i am new to this site. After looking at the info of some these systems. I have a couple of questions for the admin. How does or does your site keep track of the number of shares/contracts of each position from the system developers. If you do, how can any system be realistic when the developer trades anywhere from 1 to 150 future contracts (or 100 to 2,000 shares of stocks in the same price range). Also, does your site keep track of the cash balance/limit of the $100,000 opening balance. It seems that the developers can open as many positions as they like as if there is an unlimit fund in the account. These factors rendered your evaluation on these systems very confusing if not invalid. Trading, in many gurus’ opinion, is a game of probability and one of the way to maintain the odds (if the trader has one) is to be consistence. Trading the same setups with roughly the same amount of shares/contracts. After all, if one can tell the strong signals from the weak ones, why play the weak ones. yes, there will be times when one might play 1/2 lot or double down depending on the mkt condition. The investment swing in that case is only from 50% to 200% and certainly not from 10% to 5000%. I am only bringing this up because your site is suppose to make it easier for the subscribers to pick out a system by providing an equal yardstick for measuring but it is very hard when the results from these systems are not realistic and also are almost impossible to compare to each other.
You might want to check into your gurus qualifications.
I have been a trader for several years and I know many; not one of them uses a set position. In fact position sizing is crucial to the success of every trader, and it is only people who make up computer systems and don’t trade them in real life, who use set size positions.
Anyway, as this site provides accurate records of the size of each trade then subscribers can opt to go only with set size systems.
Thank u for your reply but u have not given any reasons or logic to what u r saying other than saying ‘thats the way it is’. Read my posting again. I have nothing against position sizing within reason, but not from 1 to 150 future contracts. After all, how many winners of the 1 contract position does it take to even the 150 contract loser?
The thing is that sort of system will have clear jumps- up and down- on the graph, and probably a low sharp ratio.
Also if you see that someone has such unusual figures - which are visible in the orders list then that would be a good reason not to subscribe.
But someone who is varying position size from say 1 to 10 futures contracts is not doing anything that traders don’t do every day.
I believe we r saying the same thing. The only thing that I was stressing is the fact that the subscribers still need to do a lot of work to sort things out after that go to the ‘Best systems’ section because the entries in there are not necessary the ‘best’.
For what it’s worth, I intend to revamp the way “Best Systems” is compiled (and simultaneously to introduce some new “Hot Lists”). Also, look for a new ‘Advanced Search’ feature. Both are very high on the site’s To Do list. - MK
Matthew, thank u for your reply but u have not answer the 2 questions from my original post.
1. do u keep track of the size of the position as well as the entry price at the same time?
2. do u keep track of the $100K cash balance so system will not allow opening positions that is >$100K collectively at one time.
I hope u know that i m not trying to trash your site but since u r providing a service to the developers as well as your subscribers, we should able to feel confidence with your ranking system to point us in the right direction. When I see a big ‘gapping hole’ in it, this also makes me think that there are other possible ‘holes’ that i m not aware of and collectively, they really invalid your ranking system. consequently, i would not and could not evaluate the listing on your site.
Here are the answers to your questions:
1) Yes.
2) Yes. You should not be allowed to deploy more than 100K in capital at any one time (either by overspending your cash or over-margining your account through shorts or futures trades).
However, the routines that check these constraints have been undergoing improvements recently and so I can’t guarantee that some systems haven’t gotten away with trades that would be rejected in real life. That is getting increasingly hard to do, however, since the most recent software upgrades.
Finally, let me add to my answer regarding question 1:
I am not 100% sure I understand what you are asking. If you are asking: Do you check what the capital requirements would be before allowing a trade? Then the answer is yes.
If you are asking: Do you check to make sure that a market is really liquid enough to support a trade at large quantities, then the answer is no - not yet. Adding this kind of liquidity simulation is quite difficult, and is something that has been discussed a lot on this web site. I intend to get to it, eventually, but it will require a complete overhaul of the hypothetical Fill Engine.
Matthew
Every system should have a margin to equity ratio. In our case the margin to equity ratio is somehwere around 20 - 25%. It is very important that the subscriber to any system must know how much contracts/shares he can buy for his account balance. You need to know how much you can risk/per account balance on any given trade. I agree with you that there are quite allot of systems out there from which i doubt the risk/money management. So, it is in my believe important that the provider and the subscriber communicate on this issue. The US$100k balance is just a number, and really based on nothing. For most daytrading systems the 100k is just fine. If you however understand the need for diversification it will depend on several things if the 100k will be enough. For our system the 100k is slightly to low, that’s why the leverage is somewhat higher then our original programme. 200 -250k would be more convenient. With 100k it is for example not possible to trade Natural Gas. Based on the volatility the %risk per trade would not fit into the rules.
To maintain the same performance over time you need to adjust your trading size to your account balance. The only way this can be done properly is through a managed account, or by receiving signals from a system providor and/or trade yourself. You then need to know the minimum account balance. If you start with 100k, but your system providor’s balance is allready at 200k, you then need to half the number of contracts. When you start trading with 25 or 50k, you need to devide bij 8 or 4, if that would still be possible, cus you can not buy 0.5 contracts.
Remember that trading is a business, and as with most small businesses under capitalisation is one of the main reasons traders fail. Sufficient funds are important. Also ask for a longer (hypothetical) track record. A robust 100% mechanical system will have been tested over a period of 10 years or longer.
Cheers,
Jack
for IDM Diversified Programme
The trader really needs to study the system he/she is considering subscribing to, and decide if it makes sense, and is a good fit for him/her. What really matters is profitability, winning %, W:L ratio, and risk management. I really don’t know if the system vendor’s current buying power should be a concern to the subscriber, or should be restricted by C2. Obviously in a real trading account, a person can’t overextend himself because of margin restrictions. But in this case, if the system vendor is restricted too much, it hurts the subscriber, who is just looking for signals. i.e. If a trader has just subscribed to a system, and has full buying power in his account, he/she is in a completely different situation than a vendor who is already fully margined and can’t enter any new signals. In that case the subscriber is not going to receive any signals until the vendor has renewed buying power, unless those signals are sent out as commentary only.
J Mah:
I also was wondering about this. I am a new system developer about to get posted on the site. I wanted to use the trial period just to see how it worked before committing but it seems to work well.
FYI my upcoming system - called VIVALDI Seasonal Portfolio System - has to address all your concerns. I don’t know what other developers do and I am sure it is different, but VIvALDI comes with 3 different money-management options for both testing and trading purposes. You can trade fixed nr contracts, i.e. 1, 2, 3 etc. Or you can trade a fixed nr of contracts per $X,000 in equity. Or you can trade the number of contracts that will risk 4%, for example, of account equity as long as it doesn’t exceed the previous parameter. You can also test the software in compounding mode to see how your moneymanagement parameters perform with larger and larger accounts over time.
I don’t mean to be plugging my system in this post particularly, but just point out that some systems do take care of these issues very precisely. The VIVALDI portfolios, for example, rarely go over 35% of margin-to-equity and rarely have drawdowns greater than 30% of equity and usually far less.
In short, these issues are very important and perhaps Matthew can add a couple of fields that show the max dd by percent and also the max margin-to-equity ratios. I believe he already has the DD.
The other main consideration is that you want a system that has, if not a live track record yet because it is new, then at least as one other poster said here 10 years. VIVALDI is tested back 20+ years for example.
Even though I am new here and will be new for some time and would love people to subscribe to my system ASAP so I can laugh all the way to the bank, I myself would not trade a system that has little or no real-time track record unless it is fully disclosed and I can test it myself rigorously. So those systems here with a year or two of data, in my opinion, are much more interesting than those - like mine will soon be - with only a few weeks data. Such a small amount of data is somewhat meaningless, but you have to start somewhere.
To see how the money-management works you can download some spreadsheets on my web-site (www.cclsys.ca) which allow you to mix and match different portfolio components. This is not the particular m-m parameters - for which you have to have the software - but I do have a 30 day trial version I can send you if you email me at vivaldi@cclsys.ca and then you can play with different position-sizing options to see how they effect things. Doesn’t mean you have to get my system or anything, but if you don’t have that capability with your current systems, it is quite interesting to see the effect of different approaches trading exactly the same signals. The man who wrote MiniMax sells a $50.00 moneymanagement utility that interfaces with Tradestation and is pretty good, but not for all systems unfortunately. It includes TS functions that you can use with yr own systems - or most of them. ( not mine for example!)
This went on a bit longer than I intended but the original I replied was because I was just having a friendly argument with Miles Dunbar who programs in the system track records for the TradeCenterInc system-assist brokerage house. He also writes really good systems himself. They have a policy that they insist on single-contract trading because, as he put it, they want to compare ‘apples to apples’. If you go to Dean Hoffman’s site ( Synergy developer, a very good system), he uses exactly this analogy to state that comparing single contract systems to position-sized portfolio systems is comparing apples to oranges. Dean is right and Miles Dunbar/TradeCenterInc are wrong. In my portfolio, for example, I trade Natural Gas and the Eurodollar. But to balance the NG with 1 Eurodollar contract instead the usual 5 traded with a $100,000 account is simply meaningless.
The point of the above story is to illustrate that this issue comes up always with system development and evaluation and there is no one right way to address it. You will have to use your judgment and also simply ask the developer detailed questions.
I think if Matthew can show the margin-to-equity ratio in the listings that this will address your concerns. Maybe the site does this already and I didn’t notice, but it would be very helpful to see a list of the past trades in spreadsheet format along with nr contracts etc.
Good luck and I hope Matthew can address your concerns.
