It is fascinating watching a number of previously successful index futures system come crashing to earth in just a few days
It makes you wonder, were some of these systems only going up because the broader market is going up.
It is relatively easy to take your account from 100 to 300K in a couple of months, when you fatten up on long e-mini positions But there is NO excuse for a system to give back 50-100% of its profits in a week!!!
I have a new measure of success for a successful QQQQ, emini or other equities advisory. How much money it makes from its short positions in an upward market. I tested some of the previously successful advisories. Most of them broke even at best on their shorts.
"It is relatively easy to take your account from 100 to 300K in a couple of months, when you fatten up on long e-mini positions But there is NO excuse for a system to give back 50-100% of its profits in a week!!!
I have a new measure of success for a successful QQQQ, emini or other equities advisory. How much money it makes from its short positions in an upward market. I tested some of the previously successful advisories. Most of them broke even at best on their shorts."
While I agree, I think there is another “change” that has taken place to wipe out these bullish surfers: volatility. I posted just before the sharp decline that I was concerned that the scale traders were due for a fall.
The SPX has had a larger net change in the last several days than it’s had in the last several months. Many systems I’ve been watching have been averaging down against losing trades until they are “even” or better. This makes for an attractive win%, but at huge risk. Now it’s time to pay the price. Anyone who has been around a while knows that it’s not a question of “IF” but “WHEN” a price contraction breaks out into sharper price movement. Failure to use stops may seem like the right thing for a while, but in the long run there is no free lunch. Time has come today…
Sam
I completely agree. I really had high hopes for ATS Futures - I thought the advisory was brilliant over the short term. But it crashed and burned, because it just couldn’t let go on one trade.
Somehow there is an old saying, I am sure nobody here has heard of it 
Cut short your losers and let your profits run
How much better would some of these advisories be if they had real stop losses?
True. But it is not so simple. In this period we had problems testing systems, because markets are up from March, 2003. Bearish periods are too old to be testes (Chi square problems).
Many providers have done so because there is not yet a science on this arguments. Not for dishonesty, perhaps. Good trades.
Strange, but all the writers have 746 as C2 ratings.
"Somehow there is an old saying, I am sure nobody here has heard of it
Cut short your losers and let your profits run
How much better would some of these advisories be if they had real stop losses?"
From Market Wizards (circa 1989):
Ed:
"There are old traders and there are bold traders but there are no
old bold traders…"
and
"What are the elements of good trading?
“1) Cut your losses 2) Cut your losses and 3) Cut your losses.
If you do these three things maybe you have a chance.” "
Again C2 ranks systems by %Winners, but not $risk/$reward…
For whatever reasons human egos tend to prefer a high % of
wins / losses to a high % $made vs % $lost. Go figure. When
your stop gets hit your ego is bruised…feels like your a “loser”,
but as another quote in Market Wizards said:
“Trying to trade without losing is like trying to breath without exhaling.”
Funny that the two most outspoken people, criticizing everyone else, both have flatline systems which they charge about $200 for. Could it be that this is easier criticizing and quoting from books than it is to trade?
Chris
Funny that the two most outspoken people, criticizing everyone else, both have flatline systems which they charge about $200 for.
In my case I’m not trying to sell a thing. The “system” on C2 was just to see the internal mechanics from the vendor side. It’s not even open. But that would be obvious if you took a look.
>Could it be that this is easier criticizing and quoting from books than it is to trade?
No doubt. But I suspect my first trades (circa 1964) were prior to most folks birth dates on the list. Please don’t confuse having a C2 track record with knowledge or trading experience. For all you know “Sam Cook” may be in Market Wizards ;-).
Anyway, as you may note, I didn’t attack any systems or persons in my post, but rather the idea of not using stops. And I sent out my initial warning message right before the decline. I assume you are among those that think using stops is a bad idea?
If you actually do have any ideas, please share them.
"True. But it is not so simple. In this period we had problems testing systems, because markets are up from March, 2003. Bearish periods are too old to be testes…"
Even if a market doesn’t have data prior to 2003 it’s not a reason not to
use stops is it? Come on. This is not a data issue. This is an emotional and/or common sense issue.
Sam said it correctly - flatline means a system was not offered, so this has no bearing.
As to quoting from books, the real problem is the dream world so many people exist in. From reading Sam’s past posts, it is apparent that he has also seen the fiction that is most modern theories and advisories.
I have spoken as a person who has subscribed to or followed over 600 systems in 10 years. After awhile, they all look the same to me. About 99% of advisories are either:
- valueless
- worked in 1994 and they are hoping
- are the result of hundreds of alternative backtests
- work until they don’t and lead to spectacular failure - look at many of the advisories that were in the top recently - ATS futures, Eagle One and many others - they gave up months worth of profits in a few days. This market plunge exposed some systms as simply having legeraged the recent market runup - they didn’t have any real advantage of their own. Then, they leveraged the market plunge, many of them on the wrong side of the market (not even mentioning those that had high win percentages by averaging down!)
The trick is to find the occasional 1% that actually extract market inefficiencies. Even then, I have not found any that have lasted more than a few months.
Offering a system has no bearing on trading profitabilities
Chris Somehow I agree.
Dear gurus Sam & Ross. Both of you have a system. Just close your system from subscribers, because it’s Holy Grail of course, and make few trades publicly even in paper word of C2. And I think all of us will be happy when you don’t blow up after 3-4 months lol.
I admit that you’re market wizards and you know about the market everything. I admit it by default. There is no offense. Just show something in C2 paper, but in forward testing instead of your useless blah-blah-blah.
With all respect to the market wizards,
Your potential follower,
Eu
"but in forward testing instead of your useless blah-blah-blah…"
Odd that you would flame us. Our suggestions, to rank systems
by net profit / worst drawdown, would clearly help good low drawdown systems like yours. I suspect you would be ranked in the top 5 or 10 instead of around # 50 (if C2 followed my suggestion). I bet you aren’t getting nearly as many subscribers as you might.
But whatever, if you want great money management like yours
to go under-appreciated go along with Chris and Company.
Good marketing strategy!
"2. The system averages down and its part of the system. (I know, I know…)"
Maybe I am wrong. Sorry.
To want to rank systems by Net Profit/Max Drawdown is clearly not well thought out.
Lets look at some examples. If you intend to use annual percentages and max drawdown percentage, then a systems with a short term trading, will have huge ratios. For example, a week old system which made 5 percent in its first week with a 10% drawdown, will have the following ratio:
(5 52)/10 = 26.
A system with 50% annualized return with a 10% drawdown will have the following ratio:
50%/10 = 10.
According to your method, the first system will be ranked higher. The ratio will only get more stable for older systems andd the new high flyers will still be presented on the top. This is exactly what your magic formula is suppose to prevent.
Also a system with a 30% return and 15% drawdown will have the same rank than a system with a 2% return with a 1% drawdown.
Also if you use life of system percentage returns, then some of the forex systems with 700% returns and 50% drawdowns, will also get pretty good ratios.
Now if you meant to use dollar values, this will just be as useless.
A system which swing for the fences and lost 50K from the get go for a 50% drawdown, but then get lucky and double its original 100K account on the next move, will have a calculation of:
100K/50K which is 2.
Another system can make 20K in a year with 10K drawdown, will have a rating of 2 also.
Or a system which make 5K a year for the last 4 years with a 10K drawdown will also have a ratio of 2.
Or you have a system which make 3K the year with a 1K drawdown, and it ratio will be 3, which beat all the other systems.
Also, please also do not put words in my mouth like saying you assume I dont believe in stops. You can assume all you want, but please do not pretend that I said anything I didn’t.
My comment was that you and Ross seems to be the most outspoken and tell other people how they should trade their systems, but yet you are not able to even trade your own system. You pretend that the systems are not open for subscription, but yet you still charge about $200 for it. Probably in the hope that some sucker will be fooled by all your writings on here and mistake you for people who know how to trade, and subscribe. Why not make the fee $0? Or even better, assign it as a test system, so that no one can see it?
You obviously know how systems should work and what they should and should not do. How about starting to show you know what you are talking about with your systems? Your suggestions on how systems should be traded will have much more weight if you can back it up with your own system.
Chris
Charging $197 means it is offered for subscription.
Dedicating a system as a test system means it is not offered.
If you charge for something useless, it doesn’t fly to say you don’t actually mean to sell it. If you don’t mean to sell it, then don’t make it available.
I am also curious. You say 99% of systems doesn’t work and the 1% which does, only work for a few months, meaning that no systems work. What exactly do you expect to get from C2, since as you explain, none of the systems here will work in a few months? Are you able to identify which systems are going to work for the next few months, unsubscribe before it blow up and subscribe to the next one which is going to work for the next few months and repeat the cycle?
A good trend system SHOULD trade with the trend. There will be some volatility and drawdowns in systems which trade with the trend when the trend change. Initially there is no difference between a pullback and a trend change and systems will have some volatility/drawdowns until the systems indicators can catch up and indentify the new trend. The overleveraged systems do not survive the trend changes. The responsible ones go through drawdowns, but recover with the new trend.
Also remember that a trend is only visible AFTER the fact. The systems which traded with the trend did quite well to identify the trend early enough to extract profits from it. This is easy to say afterwards that systems were just trading with the trend. It is not so easy when you trade yourself to identify and trade with the trend while it is developing. Something you’d knew if you were trading your own system.
If we are in a new downtrend now, this will take a few months to know for sure that it was indeed a new downtrend. Only then will we be able to see which of the systems which didn’t blow up completely already, went through a drawdown during the trend change and then traded with the new trend and which ones just knew one way of trading.
Chris
"Our suggestions, to rank systems by net profit / worst drawdown, would clearly help good low drawdown systems like yours"
I don’t think so. It would probably help most young systems because these didn’t have a long exposure to the risk of a serious drawdown. Because risk is in the denominator, this will have a disproportional effect. I agree that a good reward / risk measure is needed, but I don’t think that this is the solution. Normally I would be happy to discuss some suggestions, but my experience with the two of you is that this will produce nothing of worth.
The original suggestion of Ross, to distinguish between different market conditions, is very interesting. It would be nice to have some kind of index that measures robustness against general trend. Difficult to design it in detail though…
Charging $197 means it is offered for subscription. Dedicating a system as a test system means it is not offered. If you charge for something useless…
Yada Yada… Whatever - your posts seem to have a hangup about the trivial. It is as Sam & I said - we are not offering systems. Many people have dormant systems. But if you want to send me $197, then Matthew will get his cut.
You say 99% of systems doesn’t work and the 1% which does, only work for a few months, meaning that no systems work.
Again, this suspends logic. That statement does NOT mean no systems work. It means what it says. The hope is to identify the few systems that work (the 1%) and try to ride them while they do (the only a few months). The plunge of the hot systems, such as ATS Futures, Eagles One, and a few others from just a week or two ago illustrate the point.
A good trend system SHOULD trade with the trend.
Agreed, as every test I have ever done shows that the trades of any futures position in the direction of the trend fare much better than those against it (I do not follow individual stocks).
The overleveraged systems do not survive the trend changes.
Thank you for saying the same thing that Sam and I were saying on the “CLOSED THREAD.” We wanted an equity curve based on something approaching a unit or percentage basis, rather than the overleveraged results that made it impossible to tell how it really performs. Again, the last week demonstrates what we were trying to say.
Also remember that a trend is only visible AFTER the fact.
Not true at all. Major trends are usually apparent for a long time. The stock market tends to run for months or years in a positive direction, and seomtimes chops or goes sideways, and sometimes has horrendous downturns of short duration. Interest-rate instruments tend to run for years as the fed moves rates. Same for physical futures.
Sam Cook
Cris already explained you about RR. From my side I can only add that calculation of RR is a real beast and you have to calculate it on long-long-long history and there are a lot of ways how to calculate it. Personally I would not like to pay for unrealistic ideas that comes from “gurus”. I’ll accept any really good idea if it has a meaning.
Dear gurus Sam & Ross
I beg you to show your light of knowledge. Hundred of trades on C2 paper might be enough to make a conclusion 
Otherwise, just please, please, please stop your hatred useless posts.
With all respect to the market wizards,
Your potential follower,
Eu
"Cris already explained you about RR."
I assume you mean “Chris” and SR (Sharpe Ratio)? But I’ll admit my
psychic talents are weak.
"Otherwise, just please, please, please stop your hatred useless posts.“
OK, I just don’t think you get it My suggestion is to your benefit.
Here’s a rough estimate based on CumProfit $ / Risk $ (DD$)= P/R.
Tango (ranked about 50th based on return): $66K/$8K = 8.25
Mosaik Med-Term (40th): $76K/$200K = .38
YeKai Swing trader (30th): $91/$95K = .95
Swing Traders (18th): $137/$95K = 1.44
So, if this was a rank-able criteria Tango would come out
WAY ahead of these other somewhat similar systems that it
is currently ranked well behind. Why do you think this is
"hatred useless post”? I’m a child of the 60’s. It’s
all about love, man.
" "Our suggestions, to rank systems by net profit / worst drawdown, would clearly help good low drawdown systems like yours"
I don’t think so. It would probably help most young systems because these didn’t have a long exposure to the risk of a serious drawdown. Because risk is in the denominator, this will have a disproportional effect. I agree that a good reward / risk measure is needed, but I don’t think that this is the solution."
Here’s a rough estimate based on CumProfit $ / Risk $ (DD$)= P/R.
Tango (ranked about 50th based on return): $66K/$8K = 8.25
Mosaik Med-Term (40th): $76K/$200K = .38
Anyway, see my other post. Clearly Tango does benefit. So would
Sliced Bread (P/R= 5.4).
"Normally I would be happy to discuss some suggestions, but my experience with the two of you is that this will produce nothing of worth."
All I’ve seen is criticism of other suggestions. Why not just provide a solution. While you criticize our suggestions you complain that someone might criticize yours.
Here’s another idea for you to criticize:
Rank by “P/R” x $CumProfit = (PRC$).
So
Tango (ranked about 50th based on return): $66K/$8K = 8.25
8.25 x 66 = 544
Mosaik Med-Term (40th): $76K/$200K = .38
.38 x 76 = 29
Sliced Bread
5.4 x 108 = 583
Check out
Aestreux Fund $402/$20K = 20
20 x 402 = 8040
(FWIW, I think Aestreux Fund SHOULD be the #1 ranked system of ALL
based on it’s performance to this point, however it doesn’t even make the
list of Best Forex Systems, or Best Systems. Granted it hasn’t been around that long, but lesser systems with 10-11 week track records are ranked.)
