Mapleridge Capital Corporation

Diversified

Program Description: The primary methodology of directional trading will be trend following. It is the Advisor's belief that all markets exhibit trending behaviour, and that trends occur randomly in time within a market, but that the magnitude and duration of a trend is unknown. Therefore, it is necessary to trade as many markets as possible in order to take advantage of the markets which are moving in a given day, month or year. Furthermore, money management and portfolio management must be employed in order to minimize losses when no trends exist. All trading is systematically driven and based on a set of rules derived from an extensive, rigorous and quantitative study of large quantities of historical futures and other market data. Computer algorithms determine when to enter and exit a market, how aggressively to trade a market, whether the probability of winning on a trade is too low and the trade is filtered out, when to cut losses on a losing trade and when to take profit on a winning trade. The different trading algorithms form a diversified group of trading strategies, and each trading strategies is executed in a disciplined manner. A strategy is typically traded only if it works over a number of markets. This is a minimum level of robustness that must be achieved to trade a given strategy. Diversifying by different trade time horizons (short-term, medium-term and long-term) attempts to catch trends of different lengths. In this way, for example, a short-term trade may appear as counter-trend on a different time scale, which may result in diversification benefits when combined with longer-term trading algorithms. Money management techniques are used to set stop-out levels in the market for all trades. Stop-out levels are trading levels that require execution if the market reaches these levels, and are used to attempt to limit losses or to capture gains. Calculation of stops is consistently applied to each market, and volatility in the market is typically an important input into this calculation. Portfolio management techniques are used to address how aggressively to trade a market at a certain point in time (or how many futures contracts to trade for a given allocation of capital). One main approach to the Advisor's portfolio management system is to allocate capital based on an analysis of strategy performance and volatility in the market, and to dynamically adjust the size of each trade using a feedback loop which is tied to the ongoing performance of the trading strategy. A second approach to portfolio management employs an analysis of correlation among markets to determine the relative exposure to different markets. The application of money management and portfolio management techniques is intended to manage risk. In order to maintain a high quality investment service, the principals are actively involved in ongoing research and development of new trading strategies or approaches. A very important goal of the firm is to continuously add trading strategies with low correlation of returns to its existing portfolio. Research is conducted by testing trading algorithms using proprietary software that runs on a network of computers. To create trading rules, the Advisor relies primarily on mathematical analysis. Research ideas are generated by monitoring market behavioural trends, journal articles, discussions with industry and academic professionals, and through trading experiences. Once trading ideas/rules pass a series of tests, incorporation into the program is considered. Trading performance of all strategies is closely monitored to validate the assumptions in their development. The goal of the entire approach is to combine diversified strategies for all aspects of systematic trading to perform in different trading environments. Although the goal is to accomplish performance in various trading environments, the Advisor cannot guarantee such performance.