THE "I LOVE MONDAY" (ILM) TRADING STRATEGY

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CFTC RULE 4.41 – HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN LIMITATIONS. UNLIKE AN ACTUAL

PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT

BEEN EXECUTED, THE RESULTS MAY HAVE UNDER-OR-OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET

FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT

THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS

LIKELY TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN. GOVERNMENT REGULATIONS REQUIRE DISCLOSURE OF THE

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FUTURE RESULTS. WHILE THERE IS A POTENTIAL FOR PROFITS THERE IS ALSO A RISK OF LOSS. A LOSS INCURRED IN

CONNECTION WITH TRADING FUTURES CONTRACTS CAN BE SIGNIFICANT. YOU SHOULD THEREFORE CAREFULLY CONSIDER

WHETHER SUCH TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR FINANCIAL CONDITION SINCE ALL SPECULATIVE TRADING IS

INHERENTLY RISKY AND SHOULD ONLY BE UNDERTAKEN BY INDIVIDUALS WITH ADEQUATE RISK CAPITAL. ANY ADVISORY OR

SIGNAL GENERATED BY QSB IS PROVIDED FOR EDUCATIONAL PURPOSED ONLY. ANY TRADES PLACED UPON RELIANCE ON QSB

SYSTEMS ARE TAKEN AT YOUR OWN RISK FOR YOUR OWN ACCOUNT. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE

RESULTS. WHILE THERE IS GREAT POTENTIAL FOR REWARD TRADING COMMODITY FUTURES, THERE IS ALSO SUBSTANTIAL RISK

OF LOSS IN ALL TRADING. YOU MUST DECIDE YOUR OWN SUITABILITY TO TRADE OR NOT. FUTURES RESULTS CAN NEVER BE

GUARANTEED. THIS IS NOT AN OFFER TO BUY OR SELL FUTURES OR COMMODITY INTERESTS. Futures and options trading

involves substantial risk of loss and is not suitable for every investor. The valuation of futures and options may fluctuate, and, as

a result, clients may lose more than their original investment. The impact of seasonal and geopolitical events is already factored

into market prices. The highly leveraged nature of futures trading means that small market movements will have a great impact
on your trading account and this can work against you, leading to large losses or can work for you, leading to large gains. If the

market moves against you, you may sustain a total loss greater than the amount you deposited into your account. You are

responsible for all the risks and financial resources you use and for the chosen trading system. You should not engage in trading

unless you fully understand the nature of the transactions you are entering into and the extent of your exposure to loss. If you

do not fully understand these risks you must seek independent advice from your financial advisor. All trading strategies are

used at your own risk. This system should not be relied upon as advice or construed as providing recommendations of any kind.

It is your responsibility to confirm and decide which trades to make. Trade only with risk capital; that is, trade with money that,

if lost, will not adversely impact your lifestyle and your ability to meet your financial obligations. Past results are no indication

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projections of future conditions are attempted.
INTRODUCTION

ILM trading strategy is a simple trading strategy to trade the US index-based financial instruments with
holding period of 1 to 4 days and guaranteed flat by end of Friday.

It trades mainly S&P500 index futures (emini S&P500 futures) and SPY (S&P500 ETF). It is also applicable
for other indexes, such as NASDAQ (QQQ) and Russell 2000 (IWM).

For the explanation of each instruments here, please do Google search on each of them.

In general, ES (Emini S&P500 futures) is worth $50 for every 1 point of S&P500 move. For example, if ES
moves from 1900 to 1901, and you are long (meaning you bought a contract), then you will make $50.
If you are short (sold a contract) and ES moves from 1901 to 1900, then you will make $50. Of course the
opposite is true: You will lose $50, if the market moves against you a point.
ES market moves in 0.25 point increment. Each 0.25 is worth $12.50 per contract.

SPY (a stock ticker for S&P500 ETF) is very similar to ES and track S&P500 index. It has less leverage than
ES. 1 ES contract is worth about 500 SPY shares. Therefore, if you have a small account, you could trade
SPY instead for 100 shares or as your account risk permits.

The system allows you to trade a factor of 1, 2, or 3 contracts each entry. This means every trade you
can have 1 contract to 3 contracts. We will scale out to take profits on each contract at different price
level. For SPY, you can take less risk by using shares less than 500 per position.
Of course, when you make more money, you can increase the size of contracts accordingly.
For example, if you trade 100 shares, then you can increase your size by a factor of 2, which is 200
shares.

The system has strict hard stop loss, which means we place a stop loss order for all contracts (1, 2 , or 3).
We will only risk a constant amount and will not ever move the stop unless we hit the target. It will be
explained in the strategy later.

We assume that you understand that both ES and SPY can be shorted easily due to the liquidity of the
instruments. We can establish a short position in both instruments, not just a long position. It can be
done as easy as hitting sell button in your trading platform. No short restriction whatsoever. This is why
ES and SPY are great for this strategy. QQQ and IWM are also very liquid.

THE STEP-BY-STEP STRATEGY

RULES:

- Trade entries only on Tuesday, Wednesday and Thursday. NO trade on Monday and NO new position
on Friday (only closing open position is allowed on Friday).
- Never move initial stop loss. Unless we are trailing stops when using multiple contracts. It will be
explained below.

- Use 15-minute chart of ES or SPY. No need indicators. You need only calculator and/or drawing tools
on your chart.

STEPS:

1. After Monday market close, calculate the High minus Low of the trading day (Monday's Range).

for example: September 22, 2014 (Monday). High of ES is 1999.25. Low is 1982.50

The range is (high - low): 16.75 points.

Please see the figure below.

Figure 1. Monday's Range

2. If range is over 16 points, we consider this "Huge Range", because it is higher than average range.
The higher the range, the more volatile it is and more risk.

If over or equals to 16 points, then Stop Loss is 50% of Monday's Range. For Monday, September 22,
50% of 16.75 = 8.25 points (rounding down to nearest .25)
if lower than 16 points, then the Stop Loss is the range itself. For example, if Monday's Range is 10,
then the Stop Loss is set at 10 points.

3. We go long (buy) ES when it breaks above Monday high on Tuesday, Wednesday, or Thursday.
Or, if ES breaks below Monday low, then go short (short sell), whichever happens first (breaks out or
down Monday's Range).

Note: If ES does not break out or down Monday's high or low on Tuesday, Wednesday, or Thursday,
then no trade for the week. No new trade entry on Friday.

The example below shows that there is a trade short entry when it breaks Monday's low on Tuesday.
Note: There will be no short entry if this happens on Friday as stated in the Rules above.

You now understand the condition of a trade entry. Next, position size and trade management are
explained.

Figure 2. Emini S&P500 breaks Monday's low on Tuesday. We have a trade short entry.

4. You need a calculator for the stop and target placement.

If you are in a trade (either long or short), then immediately:

• Calculate your targets and stop.

 If Monday is a Huge Range day, the stop size is 50% of Monday's Range.
The first target is trade entry price + stop size
The second target (if trading 2 contracts) is trade entry price + 2 x stop size
The third target (if trading 3 contracts) is trade entry price + 3 x stop size

If Monday is NOT a Huge Range day, then the stop size is Monday's Range.
The first target is trade entry price + stop size.
The second target (if trading 2 contracts) is trade entry price + 2 x stop size.
The third target (if trading 3 contracts) is trade entry price + 3 x stop size
NOTE: The stop price is basically Monday's low for long position and Monday's high for short
position. However, we would like to add 1 tick below Monday's low for the stop order on long
position. For short position, add 1 tick above Monday's high.
For example, if the stop price is 2000, Monday's low, then stop order should be placed at 1 tick
below, which is 1999.75. The reason is to avoid stop hunting algorithm or noise to hit your stop
order.

• In our example,
September 22, 2014 is a Huge Range day.
We have a short trade on Tuesday.
Stop size = 8.25
Stop loss for all positions = 1982.50 + 8.25 = 1990.75
Target 1 = 1982.50 - 8.25 = 1974.25 (which is Monday's low minus stop size)
Target 2 = 1982.50 - 2 x 8.25 = 1966.50
Target 3 = 1982.50 - 3 x 8.25 = 1957.75

• NOTE: If you only use 1 contract (or 500 SPY shares), then you will only have 1 stop and 1 target,
which is the first target. If you use 2 contracts, then you will have 2 stops and 2 targets.

• If at any time ES goes above 1990.75, then you are stopped out from your position(s). Please
wait for the next trade entry. If there is no more entry by end of Thursday, then you are done
for the week.

Please open up your chart and practice the calculations shown here and apply it on your chart. Draw
some lines to mark the targets and stops.

The following is the example of the targets and stop lines:

 Figure 3. Stops and Targets drawn on the chart

5. Now, you are in a trade. Please let the market do the work for you. Do not move targets or stops.
In this section, trade management, such as trailing stops are discussed.

If you are stopped out and no targets are hit, then you are done and wait for next entry if there is any
before Friday.

If first target is hit and filled, then ideally when the 15-min bar closes above first target price or price
moving up above first target, then move your stop loss to your entry price (in this example 1974.50).

If you use 1 contract only, then you are done and wait for next trade when price and bar closes below
Monday high and breaks out Monday high again.

If you use 2 or 3 contracts, then you wait either you are stopped out or your second target is hit. If your
second target is hit and you are trading 2 contracts, then you are done with profits. If you are stopped
out, then you are done and wait for next entry.

If your second target is hit and filled and you are trading 3 contracts, then ideally wait for 15-min bar to
close above second target price or price moving up above second target, then move your last stop loss
to first target price (1974.25, in this example).

With the last contract, you will wait until the third target is hit or you are stopped out.
The strategy is simple and can be applied right away. You may make changes to the size or the rules to
enhance it, if you want to. In general, the strategy works out of the box, but can be enhanced, if you are
an experience system developer or if you are interested in modifying it to fit your own risk profile. The
main idea is we are using Monday's Range as the reference point for the trades. Why does this work?
Monday is considered as the first day of trading after the weekend. The rest of the weekdays will be
more volatile and follow the direction set by Monday's Range.

NOTE:

- Please consult your broker how to place limit orders, stop orders, and other type of orders.

- It is recommended to use 1, 2 or 3 contracts and as you make more money, you can increase the size
proportionally. The results are better with 2 and 3 positions, but if you are not well capitalized, you can
start with 1 contract.

- It may be useful to have a feature from broker to notify you if your order has been executed, then you
can take further actions as defined in the procedure. Please consult your broker.

- Your entry and exit might be different from other traders using the same strategy, because of slippage
and other reasons

- Sometimes, market can gap up or down at the open. In general, it is recommended to get the entry
order as near as the theoretical entry price defined in the manual. But, it is up to your discretion if you
want to enter the market right away after the gap, or skip the trade, or patiently wait for price to get
closer to theoretical entry price. Market cannot be dictated and described in exact words, therefore
your discretion as trader is necessary. This is one of the reasons that your results might not be the same
with other traders, but the strategy given should serve you well as long as you stick to the plan.

- We recommend Ninjatrader if you want to trade futures. We are not compensated by them, but we
think their platform is very good for traders. It allows traders to place bracket orders, which is a "One
Cancels Other" type of order. For example, you could place a buy order and when it is filled a target
limit order and a sell stop order are placed simultaneously. If the target is hit, then stop order is
cancelled automatically (One cancels other). Vice versa if stop loss is hit.
This makes trading systematic and enforces discipline to traders.
www.ninjatrader.com

- Another good Broker for taking positions either ES or SPY overnight for several days holding period is
InteractiveBrokers.com. Very good commission structure.

- Good luck in your trading! Any question, please email us at quantstrategybank@gmail.com