 commodities across all nine years were uniformly in the black.
Futures Truth optimized 5 parameters for each commodity to obtain these results, but they were unable to find any set of parameters which were profitable on New York Futures Exchange contracts, cotton, gold, cattle and lumber. If Futures Truth couldn't find a system that's profitable on every commodity, then maybe system hacks like myself should stop looking for a system that does it all. About a year later, Futures Truth showed a detailed report on Universal with the results on the best six commodities. The report showed a total profit of over $520,000 for the six commodities over a 10-year period from 1-83 to 4-30-93.
If you were looking to buy a system that would make you $50,000 a year, so you could quit your job and enjoy the good life, you would be disappointed.
For the last 12 months, this system has been loosing money overall. This is typical of all systems, and this is why so few systems show up on both of Futures Truth lists. Very few of the Top 10 since release still show up on the Top 10 for the last 12 months, and the reason is that commodity prices are non-stationary. Any type of system is doomed to fail. The only question is, how soon will it fail.
It is like someone said recently, "It is the only game where they keep changing the rules and nobody tells you." Now that I have said that, I would like to suggest an exception to the rule. The one possible exception would be a simple system based on relative strength similarly to the one used by Timers Digest on the DJIA and Fidelity Select Funds.
Take the concept of relative strength and rate all commodities compared to the CRB Index to come up with a list from strongest to weakest. You could buy the 2 or 3 strongest commodities and sell the 2 or 3 weakest ones. Add some money management rules and a trailing money management stop of $400 to $500 and you are in business.
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