In the October issue of RINA Systems' Performance Update:

         Feature Highlight – Breakout Strategies Updated
         New Information – Maximizing Portfolio Sharpe Ratio
         New Information – New Money Manager 7 portfolio Scaling Strategies available
         Offers - FREE presentation materials at TradeStationWorld Conference

Feature Highlight - In this month's performance update, we update a couple of strategies that were last seen in our April newsletter. These strategies are the Standard Deviation band breakout and the channel breakout systems. These strategies, and variations thereof, are characterized as long-term breakout strategies, and have been popular in the commodities trading markets. In this update, we will look at a "historical sample" (Since 1995) as well as a "since inception" sample that highlights the performance of the systems since we began following them in November 2003. As described in an earlier Update, these strategies were adapted from the popular book Trading Systems and Methods by Perry Kaufman.

The channel breakout (CBO) strategy takes two inputs: an x-value which is the number of days lookback for entry positions; and also a y-value which is the daily lookback for exits. In this study, we used lookbacks of 20, 40, and 80 for entries (named CBO_20 - CBO_80, respectively). The lookback for exits was half that of the entry lookback. This study implicitly sets the channels around the price movements to measure breakouts by using the trailing high and low price values. The Standard Deviation band channel breakout is similar to the simple CBO strategy, except it uses the average price movements over a certain lookback, and the standard deviation of these to determine the channels to measure breakouts.

Using RINA Systems' PortfolioStream 4.5, we compiled composite reports over the various lookback parameters for each portfolio, consisting of a diverse basket of 29 North American futures. Given the long term nature of these two trending strategies, we decided to include open position in our profit calculation for a more detailed look at performance in the short-term out of sample data. Nonetheless, the "since inception" results of these breakout systems suffer in comparison to those of the "historical sample." Profits since inception are negative across the board even including the open position profit and loss, with the sole exception of the 80 day lookback channel breakout parameter. This result reminds us of the difficulty in finding robust systems, especially well-known ideas that will hold up prospectively. In future updates we will continue to track these and other strategies, and see if the challenge of prospective performance continues to evade these popular strategies.

Recent Out-Of-Sample Performance Results - during period of   November 2003 - August 2004:

Historical Performance Results - during the period of  October 1995 - August 2004:

Notes on studies:

The average trade value is on a per trade basis. Nearly all of the trades simulated here were multiple contract trades due to the fact they were geared to risk 1% based on a hypothetical constant funding of 1 million dollars. The per-contract average trade would have obviously been much smaller. Finally, the maximum drawdown is the largest peak to trough dollar drawdown for the portfolio during the tested period.

PortfolioStream has a new feature called Portfolio Designer. Portfolio Designer allows traders to find a portfolio with the highest Sharpe ratio. The software searches between all Sharpe ratios of individual components and finds those that maximize portfolio Sharpe ratio. This new method has been developed by RINA Systems to reduce portfolio variability of return while avoiding making changes to trading models. If traders need to include other symbols into their portfolio they still can add them to the portfolio designed by the software.

The screens below show the original portfolio and the final portfolio with only four components created by the software:

Money Manager 7 now supports portfolio-scaling strategies. These strategies can be applied individually or simultaneously with money management strategies using the same parameters to all markets in the portfolio (the settings are on a portfolio basis). Now users can see if adding to or reducing positions across a portfolio of markets, during the course of a trade, favorably affects a trading system. The following variations of new scaling strategies are available:

Ø         Scaling in / out with average true range as the definition of trade risk
Ø         Scaling in / out with standard deviation based risk assumptions
Ø         Scaling in / out with margin requirements as the definition of trade risk

RINA Systems will be exhibiting at the TradeStation World Conference and Expo in Las Vegas from October 22-24 at the Venetian Hotel. We will be demonstrating all of our latest software including PortfolioStream and Performance Suite, which include our award winning Portfolio Evaluator, Money Manager, and 3DSmartView applications. The first 20 attendees who visit our booth can also receive all of the reports and code demonstrated in the conference presentation on a CD free of charge. This includes some Easy Language sample strategies and Microsoft Excel spreadsheets that highlight several test results and studies used in the presentation. If you would like to contact RINA Systems, Inc. you may do so via phone at (513)-469-7462, via fax at (513)-469-2223, or via e-mail at info@rinasystems.com

The purpose of the Performance Update newsletter is to offer ideas and educational samples of strategies through the use of RINA Systems software applications. The strategies described in the Performance Update newsletter are not intended to be used as actual trading strategies, but are included for educational purposes only. No offer or solicitation to buy or sell securities, commodities or securities derivative products of any kind, or any type of trading or investment advice, recommendation or strategy, is made, given or in any manner provided by RINA Systems or any of its affiliates. If such advice is sought, the services of a licensed professional should be obtained. Past performance, whether actual or indicated by historical, simulated tests of strategies, is no guarantee of future performance or success. Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record simulations do not represent actual trading. Also since the trades have not actually been executed the results may have under - or over - compensated for the impact if any, of certain market factors such as liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown. There is a significant risk of loss involved in futures and securities trading. RINA Systems, Inc. will not be responsible for any losses or lost profits resulting from investment decisions based on any RINA Systems product or service information obtained through use of any RINA Systems product or service or otherwise. TradeStation® and EasyLanguage® are registered trademarks of TradeStation Technologies, Inc.