I really like this new feature, it should bring more users to the website. I have 2 observations about it, you might want to consider changing the set up a bit:
1. Competitions do need restrictions, otherwise they are not different than just using the website itself where anything goes (you can trade anything as much as you like). But the restrictions in your setup is missing the “no shorting allowed”. I thought some people might want to do an old fashioned “stocks and longs only”, competition, without shorting. That should be amoung the choices.
The other restriction what seem to be missing is how much capital can be comitted to one particular trade. Competition is about winning consitently, not just having a few lucky trades. So maybe you should add a feature of how much % of the
trading capital is allowed in 1 particular trade. (like 20% max. or so)
2. I don’t see the problem of entering a competition late. If a person doesn’t mind the handicap of starting late (and 1 week late is not much of a handicap in a 3 months interval), let him enter late. People can easily miss the starting date, and they can also get into the mood by seeing how others are doing and want them to challenge.
Otherwise very good idea and wish you good luck with it…
Those are good ideas. I will try to add them shortly.
Regarding the restriction not allowing late entry (after the competition started): I wasn’t quite sure how to handle that. I thought the problem would be the following: someone joins with 2 days left, and then makes one huge bet-the-farm trade – and wins. Would other contestants be angry?
But if we are restricting the trade size (a good idea I hadn’t thought of until you mentioned it) then perhaps this issue goes away.
If anyone has any thoughts about late competition entries, please let me know here.
Thanks.
Matt:
> I thought the problem would be the following: someone joins with 2 days left, and then makes one huge bet-the-farm trade
There are 2 solutions for that:
1. Setting a minimum number of trades. Although that can be sidestepped with a bunch of small trades. We have to keep in mind that most restrictions can be sidestepped, but I don’t want to give ideas here.
2. There would still be a deadline for entries, but AFTER the competition started, like halfway through the competition or something. This could be up to the organizer of the competition.
Against the bet-the-farm strategy there is only one solution, the limiting of the size of the bets. (although I can sidestep even this one)…
It’s moot as the vast majority of traders participating on this site, “bet the farm” with each trade. Do you honestly thing anyone with a $100k account would be swinging 1000-lot QQQ option buys with actual funds? Not if said $100k is a significant % of the traders net worth.
The paper trading fallacy is the problem, not arbitrary limits on trade-size and frequency.
Matt – don’t take this as a condemnation of this site; it’s simply an issue with any paper trading service.
riskarb
It’s moot as the vast majority of traders participating on this site, “bet the farm” with each trade. Do you honestly thing anyone with a $100k account would be swinging 1000-lot QQQ option buys with actual funds? Not if said $100k is a significant % of the traders net worth.
Sure, why not. I do it all the time. I see no difference between actual funds and hypothetical funds when trading a mechanical system generated signals which gives commitment to ones methodology by generating anambiguous signals and discipline to act on ones methodology by sticking to the rules.
>The paper trading fallacy is the problem, not arbitrary limits on trade-size and frequency.
It is neither a fallacy, nor a problem, atleast for me. By the way the maximum trade-size should be 50% of the capital risked for 1 position in the portfolio which is what the optimum kelly criterion approaches for systems which have a Portfolio Risk Reward Ratio (PRRR) > 10 and %wins > 50. The maximum % for the portfolio decreases to 25% for 2 positions, 16.67% for 3 positions, and all the way to 3.34% for 15 positions. Again, the exact percentage depends on the PRRR and the %wins of your system.
>Matt – don’t take this as a condemnation of this site; it’s simply an issue with any paper trading service.
It is neither an issue and nor a condemnation, just part of learning…
rgds, Pal
Pal – your PRRR relies on a statistically-valid sample. The fact remains that the vast majority of mechanical systems are simply curve fit to a small data series. Your edge, or lack therof, will be shown only through trading. When you build on historical data, you build on mud.
Thanks. I agree. I am glad you responded in good spirit. The Mechanical System I am using has been walk-forward tested with real-data in real-time for 45 years. I doubt that most mechanical systems are even back-tested (not walk-forward tested) for that long.
The results of the long-term back-test (recommend > 20 years) is validated by walk-forward testing (atleast 2 years) and so can’t fly with back-testing alone, because the results are not validated even if the test is based on a statistically-valid sample. In my case, the walk-forward testing period is longer than the back-test period. “A Walk-forward tested system is better than the best optimized (curve-fitted) one.” I could expand on that quoted statement if anyone is curious…
rgds, Pal
Thanks for expanding a bit on your backtesting methodology… I certainly didn’t mean to imply that your system was curve-fit to a small sample. Good luck with your system. =)
riskarb
