Goldman Management, Inc : Stock Index Futures

Summary

GM trading strategy is a product of over 30 years of rigorous research developing tools to forecast the short term, intermediate and long term direction in stock indexes. Hundred of indicators and model are employed, using a quantitative analysis, many of these indicators date back to the early 1900’s. These indicators comprise the principals of both technical and fundamental analysis. The exact nature of GM trading strategy is proprietary and confidential. The following description is of necessity and is not intended to be all inclusive. The categories in which these indicators fall into are numerous and although not exclusive are as follows: the stock market structure, momentum, overbought and oversold, market sentiment from contrary standpoint, valuations, monetary climate, macro factors etc. Each of these categories has different forecasting values and timeliness and when combined can enhance the reliability of a signal. The essence of these models and indicators are used to identify beforehand the market climate likely to be encountered. The principle objective of GM is to profit from all types of markets while using strict control measures to minimize risk. Analysis and research into improving systems and strategies is an ongoing process. It may be determined that minor modifications to one or more trading models would improve performance. New systems and or models may be added, removed or modified for future use. Managed account clients will not be informed with respect to such minor changes in GM trading methods. The program enters both long and short positions and the level of investment varies.

Investment Strategy

Using quantitative analysis hundreds of indicators and several dozen models are employed. Many of these indicators have been tested though market cycles dating back to the early 1900’s and include both technical and fundamental analysis. Alignments in the groups of indicators at inflection points determine change in direction and the potential magnitude of the outcome. Categories in which these indicators fall into are numerous and although not exclusive are as follows: the stock market structure, momentum, overbought and oversold, market sentiment and contrarian tools, valuations, monetary climate and macro factors. Each of these categories has different forecasting values and timeliness. Combining groups of indicators into an overlay can enhance the reliability of a signal. The models and indicators are also used to identify in advance the market climate likely to be encountered, whether trending or range bound, enabling the principle objective of GMI which is to profit from all types of markets while using strict control measures to minimize risk. Analysis and research to improve systems and strategies is an ongoing process. Above the models and indicators there is also a veto power invoked in unique circumstances to reduce risk.

Risk Management

1 –Risk and leverage are dynamically managed by varying exposure levels in accord with signal strength.
2 –Alignment, when numerous models from different categories are aligned a larger risk band and larger profit objective are deployed.
3- Equity curve and gains/drawdown dictate an adaptive strategy to expand or contract risk.
4- Risk process is ongoing throughout the trading day as well as end of day.

Essentially a dynamic risk management program that employs the relative strength of the trading signals, the amount of leverage being utilized, and finally my discretionary overlay to constantly manage risk and volatility.