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How about this for a depressing scenario? VIX Daytrader1 helmed by James Frazer. Collective2 developer “darling” of 2016, interviewed by the site, frequently appeared in Featured Strategy section. Seemingly couldn’t lose with his daily pick of the VIX direction, opening the trade at 9:30 and closing before the end of the day. By December 6 the strategy hit its all-time high of $25,074 (model account), with about an 11% max drawdown as I remember. About 80% annual return at that point, piled onto a 33% return in only two months of 2015. Number of auto-traders on 12/6/2016: 17. Then…the entire system began to stand on its head. (Others have spoken about a change in volatility after the election, perhaps this is related). Bad losses in December 2016, and in January the first negative reviews. Yet the auto-traders only increased through the end of January, with 205 at the end of December and 254 at end of January. (Yes, I was one of them … for a couple weeks). We all thought this was a system that couldn’t lose, had found the holy grail, and yes, of course, there would be a bad month once in awhile. We all piled in thinking this was the best time to jump on-board – during a slight system downturn. Yet the losses have just continued and the system is now at the bottom of a 25% drawdown. How many auto-traders left? Still 120 !!! The strategy fee is $189/month and there’s a further $100/month auto-trade fee. The developer is making at least $272,160 per year off subscribers (before paying C2) !! For a strategy that has clearly lost its way.
To me, this illustrates why you need to have at least 3 years (and preferably 5 years) of data for a system before taking the plunge.
I am a developer who has not yet made his strategy public because of my short track record here, even though I believe my total return is the highest on C2 for strategies less than a year old. Seeking subscribers for a strategy that is less than 3 months old seems too aggressive to me, given that backtesting is not a sufficient substitute for real-time trading.
If I wouldn’t invest in a strategy less than 3 months old if run by a stranger, how can I ask others to do so? I don’t know how long I’m going to wait to make my strategy public, but probably somewhere between 3 and 6 months.
Aplha/Omega looked interesting, but I was surprised to see people jumping into it so soon after its start.
Yes, I know that … it is just an approximation. The numbers are not so important; what’s astounding is that there may be as many as 100 subscribers still keeping the faith about that system. Watching their money spiral down, down, down the drain pipe, every day and every week - hoping against hope that the developer will get it back together. And it doesn’t look like he will.
Those subs are probably just all freeloaders for 7-day free trials. They are probably not autotrading and also won’t stick around after the free trial period is over.
IMO, APD is probably the most important stat that C2 offers that almost everyone here on C2 (both subs and “developers”) all seem to ignore. Just go to the Grid and filter the so-called “top” systems by APD and you will be able to tell who really knows what they are doing versus those who may be just trading on mere luck.
Why did you think the system couldn’t lose, but most importantly why did you even pay the developer when you could have duplicated exactly what he did every day free of charge? All you had to do each day was essentially “throw a dart” (XIV or VXX) and see where it landed about 6 1/2 hours later at the close of the market. I told the developer Mr. Frazier this same thing back in October (2016) and he told me there was a method and a rhyme and reason to his “madness” and he wanted me to check back with him in a year or so when his account would have multipled at least two folds (200%). Anyone could look at any INTRA-DAY chart for both VXX and XIV for a whole year or whatever period of time and know that where the market opens in the morning on XIV and VXX has no greater likelihood (than a 50/50 throw of a dart) of ending in that direction at the close, which I argued and warned many “astute” traders who were following this system to no avail. Anyone can put any description about their system about “algo” etc…but the charts don’t lie. I am still baffled and not sure all the people still following the system when anyone can duplicate what he is doing (on this and other one-direction intra-day systems) on their own for free by just “throwing a dart” each morning.
Better yet…if you were (or any other subs is) confident that Vix DayTrader had the right direction of the market each morning…all you had to do is wait until he had a DD (from his entry trade) and you would then get in the SAME direction he did. Worst case scenario, even if you took a loss on a trade, your stats would always better than his (greater profit or smaller loss) because you would have a better entry than him but exit exactly when he did (because xiv or vxx hardly ever opened at its day’s bottom and would experience a DD before one of them eventually ended on the upside from its opening for the day). You didn’t even have to pay him to be able to do this to see where he entered his opening trade (just look at the “zoom-in” chart each hour or compare his overall P/L from the previous day to see if and when he had a DD from his entry trade and you would get in there at that “better” price for your entry trade in the same “direction” as his).
APD = Average Profit per trade vs average Drawdown per trade. Basically, it tells you how much risk a system is taking to acquire profit.
The lower the APD the more risk a system is taking to acquire its profits, so obviously the higher the APD the less risk is being taking to acquire those profits. I would say an APD above 1.0 is a very good trader/system. Like all stats, the APD can be skewed a bit if a system has one or a few big profit trades that goes well without taken much risk in the process, which makes the overall “average risk” by way of the APD better and higher than it really is, but generally speaking the APD is a good reflection of a trader’s skills (if you strip away the few anomalous trades here and there in calculating the APD’s value).
