Robert Moss has been involved in trading futures for four decades and although he learned his craft from some of the most talented and successful traders in the industry, he is not afraid to learn new things and alter his strategies.
In fact he attributes his recent success to changes he and partner Jeffrey Earle initiated in 2006. Their commodity trading advisor, Ram Management Group, earned 58% in 2007, in its Aggressive Program and is up approximately 110% in the 18 months since initiating changes in the program to improve its risk adjusted return.
Moss worked with futures trading all-stars Richard Dennis, William Eckhardt and Tom Willis at the Mid-America exchange back in the 1970s. He learned the trading game under the tutelage of Dennis though he was not a turtle and does not consider his system related to the turtle methodology.
The main lessons he learned from Dennis had to do with execution. He was Dennis’ trader in New York in the mid-1980s and learned how to enter and exit positions quietly without spooking the market. Anyone who had spent time on a futures exchange trading floor during the 1980s and 1990s knows that spotting one of Dennis’ traders and trying to figure out what direction he was entering a market was a popular sport.
After working in Chicago’s futures markets, Moss started to manage Dennis’ stock option portfolio at the Chicago Board Options Exchange. In 1984, Moss moved to New York to execute Dennis’ trades in the New York commodities markets.
Moss learned many lessons from Dennis but one of the most important was to trade the same way regardless of the size of the position.
“Richard has an incredible ability to handle a position regardless of size. The money affects the way you trade. He has an uncanny ability of being able to focus on the important aspects of [a market],” Moss says, adding, “It is better to look at the trade than the money.” In 1988, he left Dennis’ operation and moved to Connecticut to raise a family and develop a systematic futures program. He developed the Ram program based on his years of observing markets, and along with Earle launched the Managed Risk Trading Program (MRTP) in 1993. The diversified technical program relies on three components: trend following, countertrend and pattern recognition. The system creates signals based on those three components rather than separate signals for each. “It is all interconnected,” Moss says.
During that time Moss, an avid baseball fan who coached his son’s teams, also created a unique device, The Gap Hitter, to help perfect hitting a baseball. He markets the device through his firm Solid Contact Baseball Inc. In 2000 they added the Aggressive Program, which trades at 3x the leverage of MRTP.
Perhaps because of his background, Moss has always placed an emphasis on execution. Ironically he says the new electronic environment for physical commodities has allowed him to utilize those execution skills. “The execution now is easier because we can use the parameters similar to the style I used on the floor,” Moss says. And while their program is completely systematic, he is able to use the skills he perfected over the years. “There is a style on how I get in the market,” Moss says. “We risk the same amount in each market. It is a matter of being consistent and following the model.” But while the system produced solid returns, it had a great deal of volatility and struggled somewhat from 2002 to 2006. Because of that volatility, Moss and Earle performed a qualitative analysis on their program and came up with adjustments in October 2006.
“It is an improvement in risk management. We adjusted the allocation model of the system to create better risk control,” Moss says. “We took into account the volatility we felt the market would experience based on the first half of 2006. The result is we are up 110% with a worst drawdown of 14% through the end of January.”
The changes improved performance and lowered risk, but it is still the patterns they have discovered that are the key to the program. He says the patterns go to the heart of why the markets move the way they do. “Price should dictate where the market is going. There are longs and shorts setting the behavior of the market. The system examines the patterns and generates a trend or countertrend signal,” Moss says. “The trend is a matter of those people losing money at the time managing or mismanaging their losses. The people losing are moving the market. Finally there is a capitulation.”
Moss is bullish on managed futures and his program. “All we are trying to do is recognize patterns [and] look at money flows.” In his four decades of trading, Moss seems to have learned to read markets the way a .300 hitter reads a pitcher.
