Matthew,
Is it refer the min/max orders for each trade or the all open positions in you auto trade permission?
I have following situation from my advise system:
It issues signals scalping upto 5 times of buying/shorting future contracts. say, it sends different signals to buy upto 5 contracts of @ER2, then sell all 5 contract at one time. I only have enough money to place 1 contact each time.
If I put min=1 and max=1 in the auto trade permission field, is there problem to cover all 5 positions at one order? or should I put min=1, max=5 plus the scaling factor about 10%?
Please kindly help.
Regards
I’m afraid I don’t completely understand the question. But let me try to answer what I think you might be asking. (If I’m not understanding you, just let me know and try the question again.)
When using C2 AutoTrading, there are several parameters you can set. One of those parameters is the Min/Max quantities of any opening leg. The second quantity you can specify is the scaling percentage (that is, the ratio of trade sizes between C2 and your real-life account).
The most important thing you need to remember is to focus on the scaling percentage, not the Min/Max numbers. Min and max are useful – sometimes – particularly if you want to remove the system vendor’s money-management component and only follow his long or short signal advice.
But Min and Max should not be relied upon to prevent your account from receiving a margin call – only the scaling factor can do that.
To see why, let’s use an example. Imagine you subscribe to a trading system on Collective2. The system has a hypothetical account balance of $200,000. (In other words, it started on C2 with $100K, but, over time, it has doubled its account, and now has $200K.)
Let’s further imagine that you are trading a real-life account that is much smaller – only $20,000. If this is the case, the most important thing to do is to set your scaling percentage as follows:
20,000 / 200,000 = 10%
This means that each trade placed on C2 will be scaled down to 10% in your real account. Thus, a C2 signal that says BUY 10 E-Mini S&P will only place a quantity of 1 in your account.
The theory here is that C2 keeps the C2 trading system from spending too much margin. If a trading system goes over the margin available, it will receive a margin call and will be forced to close positions.
The min/max numbers are useful, but they don’t really address the margin problem.
To see why, let’s say you set you Min=1 contract, and your Max=2 contracts.
Now, the system vendor issues the following trades, in rapid succession:
BTO 1 @ES
BTO 2 @ES
BTO 4 @ES
BTO 8 @ES
BTO 16 @ES
This would be placed in your account as:
1, 2, 2, 2, 2
In other words, 9 contracts would be traded in your account… more than your max setting. Keep in mind that Max refers to the Max size per leg … not per position.
So in summary, to keep your account from being overmargined, focus first on the scaling percentage.
Matthew, just out of curosity - can you tell us what would have happened in your example with the scaling percentage set to 10% - e.g. what size trades would have been placed for the subscriber as the system placed orders for 1,2,4,8,16?
