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I think what you are observing is more a case of “small sample size for early strategy track record” = “unlikely to be indicative of future performance” (i.e. data artifacts) – rather than the issue being whether just-touched limit orders are recognized or not.
Also, I just want to note that I made two separate points in this thread, both of which you did not address:
There is no qualitative difference between requiring a minimum trade size of one versus requiring a minimum trade size of two. (I.E. The difference between allowing just-touched orders to fill, versus requiring a trade-through). There is no preferential point of reference: C2 users are no more likely to be the “lucky” person receiving fill #2 than they are to be the person receiving fill #1! Both are equally likely (or unlikely), and depend on total market liquidity and the number of followers of a strategy.
Assuming all other things are held constant, the first AutoTrader to sign up for a strategy is nearly 100% likely to get the real fill that C2 recognized when a bid or ask touched a limit.
This second point is perhaps more speculative than the first, and not as obvious, but I think it’s very interesting to at least note it.
The difference is that when there is someone autotrading the fills will not be happening like they were when no one was trading the system. So while your statement about the first autotrader getting the real fill is true what is also true is that the performance of the system will immediately drop with that first autotrader because the unfair advantage that the C2 fill-engine simulator provides to the system does not exist in the real world. In liquid markets (such as popular future products) you are rarely the first in line and often it has to trade through before you get a fill.
But you have not addressed the main point I am trying to make.
Why is being first in line qualitatively different from being second in line? Or from being third or fourth in line?
Yes, of course being second in line is “better” than being twentieth in line. But most of the time, unless a bid or ask is only for one unit (not very common, even in not-very-liquid markets) then there is no qualitative difference between being first or second in line.
One way to think about what you are saying is that you are drawing an arbitrary line in space, saying, “Matthew, you must make C2 act only when you can guarantee that the second person in line gets the fill – but please, not the first person in line.”
Well, that’s reasonable enough, I suppose. But why is it much better than my response, which is to say “Let’s have C2 act when the first person in line gets filled”?
Then again, perhaps both of us are wrong. Maybe C2 should only recognize a fill when the tenth person in line gets filled. Or maybe the hundredth?
Why are you so certain being first in line is qualitatively different than being second in line?
I’m not trying to win an argument based on verbal gymnastics. I’m simply suggesting that there is little difference between recognizing a fill on bid/ask being just-touched, or on a trade through. At small enough increments, they are essentially the same.
Bid/ask spread trading is done by non-TOS strategies without subscribers
There is no single bid/ask spread trading C2 strategy TOS or with subscribers that is P/L positive
Bid/ask spread trading can be achieved by quantitive hedge funds with speed lighting technology. C2 is era behind it, with delay quotes and execution speed that makes this kind of trading unprofitable
P.S. Which is not to say there isn’t a better way to do things. There probably is, and it probably would involve analyzing market depths at times when there are no autotraders, and assigning a “probabilistic” fill price. Not so simple, and not very obvious. But it seems better than simply choosing an arbitrary “recognize fill at first unit” or “recognize fill at second unit” or “recognize fill at Nth unit” – which is the current state of things. You and I are just disagreeing about N.
Hi Matthew, I feel like we are talking past each other.
You seem to want to have an academic argument while I am more interested in the practical results.
My premise : C2’s fills are not realistic. Some systems abuse this to pump up their profitability and then fall apart when they get their first subscriber and real fills are used.
Do you disagree with this? We can’t talk about how to fix it unless you agree that what I am saying is true.
Well, there are 2 sides. House, that always is winning and players with real money that statistically are losing. Just the rules of the game should be fair and agreed by both sides.
as long as the average profit per trade of the C2 system is many multiples of that “little difference”!
As David Juday shows in his example, for the specific system at the beginning of this thread (and other similar scalping systems with low average profit per trade), it makes an extreme difference. That extreme difference is night and day–a winning system using C2’s “little difference” fill engine (when there are no autotraders) versus a losing system when even one autotrader finally tries to trade it.
In any case, there is no need to reply to this post if you do not agree with it. You can simply delete this post (as you wish) from the thread as you have done with a few other controversial posts I have made over the years.
Well, I have a simple solution to check if theory presented by Matthew works in real life. Original Matthew post liked at the moment 6 developers. Most of them used bid/ask spread/touch orders in the past. Additional, let’s go to add Tail strategy with great results to the mix.
Why C2 fund invest in these strategies to prove that we are wrong (my suggestion will make also these 6 developers happy)?
I see Tail is private now. There is some response from C2. Again why allow it at all?
David, an excellent write up. That’s is in fact what happen as an Autotrader at c2. Every scalp strategy loses money on here due to that reason. But c2 doesn’t want to acknowledge the issue. And developer is taking advantage of the fact and create massive returns to lore in subscribers. Like you said if touch should be mkt price because that how all subscriber after the first trader will be. Being realistic and honest to subscribers seems to be in the back burner of c2 or there is not enough this type of strategy out of the millions of strategy for the work that require to re-code.
Maybe we should all be developers. Our first trade should be shorting weekly 100 vix calls at 0.05. We all put in a 1000 contract limit order, then I will buy 1 contract on etrade for 0.05 in real life. C2 will take that a limit touch order and record the profit on record. Then all of your strategies will have xxx% gain first month. Spend $50 to make $5000. I’m willing to take this ones for the team. Once we get a dozen subscribers or 2 we will just switch to selling 1 contract a week and keep drawdown low. Ride this wave until all the subscriber leaves or expire. Then start a new strategy, rinse and repeat.
I think I see at least some of the disconnect. You said, “the limit order would have existed, and would have been filled when the ask changed.” In this case, and most referenced by others in this post, the bid/ask never changes as orders get filled on both sides of the spread.
The reality is that when a bid/ask spread is sitting at 14.10/14.15 (as the Sept VIX has been most of the morning today) unless that spread moves, if I’m buying, I’m most likely going to have to pay 14.15, and if I’m selling, I’m most likely going to receive 14.10. I believe all of us here are in agreement about that, and therefore are asking that C2 adjust to reflect this reality.
I don’t think it’s an argument about which N to use. We’re suggesting that the fill price used by C2 when there are no auto-traders should be the price a market order would receive, because C2’s stated policy is, ”if we see a price get hit anywhere in the world, then we convert all your autotraders to a market order.” Because strategies WITH auto-traders are subject to this rule, simply apply the same rule to strategies WITHOUT auto-traders.
I think many others who have posted in this thread have raised a very practical question - if this type of trading is really possible in the real world, why aren’t there any examples? I’ve never seen a strategy with auto-traders that have been able to generate the these types of 20%, 30%, 40% monthly returns by playing the bid/ask spread with VIX futures.
Are there any examples that you can point to that I might have missed?
Thank you so much for being willing to engage with the C2 community on this topic!
Matthew, I have to agree with David’s analysis of the trades in question on this Forum thread. While you have a good point about market depth, that is not the issue here. Market depth would apply when we are talking about a large number of contracts attempting to be traded by a system developer and/or a large number of autotraders. Here the issue is whether even 1 contract (or the 2 contracts traded by the Tail system before he took it private) could ever have been executed. My opinion is that it would not have been possible to execute the buy and sell in question at the prices C2 filled them at for even 1 contract, and here’s why. I analyzed all of the trades and the bid/ask spread for the VXU8 contract (which is the August contract for the VIX futures) during the two minutes that the buy and sell supposedly took place. I was interested in this particular trade because I am currently in a trade for this specific contract as part of a VIX futures calendar spread in my NQ VX Trader strategy, so I am very familiar with the contract. During the entire two minutes of the trade in question, the bid was 14.55 and the ask was 14.60, it did not change during the entire two minute time period. There were a number of trades in the contract during that time, I saw one trade in the first minute at 14.55, which would have been someone selling 1 contract at the bid price of 14.55 and I saw another trade execute at 14.60, which would have been someone buying 1 contract at the ask price of 14.60. This information was obtained by using the OnDemand feature on the thinkorswim desktop platform. So if the bid/ask spread was 14.55/14.60 during this time period, it would only have been possibly to buy at 14.60 and sell at 14.60. But C2 filled the limit order to buy at 14.55 and then sell at 14.60 because someone in the world executed at those prices. The solution proposed by David is as close to reality as possible when dealing with strategies that have no autotraders. That is, when a limit order price is hit, the order should immediately be turned into a market order and filled at either the bid or the ask price, as appropriate. In this case, the 14.55 limit price of his buy order would have immediately filled at 14.60 when his 14.55 buy limit was hit, since that was the ask price. Then his 14.60 sell limit price would have immediately filled at 14.55 when his 14.60 sell limit was hit, since that was the bid price. This would have resulted in a loss on the trade of $50 per contract plus $8 assumed commissions, or $58 per contract. In reality, if this fill methodology were followed by C2 (which would put systems with autotraders and without autotraders on par with each other), he never would have attempted to fill the sell at 14.60, because his buy would have been 14.60. He would have had to wait for a higher price point, when or if the ask price rose about 14.60 in order to profit on the trade. This change in fill methodology would immediately correct the abuses that have been taking place with trading systems that have no autotraders. If you would like me to analyze any other questionable trade executions, just let me know. Jim
Sorry, I meant to say “So if the bid/ask spread was 14.55/14.60 during this time period, it would only have been possibly to buy at 14.60 and sell at 14.55.”
The trade in question was an order to buy at limit 14.55. At the moment it was typed into C2, the bid/ask was 14.60/14.65.
So of course C2 did not immediately “fill” this.
But then the ask dropped to 14.55. So C2 filled the order at 14.55.
We can certainly disagree about whether C2 should try to “bake in” one-tick slippage into all hypothetical fills without AutoTraders. But let’s please make sure we understand the facts.
C2 filled this trade because there was a willing seller who said: “I am willing to sell to anyone willing to pay 14.55.” The strategy in question said: “I am willing to buy at 14.55.”
That is the current mechanics of how the hypothetical fill engine works when there are no AutoTraders. (The point is: there is no “gaming” or “cheating” or “scamming.”)
Matthew, You are absolutely correct that if the ask during that time period was 14.55, then C2 should have filled his buy limit order at 14.55. All I saw, however, was that the ask was at 14.60 during that entire two minute time period. Jim
I doubled-checked the audit log. In this particular case, the order in question (Buy limit 14.55) was posted at 1:07:21 PM Eastern time.
It filled 11 minutes later, at 1:18:47 when C2 saw an actual TRADE print at price 14.55. (The time stamp referenced here is the time C2 recognized the fill; the actual trade at 14.55 may have happened a bit earlier.)
So, it turns out, this is a case where it wasn’t even a bid/ask triggering a fill, but an actual trade print. But more generally, yes, we do use bid/ask touches to trigger fills for most instruments (not all, by the way).
So to re-iterate my point: I’m certainly open to the idea of baking into non-autotraded results automatic slippage (perhaps one tick per side?) That is something I need to think about more. (Just to remind you, when there are autotraders, C2 currently does show real slippage that these autotraders receive.)
But what I’m pushing back on, and objecting to, are the statements made by the same people, again and again, that there is “scamming” or “gaming” or “cheating” in some way. This is inaccurate language and factually untrue. It is not “cheating” to use limit orders and to be filled when a bid/ask touches your limit.
Now, how C2 should display those trades, and how much it should penalize them, if at all, is a fair question, and one we can certainly discuss. But I will object to people characterizing these fills as “gaming” or “cheating” or “scamming.”
