From the October 01, 2011 issue of Futures Magazine • Subscribe!

Hot New CTAs: Short-term traders on a roll

Bouchard: Adapting to success

Chris Freeman always was interested in computer programming and trading, but worked in accounting and corporate finance after graduating with a degree in economics from the University of California Santa Cruz.

"I was actually programming computers before the first version of Microsoft DOS came out (in the early 1980s). I was in the accounting field, but on the side I was programming and testing systems," says Freeman, principal and head trader at Bouchard Capital.

Freeman began trading equities in 1993 and futures in 1994. Back then, he always looked at technicals and price action, but never systematized his approach. "I didn’t hold myself to any parameters; there was no system generated trade. It was more from-the-gut, seat-of-the-pants trading. That wasn’t working for me. I only became a successful trader after making an art of system-based trading," Freeman says.

In the mid-2000s Freeman was working for a firm dependent on the housing market and anticipated the industry downturn. He quit his job and decided to build a trading business. By this time he understood that his trading needed more discipline and went about designing a short-term diversified program. He had 14 years of experience in the market trading from a technical perspective, so he wasn’t starting from scratch.

"It was pretty easy to put together the Bouchard system based on all my experience programming and looking at markets and price data for so many years. It all came together," he says.

It wasn’t called Bouchard at the time and he didn’t offer it as a CTA. He initially offered it in a newsletter format where investors subscribed to it to get the signals. The program thrived in the three years it traded through subscription, so Freeman looked to take it to the next level.

"It has been through all these situations — Bear Stearns, Lehman — and it held up. That is the three-year proving ground," Freeman says.

He started out with some basic breakout methods and then went about optimizing to improve performance and make the system more consistent.

"Markets are complex, adaptive systems and the only way to survive and thrive in those markets is to build a system that adapts to [them]," Freeman says. "We use the market data, we let the markets tell us where they are going to go. The system always is taking in new information from the markets and is using this new information to [signal] new trades."

Freeman has picked up lessons from the trading masters along the way and understands that finding low-risk opportunities is a key to stronger returns.

The breakout system selects an entry level and stop or fail level and risks 1% on every trade regardless of that level. If that stop is close, he will increase the position to risk 1%.

"There is an entry level, there is a fail level; sometimes they are far apart, sometimes they are narrow. When they are narrow, we can afford to put on more positions to stay at the 1% risk per trade," he says. "I envision that as turbo trades. It is kind of like stepping on the gas pedal and if you find out you are wrong, you quickly take your foot off of the gas pedal."

When Freeman decided to offer the program as a CTA, he cut the leverage in half and brought in partner Morgan Benson to help on the business side. Bouchard is Benson’s middle name, which sounded better than some combo contemplated such as Morgan Freeman.

"When we got started we didn’t know where we would fit into the market, and from a marketing standpoint you always want to figure out what makes you unique," Benson says. "What we are hearing from clients is that we are unique. Our returns this year, not only on a monthly basis, show that we are zigging when others are zagging. An example would be the grain correction in the first part of May. It was a very profitable period at a time when long-term trend-following got whacked pretty hard."

Benson provided the initial proprietary capital in February 2010 and earned 44.97% for his trouble. The program is up 19.14% after completing a full year of trading customer funds.

For more on Bouchard Capital including contact information, click here.

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