Hartman’s impeccable market timing

January 14, 2015 07:02 PM

Anyone involved with trading will tell you that good timing is an important attribute to have. Rob Hartman, while not a “market timer” per se, has pretty good timing. 

Hartman had a 17-year information technology career before switching gears to become a trader in the late 1990s. “I worked in computer hardware and also as a programmer and in management,” Hartman says. “Toward the end of that career I was a consultant in Silicon Valley. The markets were moving like crazy and I read about trading and the idea that you could do better than buy-and-hold sparked my interest.” 

So he was leaving the dotcom world and abandoning buy-and hold-at the turn of the century. See what I mean about timing. 

Hartman began researching trading while still consulting and would consume all the trading information he could including paying for pricey seminars. “In those seminars I started asking questions. They would quote statistics about how many times a certain thing would happen in the markets and I would keep on asking ‘how do you know that,’” Hartman says. I would get dirty looks. I thought it was BS. I asked them ‘How do you know?’ and they would say, ‘I have friends who have software that can test these rules.’ I lit up and said, ‘What is it?’ and that is when someone described TradeStation to me.”  

Once he found this out he left the seminar circuit because he had the programming skills to do his own research. “If I had software and data [then] I can write the rules [and] validate it myself. And so began my quest to earn the hardest easy money I ever earned.” 

Hartman was consulting for Apple and spending all his free time coding trading strategies and wind surfing. “I got the tap on the shoulder from my wife in the fall of 2000 saying are you ever going to sleep,” he says. 

It was time to make a call and Hartman decided to dive headfirst into trading. “From that time forward I completely buried myself in doing mechanical testing and trading my own money with the goal of being financially independent.” 

He developed intraday and swing strategies for stocks and stock index futures. “My goal was to find out what markets, what timeframes, what techniques generally had more potential. That took a lot of time,” he says. “The idea was to go wide and figure out what worked and what didn’t. In that process I discovered the few things that people said should work, which is cut your losses short, let your winners run, don’t bet too much [and] diversification is good. In the end, no level of fancy coding or intellectual brilliance could replace those truisms.” 

With that he settled into futures. And he was making money but with more volatility than he was comfortable with and he understood that much of his success was due to luck and that he didn’t have the necessary capital to trade for a living. 

“In 2003 I had to make the decision of regulating it to a hobby and going back to high tech or [managing money] and that is when I looked at being a CTA,” Hartman says. 

He began laying the groundwork for his CTA, Pacific Capital Advisors, and in 2005 he launched a trend following program, which did well and attracted assets, but after a 2007 drawdown he shut it down. Hartman realized that it was tough to be a new trend follower.

He understood that he had to do something truly non-correlated to stand out and launched his Vanguard program in 2007. The conservative, 8% M/E ratio, strategy traded a combination of mean reversion and momentum on an intraday basis on the E-mini S&Ps  and bond futures.

The strategy won praise and drew assets of $45 million in 2010 but a subsequent series of flat years plus the MF Global debacle pushed Hartman to make some changes. In mid-2013 he changed the holding period to short-term (five days) from intraday, which has led to a resurgence. The program is up 15.16% year-to-date through November. 

Hartman also launched an ag program called Terra in April 2014 that is up 38.56%. Terra focuses more on momentum and trades, grains, meats and softs. Like Vanguard it is completely systematic but has a unique approach to each market. 

I have a separate strategy for each market in Terra,” he says. “They respect what I call the thumbprint in the market. When we get in choppy markets the systems are pretty good at not losing much, in fact making a little money if it is not too noisy. When things are trending I will capture a bunch of it.” 

Terra doesn’t take on any more risk than Vanguard but launched at a particularly good time in the ag markets. Once again, Hartman’s timing was spot on. 

“Vanguard has more of a convergent approach. You are not depending on huge divergent trades like in trend following. It will capture big moves if they happen but we are still making money in the range bound financial markets,” Hartman says. “The thing with Terra is that it’s always going to do better in those big divergent moves [but] stays out of trouble in choppy markets.”

About the Author

Editor-in-Chief of Modern Trader, Daniel Collins is a 25-year veteran of the futures industry having worked on the trading floors of both the Chicago Board of Trade and Chicago Mercantile Exchange.