Sigh… Another Bid/Ask spread scammer.
While I understand your reservations about strategies like this, I do want to suggest your language is inaccurate.
The trader here is not “scamming” anyone.
Very simply: he is entering limit orders. The limit orders get filled when the bid/ask crosses. It doesn’t always get filled, and sometimes the market moves in the other direction, and the limit orders are left unfilled (and eventually canceled).
This is perfectly legitimate, and behaves exactly the way the real-life market behaves:
If you place a limit order to BUY at 100, then as soon as the “ask” touches 100, you will fill your order if you are first in line.
The challenge here is the market liquidity: are you first in line?
Someone definitely does get filled when the ask touches 100. The question is: is it only one person? Is it 100 people? Is it 1000?
That answer depends on the market depth at any given price.
There is nothing illegitimate about placing limit orders. There is, of course, a challenge to understand how liquid a market is.
As a general policy, when there are no autotraders, we allow just-touched limit orders to fill.
Once there are actual autotraders to a strategy, we show the actual fills achieved, and no longer automatically assume a limit order is always filled.
Matthew this is completely unrealistic. No one can trade like this in the real world.
Anyone who subscribes to this system will get nothing like this performance. It happened with UVXY Trader, it happened with Diamond, and I’m sure others that we didn’t catch.
The one positive here is that C2 got some income and no one has subscribed yet.
Bid/ask crosses or touched the limit price (in case of Tail strategy without subscribers)?
You believe C2’s primary motivation is to make money at the expense of its customers. You are incorrect. My goal is to build a great company, and a great platform, that people can use to trade better.
Regarding your belief that use of limit orders are inherently bad, or always “unrealistic,” I disagree. It depends on the market liquidity.
Let’s think it through carefully. You say a “just-touched” limit order is inherently unachievable. My response is: It is true that there is some possibility any particular trader will not be filled on a just-touched order. (A possibility, not a certainty.)
But let’s continue to think through the problem carefully.
Imagine a world where C2 requires that a price “trades through” in order to recognize a fill – that is, that at least one unit fills.
Now, the same exact problem remains. There will be someone who fills that “first” unit. But there still may be dozens, or even hundreds, or people who don’t receive their fills.
What if the trade-through quantity is three units? Is that sufficient?
Maybe. But what if the strategy is followed by 5 people, each trading 10 units? The same issue still remains.
In fact, there is no inherent difference between requiring 1 unit to trade through, or 2 units. There is little inherent different between 2 units and 10.
My point is: There is no magic answer. All hypothetical track records are, by definition, hypothetical. C2 does the best thing it can do in this case: it shows you what actual traders receive. That means: when there are traders following the strategy, C2 factors in the slippage or lack of liquidity that exists, and bakes this into the hypothetical track record.
As far as what happens when there are no real-life traders (as is the case for new strategies like the one you point to), there is no simple answer. Requiring a one-unit trade through is not inherently different in any way from requiring a two-unit trade through. What magic begins at two units that does not exist at one? None.
Since there is no difference between requiring two units and requiring one, on any qualitative level, I prefer to allow one-unit trade throughs. There are several reasons for this. One of them is that it allows system developers to more easily interface third-party software to Collective2. These 3rd-party packages typically recognize one-unit trade throughs.
To summarize, I understand the reason you look carefully at strategies that have not yet received AutoTrade followers. I agree with that caution.
Where I disagree is with your belief that Collective2 is acting in a dishonest way.
It’s okay to have intellectual disagreements about hard-to-solve problems. But just because someone disagrees does not necessarily mean they are dishonest or bad people.
@MatthewKlein could you put some markers on the equity curve showing when strategy got autotraders? So it will be clear what is the theoretical and what is real world equity.
Yes, that’s a good idea. I know it has been raised before.
Based on my observation, some of posters here like this guy in C2 forum, who are neither trade leader (they do not have any published trading strategy in C2) nor investor (they don’t follow any C2 trade leader’s strategy), spoke loudly and frequently. They used to criticize and label many good trade leaders and strategies unfairly and improperly.
In this particular case I am afraid labeling is not off target.
If it was any other instrument; OK; but VIX futures.
This strategy started with 10 K; and please to check what Interactive Brokers ask
for opening 1 VIX futures contract.
For me at Stage5, I need to have 9900 to open only 1 VIX futures, and here you have 2 contracts traded with 18,500 . Any, and I mean any move against initial position would
result in margin call.
Other thing is, when you trade that futures, there is slippage, you pay around 50 $ slippage per contract, unless you are extra good in hitting it with limit orders.
Agreed. This would be very beneficial. Subscribers could actually see that these guys don’t actually make “real” money.
C2 has a very clear statement “these are hypothetical performance results that have certain inherent limitations”. “Unlike the results shown in an actual performance record, these results do not represent actual trading. Also, because these trades have not actually been executed, these results may have under-or over-compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated or hypothetical 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 profits or losses similar to these being shown”.
It is not hard to understand that “hypothetical performance” does not mean “real” money, unless he/she is a brainless person.
That is true. But even with the paper trading provided by C2 one can trade as close as possible to real world trading and returned results will be reliably close to real trading results, and one can hack a system of liquidity, bid/ask or leverage simulation of C2 and show thousands of unreal percents. And that thousands of percents easily make people “brainless” in investing.
Can you share what good traders and strategies were unfairly criticized here? Maybe in the separate topic.
Matthew, The theory you presented is correct. Please show me a single C2 strategy that operates based on ask/limit touched orders and achieved a similar result after 1st subscriber.
I can show you dozens of strategies that never achieved a similar result before 1st subscriber, even they operate in liquid markets.
According to C2’s FAQs regarding Limit Orders: ”By default, if we see a price get hit anywhere in the world, then we convert all your autotraders to a market order.” This policy make sense and is in place to keep the strategy and the auto-traders all in synch.
However, the way C2 records trades when there are no auto-traders is not at all in line with this policy. Just looking at the very last trade placed on 8/16 for the Tail strategy mentioned at the top of this thread, with the bid at 14.55 and the ask at 14.60, there was a limit buy order placed at 14.55 for 2 shares. “Somewhere in the world” there was a fill at 14.55, so C2 logged this as a fill at 14.55 for this strategy. A limit sell order was then placed at 14.60, and again, “somewhere in the world” there was an execution at 14.60, so C2 logged this as a fill at 14.60 for the strategy with a $100 profit minus the $16 in commissions. IF this strategy would have had an auto-trader for this trade, what would have this likely have looked like? The initial buy at 14:55 would have been turned into a market order for the auto-trader and filled at 14.60 (the ask), then when the position was closed at 14.60, the auto-trader would have gotten a market order to close the position at 14.55 (the bid). So what C2 is showing as a $84 GAIN, would most likely for an auto-trader be a $116 LOSS. Add up all of these similar trades and what C2 is showing as a 88% hypothetical gain, would in reality be a huge loss if these exact same trades were placed if the strategy had an auto-trader. Many subscribers and potential subscribers have no idea the “hypothetical” and actual performances could be so drastically different.
The solution to me seems very simple – when a strategy does not have auto-traders, C2 should try to replicate what the auto-trader experience would most likely be like. In cases of limit orders, because by default they turn into market orders for auto-traders, then treat them like that. When the limit is touched, execute the trade based on what a market order would most likely get. Is it perfect? Maybe not, but does it MUCH BETTER represent the actual executions a subscriber would likely get? YES!!!
Because trader leaders like TapK know there is an inconsistency between C2 trades and the trades a subscriber would actually achieve, it then becomes an easy SCAM. Webster defines Scam as “a fraudulent or deceptive act or operation.” Deceptive is defined as “tending or having power to cause someone to accept as true or valid what is false or invalid.” This is clearly the motivation behind strategies like this making these trades. They build up a trade record that has the power to cause subscribers to accept this hypothetical performance as something that might actually be achieved if they subscribed to the strategy. And it works – these strategies do get subscribers who were deceived into thinking this. Therefore, I based on Webster’s definitions, I would agree that they are scams.
Matthew, I think dealing with this would go a long way in showing the community that you want C2 to be a place for serious strategies and serious investors.
Just treat strategies that don’t have auto-traders in a similar way that strategies with auto-traders get treated. Turn limit orders into market orders when that price is hit somewhere. Solves this problem immediately.
Of course, there are other types of strategies that I think fit the “scam” definition – but those are probably more difficult to deal with. This one just takes a little update to the code.
I really do spend the time to write this because I care about C2 and think it will be stronger and more profitable if some of this stuff is dealt with.
Matthew, your all developers here say they don’t want to see bid/ask touch functionality. They want to see bid/ask cross. You are building C2 for us. Why are you refusing to change this simple functionality if there is no single post that someone wants bid/ask touch (no subscribers scenario)?
At the end of the day, nobody cares about this “stuff” if C2 fees are going down instead up and subscribers making wise decisions. Unfortunately, C2 fees are going up, and it needs to be a plan on how to stop it. So far C2 strategies using bid/ask touch functionality before 1st subscriber, were one of the major reasons to remove money under C2 strategies umbrella.
Transaction slippage is always an issue in the real world. The questions is, if each and every trade leader is getting fair treatment. If the movements are entirely arbitrary, you’d expect the number of positive and negative slippages to be about the same. Over time, they should average out close zero.
No, sorry, David. I think you are incorrect.
If a single AutoTrader had been following the strategy, it is 100% certain that this first AutoTrader would have filled (and probably with zero slippage.)
Think about it and you’ll see why: the limit order would have existed, and would have been filled when the ask changed.
We’re dealing with counter-factuals here, so it can be a bit mind-bending, but I want to point out that your apparent certainty about what would have happened is not certain at all, and in fact is likely wrong.
Of course, all bets are off once more than one trader follows a strategy, but that’s a different issue.
Matthew, I don’t think anyone is claiming that limit orders are bad - it is C2’s fill engine’s implementation that is unrealistic. Several people have said it already and I am really stumped how you cannot see that they are saying is completely true — systems that are fantastically profitable immediately change as soon as the first subscriber auto-trades. Does anything else need to be said? What more proof do you require?
C2 != Reality and trade leaders are exploiting this to pump up their system stats to lure unsuspecting subscribers who are going to be in a for a rude awakening (after they have already paid)
Edit: If I was able to trade futures with the assumption that I am always first in line on both the bid and ask I could literally print money all day every day. Anyone who has day traded futures knows how unrealistic that is.