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Since there has been some talk about systems going rogue lately. I would like to hear from those that have been using C2 for a while.
At what point do you quit? After 1 bad trade, after a bad month, after strategy changes? Sometimes after a huge drawdowns these systems come roaring back to new highs.
So far the most consistent system for me has been ones with really strict rules. Roptions is now the winner since I started. Their account size large but the chart over the last few years is quite amazing. He just started a new mini Roptions which requires less capital.
Although I have downscaled my strategy once, it is still too high for most subscribers. I am considering to clean it up and downscale it to a number that most subscriber can match. Not sure what the number should be, 10K? 20K?
it really depends on the risk of each strategy and their history. riskier ones or ones that require a lot of capital i go small. one like zeroT which has a high win rate i trade at 200% Big Roptions i trade at 16% For your system 20-30k most people can follow just fine.
I think this question is not C2 specific so I´ll give out my technique which I use on other sites for FX signal following. First of all I use multiple systems combined to have some diversification and uncorrelated returns. If a single system goes below its historical maxDD I cut it off but still watch it. If it recovers 50% of that drawdown I re-enter. I only choose systems with 1 year track record, that way I can have a better impression of a realistic drawdown. (And I assume 20% minimum possible drawdown even when the maxDD in the track record is lower, just for the sake of safety.)
Yes, this method is not as good as holding on if the system recovers. But it is way better if the system goes straight down the drain which happens quite frequently with FX systems or any overoptimized system.
Even if a system recovers after I exited I still only loose 50% of that drawdown for real because I re-enter at 50%. And then the maxDD got bigger so it´s supposed to be even harder for the system to push that line again (and push me out again).
Begin by defining your personal risk tolerance. For example:
“I am trading a $100,000 account and forecasting two years into the future. I want to hold the risk of a drawdown from highest equity to date greater than 20% to a chance of less than 5%.”
Using the history of trades, form a distribution of trades. From that distribution use Monte Carlo techniques to estimate the risk of drawdown. Adjust position size on a trade-by-trade basis so that the probability of a drawdown greater than 20% is less than 5%.
I have posted some videos on YouTube that will help understand:
To me bad performance ( series of loosing trades/positions ) is the just one of the factors. Even bigger factor is if the developer is communicating her/his rationale behind the trades ( the loosing trades ) and if you agree with the reasoning. When a strategy is doing bad and the developer is sending no messages or not responding to questions, you should run away from that system asap.
Other factor is ( i learned this lesson by following Volatility Trader) if you see that the developer is okay in taking losses ( keeping the losses small) or he prefers just sitting and hoping for the market to move in his direction. If its latter, i personally would avoid that system and get out of it. While I liked Volatility Trader ( his communication specially), but there were so many instances where it was extremely obvious that the trade was bad and we should get out - he stayed in till the losses became monster ( atleast for me ), for example look at AXP, UNP and short SVXY trades.
Don’t forget Hamza, he also hedge his positions with other system that he doesn’t show at c2. Furthermore, volatility trader is only small portion from his total asset n we got screw after he lost more than 30%. All his positions are bearish or counter trends because his political point of view. Never trade a system who employs counter trends. You can win some trades n make money but when there is strong trend, you account will be wipe n margin call. Using stop loss is a good tools. Please correct me if I’m wrong
For as long as I’ve been with him, he wasn’t always counter trend. Yes, he should have gone out earlier… But then I remember quite well that at the time he went bearish, I also thought the market was going to go back down in not too long… I’m not sure it has to do with politics. In times like these, I’d have expected him to keep some long and some short positions… shame. In my case the overall balance in my portfolio countered his move down, and I learned a lot about proper scaling. I had all my systems scaled too high…
Back on point, I exit a system, like Hamza, when temporary poor performance is tied with poor comms, then I feel I’m betting on a black box and that is not a good feeling as an investor. I exited many strategies, and in the end only regretted exiting 2 of them… Before exiting, I’ll consider whether my scaling is the primary cause of concern…
I like strategies scaled around 20/30k, it’s easier to configure. Especially for futures.
The thing with volatility trader’s recent trades is that it is crazy to hold a long volatility position (short SVXY, long TVIX) for more than a few days when the contango is so high. Even if the market eventually drops, before that you will have suffered huge losses because of the contango. Vol Trader also sent a message before New Years, that time is against the position and he’s looking to close it unless a big drop happens within a week. Now over a month later the position is still open with much bigger losses.
That’s what I am talking about, we are strong trend for down trend for TVIX and up trend for SVXY. Basically trying to catch falling knive and still hold at contango. That’s amazing.
I personally don’t think his SVXY trade is a bad trade. It appeared as though political conditions were/are ripe for increased or dramatically increased volatility and vol is at or near historical lows. If you look back at a daily chart it is not unlikely that he can get even or profitable on that trade in less than two weeks time with the proper trigger.
That said, it also isn’t a bad idea to wait for the down trend to start before getting long vol particularly with high contango. But if you do that, most of the damage can be done in a few days and you might miss it. Overall I am not uncomfortable with his long vol trade.
BTW, even after this huge run up, SVXY is only up about 30% over the past year and a half.
Ha yes I remember that email and seeing it I thought ok… he’s in control
of the situation… yes this isn’t great at all…
I only hope he does carry on with C2 because he still is very capable and
after sticking with him ( I scaled down little by little and have him on a
small scale now ) I hope really he will carry on fighting and not just
leave.
I pm’ed him about this and he assured me he remained committed to C2.
