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If y’all know about a broker that will let you trade with a negative account balance please advise. I too would like some free money.
Nonetheless no subscriber will join at this stage …
If you have 5K in your account and you are losing $10k on one leg and winning $11K on the other you do NOT have a 5K negative balance (5K - 10K= -5K). even if you liquidate the losing leg first. .
That’s not the problem
So what is the problem, exactly?
If you don’t see it then you probably won’t get it. BTW your math example wasn’t showing C2 calculate the legs separately. It was showing them only include one leg total. That isn’t the problem. If it was, the strategy curve would have started collapsing before it did.
Collective2 option calculations aren’t perfect but trading spreads doesn’t have the problem you suggest. We can even see that it doesn’t have that problem when looking at some of the earlier spread trades in this strategy. It isn’t a problem with C2 calculations that is causing a drop into negative NLV. Personally I do think C2 should cut a strategy off if it goes negative since no broker would ever give you free money to trade with.
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Look at the 7/7 through 7/12 trade. Sure there was a 50% drawdown on a single leg. However, both legs are calculated so the equity curve doesn’t have a 50% drawdown. The offsetting positions are calculated. The decline in the chart isn’t a C2 problem. It’s a strategy problem.
Likewise on 7-13 and 7-14 there was no equity curve drop to indicate it wasn’t counting both legs to the extent of a 150% drawdown overall.
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Never rely on the equity curve alone, because it updates very slowly, so most of the time it does not give you the right curve.
There is plenty of time in both of those windows. You can zoom in and see multiple snapshots. Your theory is incorrect.
Zooming on the chart will not give you different profit/loss/drawdown numbers, not sure where you get this idea.
Also, keep in mind that this system has 3 other open positions in progress.
You can see multiple snapshots showing the NLV is calculated including the value of both legs. If you really think C2 is completely neglecting one leg this is a problem you should bring up with C2. I’ve done all I can for you. Adiós!
I feel no guilt about warning that a strategy is too risky and will implode. I especially don’t feel guilt about it when I wasn’t wrong. Hopefully some were wise enough to listen to the warning before a 100% drawdown.
Good luck! I think you’ll need it!
PS why don’t you auto trade this strategy yourself?
And why don’t you fade each of his trading signals and make a killing…?
You are wrong , C2 will reflect the net result of the two options legs in the equity curve ,not just one leg . To suggest otherwise is strange .
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ForexStar, you are incorrect about several things.
First, you say C2 marks-to-market one leg of a multi-leg trade, but not a second leg of a trade.
That is incorrect.
Second, you say, basically: “ignore the drawdowns in the charts on C2, because C2 is slow to update charts, and only updates them at random times.”
But, if what you say is true, then it would suggest that big drawdowns that happen in real life would sometimes not appear in the C2 charts. The fact that we clearly see big drawdowns in the C2 charts means that these are actually quite likely in real life.
Finally, and most important of all, your argument that leverage is not dangerous because people can “set stop losses” is dangerous and incorrect. First of all, stop losses can be meaningless when market liquidity disappears. Markets can trade well beyond stop losses, particularly when market panic sets in.
Leverage increases risk. It magnifies wins, and it magnifies losses. The only world where leverage does not increase risk is a world where you have infinite capital (no one does), and a world where there is infinite market liquidity (such a world does not exist).
Matthew
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Mr Klein, I never said that, sorry if I gave you that impression. I was only talking about the net result of spread trading on the drawdown metric.
May I respectfully point out that I never said that the trader should simply ignore the C2 charts. My point was simply this : because C2 charts update slowly, we should not draw any premature conclusions (good or bad) about the risk potential (or the profitability) of any C2 strategy.
That’s all.
Sure, absolutely.
But I was ONLY talking about day-traders who use highly liquid financial instruments (like the e-mini S&P500 index) and go flat at or before the end of the day (no gap or overnight/weekend risk).
For these traders, a tight 1% or 2% stop loss work (regardless of leverage) and will save them from these “catastrophic” losses that “high” leverage systems are supposed to create.
Sure, in a fast moving market they will get some negative slippage from time to time, 2 or 3 ticks perhaps, no big deal, it’s just the cost of doing business.
In GENERAL, yes, no doubt, I totally agree.
But the trader who limits himself to highly liquid financial instruments can still control that “leverage” risk to a large extent, assuming he is using a strict money management protocol.
