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| Becker Asset Management,
LLC ("BAM") utilizes mechanical trading systems and risk management models
for all trading programs that have been developed by the principals
of BAM. The strategies are designed to take advantage of short,
medium and long-term movements in the futures markets while keeping
risk to a minimum. The strategies employed do not attempt to analyze
economic fundamentals or predict the direction of markets.
In developing its trading strategies, the Advisor undertook trading on both a discretionary and systematic basis; the results of this and a great deal of research and development reinforced the Advisor’s opinion that computer-based trading strategies are preferable to a discretionary approach in the trading of futures markets. The main reasons for this is that firstly, many of the uncertainties associated with human emotion are eliminated, and secondly, thorough back and forward testing of strategies can be conducted which allows the trader to develop a suitable risk management environment in which to trade a system or systems. While the Advisor maintains that the optimal method of trading is by the use of a systematic trading approach, in the event of unique market conditions the trading models may be overridden and the discretion of the Advisor may be used to ensure that certain risk parameters are adhered to. BAM’s trading programs and strategies operate on two levels. The first part of the strategy involves the use of two trading systems operated simultaneously. |
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The use of multiple systems also decreases the reliance on any one market
or trading strategy to produce consistent trading profits. The combination
of these strategies, which are applied predominantly over short, medium
and long-term time frames, will perform in both volatile and erratic
or trending markets. The Advisor defines ‘short-term’ as being positions
that are open for less than a month.
The second part of the trading strategy involves strict risk management procedures that are used in order to achieve trading returns with the least possible risk. The understanding of risk is essential in trading mechanical systems over a wide range of futures markets. Risk is analyzed on a market basis and used to regularly balance the portfolio of contracts being traded at any given time.
System in Place Today
BAM trades multiple systems over multiple time frames. All systems
can be used on any time frame.
Approach:
BAM's approach is 95% quantitative, statistical and systematic. Discretion
is used to trade markets in which BAM believes to have better technical/fundamental
understanding than systems alone. Due to this approach, there is little
style drift in BAM programs.BAM makes trading decisions using proprietary
technical trading models, which analyze market conditions. Clients are
cautioned that since the trading models are proprietary, it is not possible
to determine whether BAM is following the models or not. There can be
no assurance that the trading models currently being used will produce
results similar to those produced in the past.
BAM's trading models are designed to detect and exploit short, medium and long-term price changes, while also applying risk management models and portfolio management principles. BAM believes that utilizing multiple trading models provides an opportunity in changing market conditions and is most beneficial when multiple contracts in each market are traded. It is possible that one trading model may signal a long position while another trading model signals a short position in the same market. It is not BAM's intention to offset those signals to reduce unnecessary trading.If the signals are or are not simultaneous, both trades will be taken and, since it is unknown whether both positions would prove profitable, in retrospect, one or both trades will appear to have been unnecessary.But there are times when both trading systems are profitable trading in opposing directions.It is BAM's policy to follow trades signaled by each trading model independently of the other models.
Research & Development
R&D of existing models and new models are being conducted continuously.
Moreover BAM continues to identify optimum money management, risk, and
order placement strategies as well.
BAM attributes its long-term performance to its research methods. In BAM’s research efforts, we continue to research techniques that will identify and circumvent choppy markets and keep the trend following system out during these periods. BAM believes their current trading systems allow for opportunities to help performance in non-trending markets but continues to look for new ways to minimize equity swings without compromising returns.
All the models tested are robust using multiple time frames with few parameters. BAM uses statistical techniques that include analyzing, risk-to-reward analyses, correlation, sector analysis and drawdown analysis. BAM’s approach to developing new trading models happens several ways. (1.) Modify existing parameters of current systems, (2.) begin with a clean slate testing new ideas both on a trend and countertrend basis. (3.) Test other trading methodologies not similar to existing ones.
Risk
The risk of loss in trading commodities can be substantial. You should
therefore carefully consider whether such trading is suitable for you
in light of your financial condition. The high degree of leverage that
is often obtainable in commodity trading can for against you as well
as for you. The use of leverage can lead to large losses as well as
gains.
An investment with BAM is speculative, volatile, involves a high degree of risk and is designed only for sophisticated investors who are able to bear the loss of more than their entire investment. Read and examine the disclosure document before seeking BAM's services.
BAM applies risk management and portfolio management strategies to measure and manage overall portfolio risk. These strategies include position sizing, correlation analysis, stop loss, and cross commodity hedges. BAM may reduce or increase position size accordingly. It is possible, however, that this reduction or increase in position size may not enhance the results achieved over time.
Order placement and execution:
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Position size and correlation
Each trade is analyzed thru a correlation and position sizing money management algorithm. All trades are position adjusted as to equalize the return impact on the portfolio. BAM’s philosophy is that we do not know which trades will be profitable and which trade will be unprofitable before the trade is entered. Therefore, all trades placed will have the same return impact on the portfolio.
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Drawdown
Investors should be aware of the volatility inherent in BAM’s trading programs. Because the same risk profile is intrinsic to all BAM trading systems, investors can be expected to experience volatility similar to BAM’s historical track record.
During our multiple years of trading, the proprietary composite record, on a month-to-month basis, has experienced two serious peak-to-valley losses ("drawdowns") exceeding 25%. BAM’s clients should be prepared to endure similar or worse periods in the future. The inability (or unwillingness) to do so may very well result in un-recouped serious losses, without the opportunity for subsequent recovery.
IT Infrastructure
BAM has operational structures to help insure data integrity, reliability,
and smooth operation in case of an emergency.
