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Robinson-Langley Capital Management
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The Robinson-Langley Capital Managed Account Program (“trading system” or “program”) uses a mechanical trading method, which is applies to a diversified portfolio of commodity, domestic and foreign currency, and financial futures markets. By utilizing a systematic trend-following system, Robinson-Langley Capital intends to reduce if not eliminate the emotional and behavioral biases that many times result in second-guessing and indecisiveness in the trading process. The trading program is designed to answer questions such as, “When should I buy or sell?”, “How much should I buy or sell?”, or, “When should I get out of the trade?” before the trade is initiated. This design seeks to eliminate impulsive trading decisions, which we believe have a higher risk of large losses in the long run.
By applying a disciplined, long-term approach to the markets, the Robinson-Langley Capital trading system is designed to ignore directionless daily price changes or “noise” and focus solely on price trend, thus eliminating the challenge of listening to market “gurus” or following market fundamentals for the purpose of predicting every short-term market movement. Our models have demonstrated consistently in the course of testing that market prices, which may at times seem random, are actually related through time in complex, nonlinear ways. The trading program is designed to take advantage of these relationships not by predicting price changes, but rather by filtering as much of this “noise” as possible in order to take advantage of burgeoning long-term trends.
The underlying principle that market prices simply reflect participants' expectations, feelings, and reactions to changing market dynamics is the basis for our trend-following models. Investigating prices and the theory of crowd behavior has led us to the premise that markets, in the long term, move in a non-random fashion that, in our opinion, is exploitable by those with the right strategy and the discipline to carry out that strategy. In our opinion, trends can be observed in all environments and manifest themselves in capital markets through the adjustment of market participants’ expectations to both short and long-term market conditions. For example, during periods of steady, consistent downward price movement in a given commodity, sellers have overpowered buyers in their expectations/feelings of where they believe prices should be, thus forming enough of a consensus to produce a trend. With more disagreement within ‘the crowd’ of where prices should be, comes more consolidation or trend-less price movement. In summary, we believe that prices are simply the sum total of expectations and given that prices reflect all relevant information, they exhibit the tendency to develop persistent trends over the long-term as these expectations align and diverge.
Our intent at Robinson-Langley Capital is not to predict trend but to apply a systematic approach for filtering irrelevant information from prices in order to ‘jump on’ a developing trend and capture the ‘meat’ of that trend while always practicing strict risk management rules. By definition, our system is designed to never get in at the beginning of a trend or get out at the top. In our view, predicting any market especially tops and bottoms, appears to be more a function of luck rather than science. By following or reacting to market trends, not predicting them, we believe we can successfully capture the inherent return given by persistent price movements at the cost of short-term volatility.
The Robinson-Langley Capital trading system is designed using only robust trading strategies or techniques based, in our view, on general, successful trading principles. Robust trading strategies are not optimized or fit to any one set of market conditions, but are applied equally to all markets for all time periods. While some optimization must occur in order to prevent system parameters from being selected arbitrarily, the parameters employed by the Robinson-Langley Capital trading system will rarely, if ever, fit any specific market situation exactly. Using robust system variables protects from “curve-fitting” in the development process of the program. Curve-fit systems customize the trading rules or parameters differently for each market traded, many times producing great, yet unrealistic results. We at Robinson-Langley Capital feel that the allure of achieving fantastic simulated results attracts many trading system designers to apply specific parameters to specific markets, even though these results will be difficult to duplicate in real trading for an extended period of time. The Robinson-Langley Capital trading system rules are few in number and the same for each market. Further, these parameters have tested well over a wide range of conditions. The importance of robust strategies is that they will, in our view, be easier to follow in actual trading and are designed to enhance the probability of long-term success at the cost of near-term volatility of returns as shown earlier. Significant volatility as a result of non-optimized parameters is, in our view, a necessary by-product of achieving above-average long-term capital growth.
Money management, which encompasses risk management, is considered by Robinson-Langley Capital to be absolutely critical to successful trading on an ongoing basis. Money Management includes protective stops, exits, and position sizing and is the largest component of the Robinson-Langley Capital trading system. We understand the importance of money management believing that good trading results are a function of proper, disciplined money management techniques. Indeed, lack of proper money management can be, in our view, a major cause of failure among new and experienced traders alike, as most traders appear to focus on entry strategies, which we believe to be an ineffective use of our time and resources.
The Robinson-Langley Capital trading system uses money management and risk control strategies designed to cut losses short and let profits ride. The system is built to keep the initial risk on any given trade constant using a measure of current intra-market volatility. Stop-loss orders will be entered concurrent with market entry orders and set to quickly exit the position if the market moves against us. While stop-loss orders do not guarantee exact exit points, they are designed within our program to allow us to endure many losing trades in a row without experiencing complete depletion of trading capital, in normal market conditions. Individual market risk and overall portfolio risk levels are designed within the system and are predetermined and controlled on every trade. Statistical boundary limits will be established as stop-loss protection for the overall trading program and are to be monitored continuously.
Our trading program is designed to use a volatility-based position-sizing algorithm. Volatility refers to the amount of daily price movement of an underlying instrument over a fixed time period. It’s a direct measurement of the price change that account equity will be exposed to in any given position at any given time. Each position will be calculated by taking a measure of market volatility and making it a fixed percentage of total equity (say, 1 percent) thereby normalizing risk across each market within the portfolio. For instance, in a more volatile market, our system is designed to buy/sell fewer contracts, exposing the portfolio to less volatility. Additionally, pyramiding or increasing profit potential by adding to existing profitable positions will be done systematically in pre-determined intervals.
By consistently measuring the market fluctuations of each portfolio element to which capital is exposed, we intend to place optimal, controlled bets on each position within the portfolio. Doing this is meant to keep our risk within our already established tolerance bands and reduce overexposure to any individual market or set of correlated markets. For example, Crude Oil futures and Unleaded Gasoline futures are likely to exhibit similar price behavior over time (be highly correlated) due to the fact that Unleaded Gasoline is produced from Crude Oil. Therefore, our system is designed to buy/sell less contracts when signals are generated for both markets simultaneously, thus reducing the exposure to sudden movements in these correlated markets from say, a hurricane in the Gulf of Mexico, war in the Middle East, or an increase in supply from OPEC.
Under certain market conditions volatility parameters may dictate that positions be established in larger accounts only. There may be instances where certain trades are not suitable for the minimum account size given the Advisors risk management guidelines. For these reasons, returns may vary from account to account. The Advisor does not believe that such returns will vary significantly, or that any such differences will be material.
The allocation to the markets/instruments can vary over the course of time. Upon inception of trading, Robinson-Langley Capital will monitor and trade within the following markets: Wheat; Kansas City Wheat; Corn; Soybeans; Soybean Oil; Soybean Meal; Canola; British Pound; Canadian Dollar; Swiss Franc; Euro; Japanese Yen; Mexican Peso; Australian Dollar;; Silver; Platinum; Copper; Gold; Aluminum; Zinc; Nickel; U.S. Treasury Notes; U.S. Treasury Bonds; Australian Bonds; Japanese Bonds; German Bunds; British Gilts; Canadian Bonds; Eurodollars; Australian Bank Bills; Euribor; Crude Oil; Brent Crude; Heating Oil; London Gas Oil; Harbor Unleaded Gas; Natural Gas; Cotton; Sugar; London Sugar; Coffee; London Robusta Coffee; Cocoa; London Cocoa; Orange Juice; Lumber; Milk; Live Cattle; Feeder Cattle; Lean Hogs and Pork Bellies; S&P 500; Russell 2000; FTSE 100; Euro Stoxx 50; Hang Seng Index; Nikkei 225; Australian SPI 200 Index; Xetra DAX 100.
Robinson-Langley Capital intends to trade any commodity interests that are now or may hereafter be offered for trading on United States and international exchanges and markets. In that regard, Robinson-Langley Capital will add or remove commodity interests from the managed account program at anytime.
Jon Robinson is a Co-Founder of Robinson-Langley Capital Management, LLC. He shares both administrative and trading responsibilities with his partner, Brandon Langley. He has been registered with the National Futures Association as a Principal and Associated Person since July 18, 2006. Jon earned Bachelor of Science degrees in both Finance and Economics at the University of North Carolina at Greensboro in the spring of 2003. From May of 2003 until February 2004 Jon was a clerk and trader for Bear Wagner Specialists, LLC a market maker on the floor of the NYSE. He joined the equity research department of Prudential Equity Group in New York covering the Infrastructure Software industry beginning in March of 2004. He was with the firm until April 2005, when he moved back to North Carolina to partner with Brandon Langley in research and development of mechanical trading methods and systems. This intensive research effort led to the design of the Robinson-Langley Capital trading system and the subsequent, official formation of Robinson-Langley Capital Management, LLC in March of 2006. Jon was a self-employed trader during this research period (May 2005 to March 2006). He also worked as an IT consultant for Powell & Co., a furniture manufacturer and retailer in High Point, NC from March 2006 – May 2006.
Brandon Langley is a Co-Founder of Robinson-Langley Capital Management, LLC. He shares both administrative and trading responsibilities with his partner. He has been registered with the National Futures Association as a Principal and Associated Person since July 18th 2006. Brandon received a Bachelor of Science degree in Economics from the University of North Carolina at Greensboro in May, 2003 where he graduated Summa Cum Laude. He received a Master’s degree in Applied Economic Analysis from UNCG in December, 2004 while working as a Financial Analyst for Gilbarco Veeder-Root, a manufacturer of fueling and retail management systems in Greensboro, NC (8/04 to 12/04). Since January 2005, he has served as a Senior Risk Analyst for Wachovia Bank’s automotive and specialized lending division, Wachovia Dealer Services, located in Winston-Salem, NC.
The descriptions above are from the manager’s disclosure document.
THE RISK OF LOSS IN TRADING FUTURES AND
OPTIONS CAN BE SUBSTANTIAL. PAST RESULTS
ARE NOT NECESSARILY INDICATIVE OF FUTURE
RESULTS. THIS MATERIAL HAS BEEN PREPARED
BY A SALES OR TRADING EMPLOYEE OR AGENT
OF ALTAVRA AND IS, OR IS IN THE NATURE
OF A SOLICITATION. THIS MATERIAL IS NOT
A RESEARCH REPORT PREPARED BY AN ALTAVRA
RESEARCH DEPARTMENT. YOU AGREE THAT YOU
ARE AN EXPERIENCED USER OF THE FINANCIAL
MARKETS, CAPABLE OF MAKING INDEPENDENT
TRADING DECISIONS, AND AGREE THAT YOU
ARE NOT, AND WILL NOT RELY SOLELY ON
THIS DOCUMENT IN MAKING TRADING
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