I don’t understand the Best Systems link? Most systems displayed in that section are traded only for days, or a couple of weeks, and therefore do not classify as Best Systems. Under Best Systems I would classify systems that have a track record of 3/6 months and older, preferably longer but the site is still quite new. Why not just take the C2 Rating as the Best System criteria?
The whole calculation idea of cumulative returns on an annual basis doesn’t make much sense.
Also the chart with the best 5 systems on the homepage is not of any use for the same reasons.
Cheers
Sjaak
Agreed. This will be changed shortly. - MK
It is my opinion that more important than the length of the track record, is how realistic the trades are (do the trades have a reasonable volume or does it exceed 10% of the daily volume which would unduly affect the price) and the number of trades (directly affects Expectancy Score.) This could be directly handled by the software which could even go back and rectify those unrealistic trades based on the historical daily volume. This directly underscores how realistic and reliable C2’s certified records are. Sorry for being a bit explicit here.
Ranking best systems by annualized return may make sense for some, like proprietary traders and hedge fund managers but not for others. What we really need is a way to rank systems based on user-defined criteria.
I don’t know what the C2 Rating exact methodology is. People are more familiar with Expectancy, Expectancy Score, Profit Factor, Win/Loss Ratio, Return/DrawDown Ratio, Annual Return etc., It would be fine if C2 Rating includes all or most of the familiar critieria.
Would it be too difficult to provide the viewer/subscriber with a basic tool to evaluate systems using his own preferences which would again depend on his own objectives and risk tolerances instead of C2’s or some system vendors objectives and risk tolerances including C2 Rating?
rgds, Pal
Midas Value
Just to clarify:
Expectancy Score also takes Trade Length into account… For eg.,
W1 = 0.509; //Win %
AWT = 1058; //Average winning Trade
ALT = 873; //Average losing Trade
E1 = (W1 x AWT - (1-W1) x ALT)/ALT;//Dollar Expectancy per dollar risked
NT = 214; //Total # of trades
NST = NT - (1-W1) x NT - 1;
TL = 26 x 4.8077; //Trade Length in weeks x Avg. # of days in a week assuming approx. 250 trading days in a year
ES = E1 x (NST x 365/TL); //Profit per Dollar Risked ($ Expectancy) x Opportunities to Trade = Expectancy Score
rgds, Pal
Midas Value
Yes, I know you’ve heard it all before, but I am working on some “new stuff” which will address some (if not all) of Pal’s ideas. A note on the way stuff gets done around here on Collective2: software improvements tend to come in batches, usually in response to user feedback. Often, I need to work on a lot of things behind-the-scenes, in order to allow for the features you are interested in. Thus, it seems like not much is happening. But please be patient, and keep the suggestions coming. I will continue improving the site, in order to make it a valuable tool for both traders and system developers.
Matthew
Thanks for your effort.
In my opinion, C2 Rating may be ideal for rating the traders if it is made specific to trading at C2. Probably in terms of how realistic their trades are (volume/open interest) and how reliable their advice is based on how easy it is to follow them in practice. The advice would be worthless if it cannot be implemented in practice easily or cannot be implemented without unduly affecting the price, when for eg., entering and exiting a huge volume position within a space of few minutes. Software features may implement these easily, for eg., it can deny huge orders based on daily trading volume and could penalize the rating everytime such an order is placed and/or a position exitied too quickly.
I would agree with Alex Matulich that Expectancy Score is a better, more objective measure than the Sharpe Ratio for evaluating the relative performance of different trading strategies. By trading strategy, I mean not only the Technical Analysis, Fundamental Analysis part of it, but also the money management part and selecting markets appropriately towards the goal of shaping an optimal portfolio selection strategy which takes into account the payoff structure of the portfolio and its sensitivites to various market factors and economic shocks leading to a robust system.
Also, I would keep in mind that, all optimal systems are not robust, but all robust systems are by definition optimal or near-optimal.
rgds, Pal
Midas Value
As a new developer on the site who has just gone through the trial period and now signed up, I am aware of several things:
1 this is a new service as MK keeps reminding us, aka still in formative phase and therefore with glitches, omissions and also flexibility to gradually coalesce into a steady incarnation that will endure over time.
Although I am new and although I liked seeing my system VIVALDI Seasonal Trends on the home page, I feel that systems that have only been tracked for 3 weeks simply cannot be compared to those that have been tracked for a year.
Since the W/L percentage figure is just about the only one that is useful - the annualised return is meaningless with systems that are tracked for less than 6 months at least - I am not happy with the fact that every time you rollover a futures trade that counts as a trade. This does not effect the equity curve which is perhaps the single best evaluative tool when all is said and done, but sinde the W/L% statistics are posted, I am not happy that they are posted ‘inaccurately’ and hope this will change.
I find moving around the site very difficult in terms of seeing all the systems etc. but what would be nice is a master all systems page that you can then sort by criteria, i.e. lowest % drawdown, longest duration of track record, Sharp ratio (which I haven’t used in years), W% trades, futures vs stocks etc. This would allow the user to choose their criteria and not have to flip between pages and options so much. Since I don’t know what the C2 criteria are, and since they don’t seem to favour 60 week systems over 3 week systems all that much, I am not sure I trust them. Would prefer more simple ways of user-directed comparing as suggested above.
In fact, ‘best systems’ is a misnomer: it should be ‘best systems for me.’ Each client has different needs, goals and passions - and markets that he/she likes to trade - futures, stocks, options, day-trading. This is why Matthew’s job here is so complicated!!! So I am not sure that a ‘best systems’ ranking is actually the way to go except for those that have been tracked for quite a while and then a simple % return/ drawdown ratio along with the equity line chart will pretty much tell the story.
Also, it is very helpful to distinguish ‘open equity’ drawdowns from ‘closed equity’ drawdowns. The closed equity is the ‘real’ drawdown whereas the open equity is intraday/open position-fluctuation. They are both valuable and good to compare whenever possible and an equity plot showing both would be an extremely helpful addition.
The home page 5-graph display as mentioned above is inaccurate and gives a sloppy impression to the first-time viewer. Financial analysis should be crisp and above all precise which this is not. Also, I think you should only display systems that have been traded for 6+months, or simply have 2 or 3 charts: 6+ months (later on a year+), 3+ months and 1 month. That would be informative and also more helpful. By featuring such short-term records (including mine unfortunately!), it makes the whole site seem questionable. And rightly so. I strongly suggest that you change this. It will also reward those of your developer clients who stay with you over the longer term. It is really not fair to compare the annualised return of a system trading for one year with one trading for 3 weeks. Indeed, it is somewhat irresponsible and again gives a bad impression of the whole site and approach.
The time-stamp system for placing trades seems quite ‘fuzzy’. I place two trades together and the time stamp was 1.20 different. For day-trading systems this is important. But now I realise I am into general suggestions and not on the best systems subject per se so I will stop!!
Ashley Howes, VIVALDI Seasonal Trends System.
Although I am new and although I liked seeing my system VIVALDI Seasonal Trends on the home page, I feel that systems that have only been tracked for 3 weeks simply cannot be compared to those that have been tracked for a year.
This is my main argument for using Expectancy Score for rating best systems because it takes into account the number of trades and trade length.
>Since the W/L percentage figure is just about the only one that is useful - the annualised return is meaningless with systems that are tracked for less than 6 months at least - I am not happy with the fact that every time you rollover a futures trade that counts as a trade. This does not effect the equity curve which is perhaps the single best evaluative tool when all is said and done, but sinde the W/L% statistics are posted, I am not happy that they are posted ‘inaccurately’ and hope this will change.
I disagree that W/L percentage figure is just about the only one that is useful. A lot of other criteria are useful, for eg., %Expectancy, $Expectancy, Profit Factor, inaddition to Expectancy Score. Please visit my BB articles for a discussion of these topics. The posted W/L% statistics are not inaccurate, just that they are not updated real-time; they are only updated periodically.
>Also, it is very helpful to distinguish ‘open equity’ drawdowns from ‘closed equity’ drawdowns. The closed equity is the ‘real’ drawdown whereas the open equity is intraday/open position-fluctuation. They are both valuable and good to compare whenever possible and an equity plot showing both would be an extremely helpful addition.
Agreed.
>In fact, ‘best systems’ is a misnomer: it should be ‘best systems for me.’ Each client has different needs, goals and passions - and markets that he/she likes to trade - futures, stocks, options, day-trading. This is why Matthew’s job here is so complicated!!! So I am not sure that a ‘best systems’ ranking is actually the way to go except for those that have been tracked for quite a while and then a simple % return/ drawdown ratio along with the equity line chart will pretty much tell the story.
Again, the problem of ranking is solved by using an objective measure of measuring the relative performance of different strading strategies. For an idea of what it is, please visit my system description and also posts in my BB. % return/ drawdown ratio doesn’t tell you anything about the relative performance of different trading strategies, which is what we are trying to measure, but it does define your risk tolerance which you are willing to accept. For proprietary traders and hedge fund managers, who can hedge their portfolios using options, the drawdown is not a concern. But because, C2 lacks options on futures and forex, using %return/drawdown as even one of the criterias will not be correct. Buy-and-hold without hedging your portfolio with options is synonymous with Crash-and-burn. One cannot shape an optimal portfolio selection strategy without hedging the portfolio with options.
>The home page 5-graph display as mentioned above is inaccurate and gives a sloppy impression to the first-time viewer. Financial analysis should be crisp and above all precise which this is not. Also, I think you should only display systems that have been traded for 6+months, or simply have 2 or 3 charts: 6+ months (later on a year+), 3+ months and 1 month. That would be informative and also more helpful. By featuring such short-term records (including mine unfortunately!), it makes the whole site seem questionable. And rightly so. I strongly suggest that you change this. It will also reward those of your developer clients who stay with you over the longer term. It is really not fair to compare the annualised return of a system trading for one year with one trading for 3 weeks. Indeed, it is somewhat irresponsible and again gives a bad impression of the whole site and approach.
Again, this problem of ranking is solved by using an objective measure of measuring the relative performance of different strading strategies.
rgds, Pal
Midas Value
Pal: about the W/L ration: I meant it in the context of the current display, not as a general comment. Right now, annualised percent and W/L ratio are the main figures used at C2. I don’t think W/L ratio necessarily means anything because it all depends upon system method.
As to hedging with options, that is a separate issue. Each system should be judged on its own merits and performance. Futures portfolios do not have buy and hold issues necessarily, and/or such systems can, as you say, be hedged with options. But if that capability is not there at C2, then it simply cannot be evaluated.
In any case, I disagree with your statement that you cannot make a portfolio without using options. Maybe that is your approach - which I will go study - but as a sweeping comment it is far too broad. Entry, exit, money-management and other rules are a form of hedging against adverse losses etc.
Also, I thought that there were some option systems at C2. Doesn’t Dave’e Goofitz use them? Or maybe they are not displayed in the C2 track record.
Also: seeing the account drawdown would not be ‘incorrect’ as you say, rather just further information beyond W/L and annualised return and return since tracking. I still believe that you can tell most of what you need from a system if you can see the drawdown plot as well as the closed and open equity plots. That tells the story in terms of what happened even if it doesn’t reveal the risk incurred in each position. But after a year or so (and with historical testing one can go back 20+ years of course ), the typical performance of the system should speak for itself in terms of the risk incurred and the losses actually taken.
Also, you state that the W/L stats are ‘not incorrect’. This is not true as I pointed out. A rollover trade is not a new trade and should not count as such in terms of W/L. The existing position might be profitable for example. Then you rollover and that new position might show a loss even if the overall ‘real’ position was a winner. So intead of one winner you have one loser and one winner. Since W/L is one of the few evaluative criteria at C2, I was pointing out that it is a pity that it is inaccurate. Which it is.
This has nothing to do with the updating issue as you explained it.
In any case, I disagree with your statement that you cannot make a portfolio without using options. Maybe that is your approach - which I will go study - but as a sweeping comment it is far too broad. Entry, exit, money-management and other rules are a form of hedging against adverse losses etc.
You misunderstood my statement. I did not say that imply that you cannot make a portfolio without using options. I said previously that studies have shown that a buy-and-hold portfolio (rolling over with futures contracts) with options is the optimal portfolio and since C2 does not have options except on stocks, it would be grossly incorrect to use return/drawdown criteria as the main criteria for evaluating systems which also trade forex and futures.
Also, I thought that there were some option systems at C2. Doesn’t Dave’e Goofitz use them? Or maybe they are not displayed in the C2 track record.
see my above statement.
Also: seeing the account drawdown would not be ‘incorrect’ as you say, rather just further information beyond W/L and annualised return and return since tracking. I still believe that you can tell most of what you need from a system if you can see the drawdown plot as well as the closed and open equity plots. That tells the story in terms of what happened even if it doesn’t reveal the risk incurred in each position. But after a year or so (and with historical testing one can go back 20+ years of course ), the typical performance of the system should speak for itself in terms of the risk incurred and the losses actually taken.
See my above statement.
rgds, Pal
Midas Value
Ok, I misunderstood. I stand corrected.
rgds, Pal
Midas Value
Sri Anand,
I visited your website - lots of stuff! - and noticed the track records which seem very different from the graph at C2. If I remember correctly, there were few option plays in the track records, no? Mainly straight FX trades. Is the system you are showcasing on C2 using options on the side but they are not being shown?
Anyway, I went back to the Trading Solutions site which you mentioned and am once again considering using them. The problem is that it is much harder to program in really different logics like I use, but it is a fantastic neuro and portfolio platform way ahead of TS in that regard.
In terms of best system analysis, there is an interesting article about this in an old Attain newsletter they sent me this morning at
http://www.attaincapital.com/alternatives/alt_jan1005.htm#topic
Great minds think alike: in it they state that there is no real way of qualifying a ‘best system’ but a ‘best system for me’. That is exactly what I said here two days ago.
I think your expectation formula makes sense, by the way, but also the Stirling ratio is pretty good too. I think it addresses the volatility issue you mention vis a vis robustness vs. smoothness. That said, when you are analyzing very large multi-million dollar accounts, most of them in our game are placing .025% risks per position, or maybe up to 1%, so the volatility of returns ideally should be low, even if they are hitting a few home runs on individual positions at any given time.
Anyway, I enjoyed your site even though I only saw a fraction of it. Got the T Solutions demo and that distracted me from further exploration.
The track records at my website shows the system which essentially trades (options as well as straight) short-term and designed to double you money in a short time-frame, typically 1-3 months.
But, when one is playing for the long-term, there will be inevitable short-term moves against the long-term and options are indispensible to ride out these short-term counter moves.
rgds, Pal
Midas Value
Another suggestion would be that if we can classify systems according to the trade length, for eg., Ultra Short-Term (0-1.9 days), Short-Term (1.9 - 9.9 days), Long-Term (10-64 days) and Ultra Long-Term (greater than 64 days), we can score systems based on an objective measure within those classifications;
Best Ultra Short-Term systems, Best Short-Term systems, Best Long-Term systems and Best Ultra Long-Term systems with the relevant statistics.
This would enable viewers/subscribers to quickly/accurately identify/search for systems that cater to their needs of different holding periods.
We may not expect Warren Buffet et. al, to engage in Ultra Short-Term trading and the average investor to hold on to positions where the average trade length spans several months.
rgds, Pal
Midas Long-Term Value
Midas Short-Term Value
