Prospective students often ask about the potential profits from using Drummond Geometry.

Drummond Geometry has an excellent record of harvesting potential profit from the market. Because the methodology contains elements that are discretionary to the individual user, results vary from trader to trader.

Nevertheless, the rules that accompany the following pro-forma track record of trades are clear and objective and are set down in the Lessons with great care and completeness.

The track records were created by a bar-by-bar forward walk-through incorporating time period analysis on three timeframes. The daily trades were made without the benefit of intraday data. The hourly trades were made without the benefit of data lower than that provided by the hourly bars.

The results that can be achieved by Drummond Geometry are excellent, but we do not wish to be unrealistic in our presentations of track records. First there is the matter of slippage and commissions. Although most trades can be entered and exited without much slippage, it is nevertheless a fact of life. Commissions, though small, are also a fact of life. A much bigger potential influence is the basic humanity of all traders – not every day is a good day; sometimes we cannot execute as well as on other days; sometimes computers break and data feeds fail and other unpredictable elements enter into the picture.

To account for all of these elements the results shown are only 50 percent of the actual results. In other words, we have already reduced the results by half to account for slippage, commissions, and errors. In one case we have reduced the results by 75 percent.

These trading results are pro-forma results and we include the normal statements suggested by the CFTC regarding the presentation of trading records:

HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR TRADING PROGRAM. ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCES RESULTS IS THAT THEY ARE GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. IN ADDITION, HYPOTHETICAL TRADING DOES NOT INVOLVE FINANCIAL RISK AND NO HYPOTHETICAL TRADING RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR TO ADHERE TO A PARTICULAR TRADING PROGRAM IN SPITE OF TRADING LOSSES ARE MATERIAL POINTS WHICH CAN ALSO ADVERSELY AFFECT ACTUAL TRADING RESULTS. THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF ANY SPECIFIC TRADING PROGRAM WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL PERFORMANCE RESULTS AND ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL TRADING RESULTS.

This document and the lessons to which it refers contain the views and opinions of the authors, except opinions which are attributed to other sources. Written permission is required prior to any distribution or reproduction. Any views or opinions published by the authors are not to be construed as advice and any trading positions taken by a customer due to such publication are at the sole decision and discretion of the customer. Any losses accruing from such a trading decision are the sole responsibility of the customer. Futures trading is risky and can cause substantial financial loss. The use of options and option trading involves a high degree of risk. The use of stops may not limit losses to intended amounts. Spread or arbitrage positions may not be less risky than outright futures positions. Past results are not necessarily indicative or a guarantee of future results. Sources and methods of analysis are believed to be reliable but no assurance is made for accuracy.

The “Big Four” Trades using Drummond Geometry are identified/listed below:

1) The ‘Dotted Line Trade” picks off a market turn at the extreme and rides the trade down to the block level of congestion.

2) The “Block Level Trade” starts from the block level of congestion and manages the trade according to the strength or weakness of that block level.

3) The “Congestion Exit Trade” runs starts in congestion before a new trend-run begins and carries into the new trend.

4) The “Congestion Action Trade” moves between the confines of congestion only.

5) The “Consolidated Trade Plan” takes each of the above trades as they are offered, in sequence.

So, with the CFTC-suggested language firmly in mind, we present the following results. These track records are drawn directly from the summary sections of Lessons 16-20 of the P&L School of Drummond Geometry.

The “Dotted Line” Trade (Congestion entrance trade)
(Results reduced by 50 percent)

T-Bond daily - 3 months
Aggressive $8,125
Conservative $3,900

The “Block Level” Trade
(Results reduced by 50 percent)

T-Bond daily - 3 months
Aggressive $6,900
Conservative $3,400

S&P daily - 3 months
Aggressive $22,150
Conservative $11,500

S&P hourly – one week
Aggressive $9,250
Conservative $2,875

 

The “Congestion Exit” trades
(Results reduced by 75 percent)

T-Bond daily - 3 months
Aggressive $10,400
Conservative $6,762

S&P daily - 10 weeks
Aggressive $30,500
Conservative $12,000

S&P hourly – one week
Aggressive $3500
Conservative $2,000

 

The “Congestion action” trades
(Results reduced by 50 percent)

T-Bond daily - 3 months
Aggressive $4,000
Conservative $3,500

S&P daily - 3 months
Aggressive $31,000
Conservative $31,000

S&P hourly – one week
Aggressive $6,000
Conservative $3,700

The “Consolidated Trade Plan”
(Results reduced by 50 percent)

T-Bond daily - 3 months
Aggressive $34,000
Conservative $18,044

S&P daily - 3 months
Aggressive $108,375
Conservative $ 35,875

S&P hourly – one week
Aggressive $10,600
Conservative $ 7,000

A Word about Return on Investment (ROI) . . .

We do not regard return on investment figures as particularly significant because there are so many variations in the way that people approach the conventions of futures trading.

Futures trading is anything but passive investment and the comparisons with conventional investing are all but meaningless.

Nevertheless we offer these comparisons for those who might be interested.

These track records are for the most part based on one-contract trading. The aggressive trader sometimes adds a second or a third contract. The conservative trader always trades with one contract.

The margin for a US T-Bond is currently set at $2700. We advocate placing $10,000 of risk capital behind each contract traded

Thus, using these guidelines, we can calculate the ROI for the Dotted Line Trade, for the conservative trader, as follows:

Net income for the conservative trader was $3,900 for 90 days or $15,600 on an annual basis. The annual ROI based on one-contract margin would be 578 percent. The annual ROI based on a more prudent $10,000 trading capital standing behind one contract would be 156 percent.

We leave the other calculations of ROI up to you.

Ted Hearne
Charles Drummond