1. ALPHAENGINE STRATEGY FAQ

 

Our automated algorithm earns profits from up or down moves in 20 uncorrelated markets like foreign currencies, precious metals, the energy sector, agriculture commodities and even stocks and bonds. Why limit your capital appreciation potential by simply buying stocks when there are so many long and short opportunities in these diverse and dynamic markets that span the globe?

While it is true that past performance is not a guarantee of future results, we do have an impressive track record. In almost 3.5 years we have shown a return of 104.98% with a one-time maximum peak to valley drawdown of only 27% (between Dec 2018 and March 2019). A drawdown is a losing period, and there is no avoiding those. Even the stock market has losing periods, and in fact, it recently had a drawdown of almost 40% after the pandemic hit. For details on how we have calculated our historical performance, please see reference (*10) below.

1. How do we do it?

  • When the stock market crashed after the pandemic hit in February of 2020, did you know that you could have earned profits with a short position? (investors speculate with short positions when they want to profit when markets decline in price). (*1)
     

  • After the shocking attack on Saudi Arabian oil production on September 16, 2019, Oil prices rose by the largest amount in history. Did you know that you could have earned a profit by that price shock? (*2)
     

  • When a flooding and heavy rain affected the 2019 corn crops, and the price of corn went to the moon, did you know that you could have earned speculative profits resulting from that event? (*3)
     

  • When the British Pound tanked due to a surprise Brexit vote in 2016, did you know that you could have made money as the pound lost value? (*4)
     

  • When Donald Trump surprised the world by winning the 2016 US elections, and the stock market initially sank, then rallied to new highs, did you know that you could have earned returns on both sides of that stock market whipsaw? (*5)

These are just a few examples of potentially lucrative opportunities to earn Alpha (Alpha is profits generated separate from the normal, overall direction of an entire sector) by being on the right side of major market events like crashes, price spikes, rallies, bear markets, crashes, droughts, weather events, wars, currency crisis, pandemics, surprise news events, etc. The Alpha Engine trading strategy was designed to take advantage of these kinds of short-term trends.
 
According to famous physicist Richard Feyman “The word is a dynamic mess of jiggling things”. Our world is interconnected, random and chaotic. Change is unavoidable, and it’s unpredictable. The Alpha Engine is a complex, algorithmic, computer driven investment strategy that seizes these price movement opportunities by hopping onto either the up or down trend and then hanging on for the ride. The Alpha Engine invests in short term up or down price movements in 17 diverse futures markets including Crude oil, Heating oil, Natural Gas, Gasoline, Gold, Copper, S&P stock market index, DOW stock market index, NASDAQ stock market index, NIKKEI stock market index, Corn, Wheat, Soy meal, Soy beans, Euro, British Pound, and the Japanese Yen. If something is happening in the world, changes are very good one or more of these major world markets will be on the move, and Alpha Engine will be poised to seize the day.

2. Why not do what everyone else does and invest in stocks?

Nearly all investors in the stock market only earn investment returns if the value of the stock market increases, yet stocks only increase in value 50% of the time (*6). Why risk your hard earned capital by speculating that stocks will always increase in price, when there are so many more diverse and dynamic world markets that are constantly on the move - both up and down. Do you have an investment plan that can profit from this alpha?

It is true that the stock market does tend to go up over a long period of time. In fact since 1990, the S&P 500 stock market has offered a 9.61% average annual return including dividends reinvested (*13). However, the average drawdown, which is the amount that the S&P 500 DECREASES in value is more than it gains each year! The average loss is -14% (*7). So basically, with a stock market investment, for every dollar that you risk losing, you are only earning $.68 cents in profit. This is what happens when you join the investor band wagon and follow along in everyone else's footsteps.

To over-achieve in investing implies that you have to be different from the crowd. The reason is that if you do the same thing as everyone else (buy stocks and bonds), then your result will be the same as everyone else and your average return after reinvesting your dividends after dozens and dozens of years will be 9.61%. I’m willing to bet that you got to where you are in life, NOT by blindly following everyone else, but by striking out on your own, and blazing your own path to success. Why not take what you have learned about the value of being different, and apply that to your wealth creation plan?

3. What is your track record?

Our first client started trading with the Alpha Engine program in March of 2017 with $100,000 notional funding, and 3.41 years later his account has more than doubled. In almost 3.5 years we have shown a return of 104.98% with a one-time maximum peak to valley drawdown of only 27% (between Dec 2018 and March 2019). For details on how we have calculated our historical performance, please see reference (*10) below. View all client returns here (*11).
 

4. What is the risk?

Of course, like all investments Alpha Engine is not immune to losses, but our average annual loss (drawdown) is similar to the stock market at around -14%. However, our average annual return is around 30% compared to the measly 9.61% return from stocks (*9). Alpha Engine can offer you $2 of profit for every $1 that you risk in loss which compares to only $.68 in profit for every $1 that you risk with a stock market investment. This represents almost three times better risk/reward ratio than a stock market investment. 

That bears repeating: An Alpha Engine investment can offer you nearly three times better risk/reward ratio than stocks. That right there is the value of a TRULY diversified investment strategy - not the pseudo diversification of a stock portfolio, when all of your investments are still stocks, and are all mostly correlated with each other. In fact, did you know that all stock market sectors show a 95% degree of correlation (*12)? This means that all sectors move basically in lock-step with each other. A stock market “diversified” portfolio is sort of a myth.

It would be irresponsible if I didn't discuss the maximum risk of Alpha Engine. Our largest peak to valley drawdown (loss from peak profit to the bottom of a trough before the strategy started to earn profits again) was -27% from December 2019 to March, 2020. This compares favorably to the largest stock market drawdown of over -50% during the financial crisis, and -40% just recently after the pandemic in March of 2020. In fact, there have been dozens of stock market bear markets and crashes that have exceeded -30% (*8)

5. Why is the minimum investment $100,000?

The minimum investment in the AlphaEngine program is $100,000, but you can fund your account with $75,000 using notional funding. Notional funding is a way to access some additional leverage - you deposit $100,000 in your brokerage account and we trade it as-if it was worth $100,000. If you don’t have $75,000, we do have another program called “Alpha Engine mini” with a minimum investment of $40,000. Once your account reaches a value of $75,000, you can convert your investment over to the full Alpha Engine program.

7. Is this legit?

We do not have access to your capital. We are a commodity trading advisor and registered with the CFTC and regulated by the NFA. As such, we cannot access your capital. Your funds stay safe in your own brokerage account where our AlgoLab software plugs into and manages your trades and investments. You can start or stop your investment anytime you want. Since it is your own brokerage account, you call the shots and you are in control. Contractually, there is no minimum holding period, and if you wanted out, we can have you flat and in cash within an hour.

 

*1 https://en.wikipedia.org/wiki/2020_stock_market_crash#:~:text=The%202020%20stock%20market%20crash,began%20on%2020%20February%202020.&text=On%209%20March%2C%20most%20global,countries%20led%20by%20Saudi%20Arabia.

*2 https://mansfield.energy/market-news/largest-price-spike-in-crude-history-us-locked-and-loaded/

*3 https://www.cnbc.com/2019/05/29/corn-futures-surge-bringing-may-gain-to-20percent-as-soft-commodities-rally-on-midwest-flooding.html

*4 https://www.theguardian.com/business/2016/jun/23/british-pound-given-boost-by-projected-remain-win-in-eu-referendum

*5 https://www.wsj.com/articles/trumps-surprise-victory-sent-global-markets-on-a-12-hour-thrill-ride-1478740554

*6 https://www.crestmontresearch.com/docs/Stock-Yo-Yo.pdf

*7 https://www.cobizmag.com/what-it-takes-to-be-an-equity-investor/#:~:text=The%20average%20annual%20drawdown%20for,years%20has%20been%20about%2014%25.

*8 https://en.wikipedia.org/wiki/List_of_stock_market_crashes_and_bear_markets

*9 According to the document linked here titled "How Our Performance Estimates Are Determined", the pro-forma client account shown earned a 104.98% return in 3.41 years months which roughly results in an average return of around 30.7% per year (104.98% / 3.41).

*10 HOW OUR PERFORMANCE ESTIMATES ARE DETERMINED

*11 VIEW ALL CLIENT RETURN: https://www.algolabcapital.com/clientreturns

*12 https://www.investopedia.com/articles/financial-advisors/022516/4-reasons-why-market-correlation-matters.asp

*13 https://dqydj.com/sp-500-return-calculator/
 

2. FEES & MINIMUM CAPITAL

 

  • Minimum Recommended Capital = $100,000 USD (program will trade 1 contract per symbol per trade per each $100,000 of capital in account.)
     

  • Minimum Funding = $75,000 USD (25% notional funding minimum)
     

  • Minimum Notional Funding = 25%
     

  • 2% management fees
     

  • 20% performance incentive with high water mark
     

  • LOW CAPITAL OPTION: If you are interested in a $40,000 minimum investment version of AlphaEngine, please contact us


 

3. NOTIONAL FUNDING

"Notional Funding Percentage" is the percentage of your investment that you actually fund your account with. For example, a $100,000 account using 25% notional funding means that you fund your account with $75,000 ($100,000 - 25%) of actual capital, but your account is treated as if it was worth $100,000 for purposes of calculating trading volumes.

Funding your account with less capital than the standard requirement serves to increase the volatility of your returns by increasing your returns, while also increasing your drawdowns. Funding your account with more capital than the standard requirement (as in the case of an IRA account for example) serves to reduce the volatility of your returns by reducing your return while also reducing your drawdowns.

 
 

The ESTIMATED average annual returns and drawdowns in the table above are estimates based on the last 3 years of actual trading and are net of all commissions and fees. Actual annual returns may be lower. Actual maximum annual drawdowns may be higher.

4. IRA ACCOUNTS

Due to IRS rules for IRA and other retirement savings accounts, these accounts are set to notional funding level of 200% and the minimum actual funding required is $200,000

 
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AlgoLab Capital Management, Ltd. is registered with the CFTC as Commodity Trading Advisor and is listed as an NFA member (NFA # 523700). This web site has been published in the United States and is not intended for use by, or to provide any information to, residents of Canada.