C2 star - Daytrading only?

C2
21

Ah, after a more careful review, I suspect what you may be asking is:

“Why bother specifying both conditions? Won’t an open-position loss of $2,000 automatically cause an equity-drawdown of $2,000?”

The answer is: often, but not always.

To see why, consider a situation where you have two open positions: a huge winner and a huge loser. From a total-equity equity perspective, they cancel each other out. But if you then close the huge winner, you are stuck with a huge open loser, and now – suddenly – are in violation.

As I write this, I admit this scenario doesn’t seem terribly fair, or even sensible, but the constraints were designed as a way to describe what we consider important (i.e. don’t keep large and growing open losses, don’t let your equity curve decline too much), without much consideration about how, at the margins, they could lead to weird edge conditions, etc.

Like all programs and rule sets, C2Star has its idiosyncrasies, but I think the general set of rules makes sense as an organic whole.

1 Like
22

Actually no in your example you’d be in violation even before you cancelled the big winner as you’re unrealized $2k loser was already in violation of the open loss requirement. So with all due respect I’m not sure the construct works (hey I used to be a lawyer so I spent my days thinking about this kind of stuff :smile:) . Seems to me it would be much simpler if you just stuck with the equity drawdown restrictions as the daily $2k limit and the hard $5k permanent limit should get you there. This is also in fact how the other posters on this thread (and probably most of the people on this site) thought it worked… sometimes easy to overcomplicate things IMO…

23

The P/L of the open positions ( i.e. “big winner” plus “big loser”) are added together. So, no, a strategy would not technically be in violation before the closing one side of the trade. (Before closing one of the trades, the total Open P/L would be close to zero, in our simplified example.)

24

Its not complicated and both rules are needed .

Some traders may lose only $100 per trade but they may trigger the drawdown limit by making multiple losses in a raw with an odd winner thrown in .

25

Ok I see so you’re trying to force people to shut down losers first but I guess this wouldn’t affect my strat as it only takes one position at a time so in all cases would be covered by the simple equity drawdown requirement. Just coming back to what you said before though, it seems a little perverse to penalize people for being hedged as this is effectively what is happening here (it forces them to incur losses when there has been no drawdown as such). Seems to me you’re adequately covered by the portfolio size restrictions if they’re going to keep winners open to offset large and growing losses. This just messes with their ability to trade in a way but no point in arguing about it further. Thanks for explaining

26

CJan the scenario you’re talking about would be covered by the simple equity drawdown requirement for a peak to trough drawdown. Matt take note as I don’t believe most of the traders on here really understand this open loss requirement and what it actually entails if they have multiple open positions. This is why you should probably just ditch it as it doesn’t really get you anything in terms of derisking if people are already hedged. Up to you guys though

27

And just to make one final point here I don’t believe this is a small “idiosyncrasy” or a problem at the “edge” as it interferes with the whole ability to trade. If you can’t hedge then you’re actually adding risk to your portfolio not reducing it. Thx

28

If you have an open loss of $2000 you still wont violate the $5000 drawdown rule , so another rule was needed . Its simple .

29

We’re going round in circles here as Ive already mentioned that this is a perverse outcome if you’re hedged. If you don’t hedge that’s fine but it’s not how I operate. Thx