The primary objective of TMPCTA’s Trading Program is capital appreciation through speculation in the exchange-listed DOW futures contracts. TMPCTA will attempt to meet the objective of capital appreciation by making trading decisions based upon our proprietary TMP DOW EOD™ trading algorithm. There can be no assurance that TMPCTA and its client accounts will achieve this objective, or that the client accounts will not incur losses. Moreover, there can be no assurance that TMPCTA’s trading will yield the same results as it has in the past.
TMPCTA’s EOD Trading Program is designed for sophisticated investors. An investment in an account to be traded by TMPCTA should only be considered by
investors that can assume the significant risk of commodity futures trading, including losses in excess of their initial investment.
In managing the accounts of customers, TMPCTA employs the trading concepts and strategies developed by Mr. Aretos, TMPCTA’s sole principal. Since the trading methods to be utilized by Mr. Aretos are proprietary and confidential, the discussion that follows is of a general nature and not intended to be exhaustive.
TMPCTA’s trading models are designed to detect and exploit volatility changes occurring with trending markets, while also applying risk management and portfolio management principles. The algorithm employs a complex set of variables from realtime
market data which produces a result that forecasts the direction of the market’s movement for roughly the last hour of trading in the market each day. There are 3 separate actions that can occur from the results of the algorithm, trading UP, trading DOWN, or NT (NO TRADE). This means that there are days when no trading will occur in the program. There is no way of determining how many NT days will be at any given
time, as information is gathered, filtered, and computed in real time each day.
Over the course of a price change, there are times when the risk of the market does not appear to be justified by the potential reward. In such circumstances, TMPCTA’s trading method may exit a winning position prior to the end of a market move. While there is some risk (in the form of opportunity cost) to this method (for example, being out of themarket during a significant portion of a price move), TMPCTA’s research indicates that this is well compensated for by the decreased volatility of performance that may result. While TMPCTA generally follows a disciplined systematic approach to trading, on occasion it may override the signal generated by the algorithm when, in TMPCTA’s opinion, market conditions dictate otherwise. While such action may be taken for any reason at any time at TMPCTA’s discretion, it will normally only be taken to reduce risk, and may or may not enhance the results that would otherwise be achieved. Moreover, although technical trading systems normally consist of a series of fixed rules applied manually or by computer, TMPCTA believes that such systems still require certain subjective judgments and decisions. The typical nature of trading will be to enter
positions during market hours, and exit positions before the close of the market day, being FLAT for the session, and not having or holding any outstanding contracts. There may be times, however, when this action will be overridden for posterity of reducing risk. These types of decisions require consideration of, among other things, the volatility of a particular market, the pattern of price movements (both interday and intraday), open interest, trading volume, changes in spread lationships between various contract months and between various contracts, and overall portfolio balance and risk exposure. With respect to the timing and execution of trades, TMPCTA will open positions at any time during the day when conditions warrant such action. The exit of the positions acquired during the trading day will be exited, generally before the close of each day of trading. No assurance can be made that consideration will be given to any or all of the foregoing factors by Mr. Aretos with respect to every trade for an account managed by THE TMP GROUP DOW EOD CTA or that consideration of any such factors in a particular situation will lessen the account’s risk of loss. Clients should be aware that such decisions may involve a substantial element of judgment and Mr. Aretos’s unavailability to make such decisions could materially impair the operation of trading strategies. TMPCTA seeks to maintain a commitment to consistent portfolio construction and
program integrity. TMPCTA generally has not been persuaded to change the fundamental elements of the portfolios by short-term performance, although adjustments may be, and have been, made over time. In addition, TMPCTA has not changed the basic methodologies that identify signals in the markets for each program. TMPCTA believes its long-term track record has benefited substantially from its adherence to its models during and after periods of negative returns; however, adherence to its strategy may lead
to prolonged periods of market losses and high risk. The dynamic elements of the TMPCTA investment process involve periodic adaptation to changing market onditions and subjective discretionary decisions on such matters as portfolio weightings, leverage,position size, effective trade execution, capacity and entry into new markets- all of which
depend on professional experience and market knowledge. These changes are made as warranted by TMPCTA’s research findings concerning its portfolios and their performance.
From time to time, TMPCTA’s trading strategies and systems may be revised, refined or abandoned, and the implementation of its trading strategies may be changed as a result ofongoing research and development as TMPCTA seeks to devise new trading strategies and systems as well as test methods currently employed. The trading strategies and
systems used by TMPCTA in the future may differ significantly from those presently used, due to the changes, which may result from this research in the ever changing marketplace. Clients will not be notified or be given an opportunity to approve of any
changes, or a revision to TMPCTA’s trading strategies, or the implementation of its trading strategies.