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Paradigm Shift

I'm Keith Fitschen. My Paradigm Shift system is a unique commodity futures trading strategy for US domestic commodites. It uses the exact same logic and parameter values across all commodities. The strategy wins about 53 percent of it’s trades, nets an average profit of about $800 per trade, and averages over $240,000 per year since May 2011. These hypothetical performance figures are based on CSI continuous contracts, and they include a $50 slippage and commission deduction from each trade. Paradigm Shift, Basic Commodities is only available through subscription.

Paradigm Shift Details

The strategy enters a trade on a stop when there is a high probability of a strong move in that direction. Signals are given when CSI end-of-day data becomes available, between 8:30 and 9:00 PM EST. The trade risk in dollars is given with each order. If the risk is too high for your account size, bypass the trade. Trades are exited when the probability of a move in the trade direction lowers, or when the stop value is exceeded. Exit is done on the next open.

Paradigm Shift Performance by Commodity

The following tables show the strategies’ trade results from May 2011 through December 2013. These figures were generated using continuous, back-adjusted contracts. A $50 slippage and commission deduction was taken from each trade.

 

Paradigm Shift on Grains (May 2011 - Aug 2014)
Commodity
Winning Trades
Losing Trades
Total Profit
Profit-per- Trade
Corn
10
7
6050
355
Oats
3
3
750
125
Soybeans
14
14
10562
377
Bean Meal
18
11
21400
737
Bean Oil
3
2
500
100
Wheat
6
21
-14163
-525
KC Wheat
9
12
-850
-41
Rough Rice
4
5
820
91
Totals
66
74
24595
175

 

Paradigm Shift on Meats (May 2011 - Aug 2014)
Commodity
Winning Trades
Losing Trades
Total Profit
Profit-per- Trade
Live Cattle
3
3
360
60
Lean Hogs
5
4
1339
148
Feeder Cattle
7
7
6337
452
Totals
14
14
5662
202

 

Paradigm Shift on Softs (May 2011 - Aug 2014)
Commodity
Winning Trades
Losing Trades
Total Profit
Profit-per- Trade
Coffee
17
21
24537
645
Cotton
15
10
18860
754
Lumber
12
9
19740
940
Cocoa
4
7
-1740
-158
Sugar
2
4
-687
-115
Orange Juice
9
5
7032
502
Totals
57
56
64314
569

 

Paradigm Shift on Metals (May 2011 - Aug 2014)
Commodity
Winning Trades
Losing Trades
Total Profit
Profit-per- Trade
Copper
15
18
4862
147
Palladium
21
18
41825
1072
Silver
18
13
152365
4915
Gold
18
15
34820
1055
Platinum
19
10
47105
1624
Mini Silver
18
13
28772
928
Mini Gold
16
15
8162
263
Totals
123
101
316244
1411

 

Paradigm Shift on Energies (May 2011 - Aug 2014)
Commodity
Winning Trades
Losing Trades
Total Profit
Profit-per- Trade
Crude Oil
15
11
36869
1418
Natural Gas (mini)
1
1
-1138
-569
Heating Oil
22
13
77840
2224
Reformulated Gas
15
21
41434
1150
Mini Crude
18
14
16262
508
Totals
71
60
171269
1307

 

Paradigm Shift on Currencies (May 2011 - Aug 2014
Commodity
Winning Trades
Losing Trades
Total Profit
Profit-per- Trade
Japanese Yen
11
16
-6563
-244
Swiss Franc
12
15
10525
389
Canadian $
11
5
3530
220
British Pound
6
11
-9750
-574
Dollar Index
4
2
4895
815
Mexican Peso
2
0
2410
1205
Australian ($)
11
8
9730
512
Euro Currency
18
9
38725
1434
Totals
75
65
55065
393

 

Paradigm Shift on US Financials (May 2011 - Aug 2014)
Commodity
Winning Trades
Losing Trades
Total Profit
Profit-per- Trade
30-Year Bond
14
17
17012
548
10-Year Note
4
3
3400
485
5-Year Note
0
0
0
0
2-Year Note
0
0
0
0
Eurodollar
0
0
0
0
Totals
18
20
20412
537

 

Paradigm Shift on Stock Indices (May 2011 - Aug 2014)
Commodity
Winning Trades
Losing Trades
Total Profit
Profit-per- Trade
S&P 500 (mini)
15
10
25325
1013
Midcap 400 (mini)
17
22
22220
569
Nasdaq 100 (mini)
10
12
-20
-1
Dow Jones (mini)
12
10
11630
528
Russell 2000 (mini)
24
12
66210
1839
Nikkei
12
10
2930
133
Totals
88
75
127922
784

 

Paradigm Shift Group Summary (May 2011 - Aug 2014)
Commodity
Winning Trades
Losing Trades
Total Profit
Profit-per- Trade
Grains
68
74
24595
175
Meats
14
14
5662
202
Softs
57
56
64314
569
Metals
123
101
316244
1411
Energies
71
60
171269
1307
Currencies
75
65
55065
393
US Financials
18
20
20412
537
Stock Indices
88
75
127922
784
Totals
512
465
785486
803

This breakout shows many differences from typical trend-following performance before the Paradigm Shift:

• There are more winners than losers. Trend-following strategies typically average between 30 and 40 percent winning trades.

•  The stock indices trade very well in the new environment where trend-following strategies used to be little better than break-even on the stock indices.

•  Though a very small sample, the meats perform surprisingly well. They were the worst group for trend-following strategies.

• The profit-per-trade of over $800 is larger than any trend-following strategy I’ve ever seen. Additionally, trades average only 12 trading days per trade while longer-term strategies like Aberration would hold for 2 months on average.

There is another huge difference: the short side makes about twice as much as the long side. Before the paradigm shift, trend-following commodity systems usually made about twice as much on the LONG side as they did on the short side.

Though the timeframe that the Paradigm Shift has been in effect is only 3.25 years so far, the results are still impressive. The average profit per year across the basket is about $240,00. Each trade averages about $800. And across all trades, the system wins about 53 percent of the time. Additionally, the trades last only 13 trading days on average.

These results were generated using back-adjusted continuous contracts. A $50 slippage/commission deduction was made on each trade. The following CFTC notice on hypothetical results should be noted.

NOTICE: "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 PERFORMANCE 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.

TRADING THE STRATEGY ON SMALL ACCOUNTS

The strategy works across the commodity groups. A way to use this characteristic is to trade a diversified portfolio of commodities with multi-group representation that suits your account size. This strategy minimizes exposure in correlated commodities which tend to make winning trades at the same time, and losing trades. Diversification smooths the equity curve which results in lower drawdowns. Since risk management should be the primary aim of every trader, diversification is an investment tool that should be used where possible. Additionally, use the trade risk given with each signal to stay away from trades with excessive risk for your account size.

The following tables show performance when the number of trades in each group is constrained, and the trade risk threshold is restricted. The basket of commodities included in the analysis is the group that has been profitable to date.

Small Account Performance when a Max of 1 Trade is on in each Group versus Entry Risk Threshold
Max Risk Threshold
Average Annual Return
Max Draw-Down
Average Max Draw-Down
N/A, All Trades
$72,881
$45,225
$28,100
$1,250
$15,172
$9,307
$7,309
$1,500
28639
11528
9412
$1,750
$37,631
$12,992
$11,148
$2,000
$37,816
$27,229
$15,774

 

Small Account Performance when a Max of 2 Trades is on in each Group versus Entry Risk Threshold
Max Risk Threshold
Average Annual Return
Max Draw-Down
Average Max Draw-Down
N/A, All Trades
$167583
$40,578
$36,619
$1,250
$17,553
$8,789
$8,288
$1,500
$30,201
$16,287
$12,505
$1,750
$67,097
$12,114
$11,093
$2,000
$69,919
$22,369
$16,100

Small Account Performance when a Max of 2 Trades is on in each Group versus Entry Risk Threshold
Max Risk Threshold
Average Annual Return
Max Draw-Down
Average Max Draw-Down
N/A, All Trades
$242,028
$40,130
$34,270
$1,300
$19,735
$9,484
$9,391

 

Small Account Performance when a Max of 3 Trades is on in each Group versus Entry Risk Threshold
Max Risk Threshold
Average Annual Return
Max Draw-Down
Average Max Draw-Down
N/A, All Trades
$205,989
$49,542
$43,470
$1,250
$18,477
$8,789
$8,288
$1,500
$33,790
$16,287
$13,347
$1,750
$68,333
$17,227
$14,251
$2,000
$78,626
$19,628
$16,015

As the tables show there is a good trading solution in terms of return and risk for smaller accounts. It is recommended you select the max draw-down you're willing to accept for your account size and determine if the return is worth that amount of risk for your trading makeup.

TRADING THE STRATEGY ON LARGE ACCOUNTS

For large account fixed risk sizing is recommended. In this money management approach, a fixed percentage of equity is risked on each trade. It is implemented by taking the fixed percentage of account equity on the day of the trade and then using Paradigm Shift’s trade risk to determine the number of contracts that should be traded to risk the desired amount. For example, if account size is $250,000 and the fixed percentage the trader has decided to risk is 3 percent, $7,500 could be risked on a trade signal (0.03 multiplied by $250,000). If the trade risk for a signal is $1,400 (distance from entry to the catastrophic stop level converted to dollars), 5 contracts would be bought or sold on the signal (fractions are rounded down). This example illustrates that a sizeable account is required to implement this conservative money management strategy, otherwise the fixed percentage of equity will be too small to support even a one-contract trade.

The following tables show performance when the number of trades in each group is constrained, and the trade risk threshold is restricted. The entire basket of 45 commodities was included in the analysis.

Fixed Risk Performance

Risked Per Trade

Average Annual Compounded Return
Max Draw-Down
0.5%
39.0
13.8
0.75%
67.2
21.6
1.0%
100.2
28.9

Again, the ratio of return to draw-down is outstanding.

Subscription Signals

The Paradigm Shift trading signals are only available through subscription. If you subscribe, you will select a user name and password. Each day you login to this website to see the signals. The following table shows the actual signals for November 16, 2013, based on closing data from November 15, 2013. Each of the 45 commodities is listed, along with it’s current contract month, position, and any new orders. It’s very simple to trade: all entries and exits are stop orders, so the orders can be placed as soon as they are posted. Once you’ve placed the orders, you’re done til the next day.

Paradigm Shift

Based on Closing Data for 20131115

Grains
Oats March Out. No orders today.
Corn March Out. No orders today.
Soybeans 
January
Long since 20131031. Open equity profit: -325.
Soy Meal
January
Long since 20131108. Open equity profit: 89.
Soy Oil
January
Out. No orders today.
KC Wheat
March
Out. No orders today.
Rough Rice
January
Out. No orders today.
Meats
Lean Hogs
February
Out. No orders today.
Live Cattle
February
Out. No orders today.
Feeder Cattle
January
Out. No orders today.
Softs
Coffee 
March
Out. Buy at 111.5 Stop .
Cotton
March
Out. Buy at 80.93 Stop.
Cocoa
March
Out. No orders today.
Orange Juice
January
Out. No orders today.
Lumber
January
Short since 20131114. Open equity profit: 44.
Sugar
March
Out. No orders today.
Metals
Copper
March
Out. No orders today.
Silver
December
Out. Buy at 1309.5 Stop.
Gold
December
Out. Buy at 1309.5 Stop.
Palladium
December
Short since 20131113. Open equity profit: 590.
Platinum
January
Short since 20131111. Open equity profit: -380.
Energies
Crude Oil
December
Long since 20131114. Open equity profit: -601.
Natural Gas*
December
Out. No orders today.
Heating Oil
January
Out. No orders today.
Reformulated Gas
January
Long since 20131111. Open equity profit: 2192.
Currencies
Japanese Yen
December
Out. No orders today.
Swiss Franc
December
Out. Buy at 1.1026 Stop.
Canadian Dollar
December
Out. No orders today.
British Pound
December
Out. No orders today.
Australian Dollar
December
Out. Buy at .9468 Stop.
Euro-Currency
December
Short since 20131031. Open equity profit: 1687.
Dollar Index
December
Out. No orders today.
Mexican Peso
December
Out. No orders today.
Financials
30-Year Bonds
December
Short since 20131101. Open equity profit: 1250.
10-Year Notes
December
Out. No orders today.
5-Year Notes
December
Out. No orders today.
2-Year Notes
December
Out. No orders today.
Eurodollar
December
Out. No orders today.
Trading Statistics (Open Equity)
Open Equity Winning Trades: 6
Open Equity Losing Trades: 3
Open Equity Profit: $4,548
Trading Statistics (2012)
Winning Trades in 2012: 140
Losing Trades in 2012: 142
Total Profit in 2012: $211,339
Trading Statistics (2013)
Winning Trades in 2013: 108
Losing Trades in 2013: 105
Total Profit in 2013: $118,777

Subscription Cost

If you trade the strategy yourself, the price for a subscription is $149 per month. Payment is made via credit card and auto-billed each month until you decide to stop.

Broker-Assist

You can also opt to have one of our “preferred brokers” trade the strategy for you. They take all the work out of the trading: managing entry, exit, and rollovers. If you trade the strategy through one of the brokers below, the price for a subscription is $99 per month, on a one-contract per signal basis. Payment is deducted from your trading account each month.

 

 

Preferred Broker: Wisdom Trading, 800-854-6354

Preferred Broker: Highground Trading, 855-225-4785

 

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