Excuse my ignorance:
Are the performance stats for Forex systems in C2 based on trading mini-lots or lots? Or does it not matter? My thinking is that the risk and reward for a traded lot is 10x that for a minilot. Therefore, statistics like max DD should in effect be 10x larger when trading lots compared to minilots (assuming the same nominated account size).
This is basic stuff I know… Go easy on me.
Thanks
Charles.
Most statistics are in percentages, and then it doesn’t matter. Some statistics (notably Cumu $) assume the account started with $100K.
Hi Charles,
It is indeed basic stuff and I’m sure you’ll get lots of good advice here on questions like these (as Jules gave you). I’m not sure if you’re considering selling a system or subscribing to a system, but in the latter case I’d suggest to trade it in a demo account first for a couple of weeks/months until you’re 100% sure your demo account replicates the profits and losses you see for a system on C2.
NB. The number of lots you see in the “Position Details” table are always minilots.
Charles,
Science Trader’s post reminds me of this: If you are new to C2 it might be a good idea to read some older threads on the Suggestions forum. There is a lot of information there (if you skip the personal attacks).
Hi Guys, thanks for your advice.
Yes, I’m new to C2, but I’ve spent several hours scouring the forums, and found loads of useful information, largely contributed from a small selection of people - it’s really appreciated. I’ve also been trading demo accounts in different guises two / three months now (but almost entirely on UK spreadbetting sites) with overall some small success. The BulldogFX demo account I opened was trading in minilots, I believe.
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On the other hand, I still don’t get this one :0(
I must be missing a crucial piece of information.
Help me out:
1. I open a $100K account at MAN Financial, asking to trade in units of full lots (not minilots).
2. I choose BulldogFX to be my autotrade Broker.
3. I select and subscribe to a Forex trading system.
4. The trading system sends a message to BulldogFX, with the following intention: STO 20 EUR/JPY @ LIMIT 160.80000
5. A little later the trading system closes that position by sending a message akin to: BTC 20 EUR/JPY @ STOP 160.81750
Now did BulldogFX trade 20 Lots or 2 Lots here?
(ST, I know you said that the Position Detail shows minilots, but did BulldogFX know to convert them to lots when the message was sent?)
If the answer is 20 Lots then my drawdown is now 10 times greater than if it was 2 Lots (obviously, right?), despite the fact that I started with the same account size ($100K). Unless I am being really dim here.
If that’s true, statistics such as: Max Drawdown (%); Compound Annual (%); are skewed because they take figures such as the sum of Wins/Losses (which are dependant on lot-sizes) and compare it with the original account size (which is NOT dependant on lot-sizes).
Knock me down gently.
Charles.
Charles … you control the number of “lots” used in the orders to Man from the trading preferences options in C2, where currency units (eg. dollars) are entered and not lots or minilots. For an example say you are trading USD/JPY where the trade amount would be in U.S. dollars. If a vendor enters an order for 20 “lots”, C2 translates this as $200K worth of USD/JPY, and sends that to Man. For your example of EUR/JPY you have to use the appropriate base/counter exhange rates to determine the dollar amount of a "minilot."
If you only want to trade $100K (ie. 10 minilots or 1 lot) you would enter a scaling factor of 50% into C2’s trading preferences. If you wanted to trade $400K you’d enter a 200% scaling factor, etc. So although the system pages show minilots, the order to the broker is in currency units (which may then be transferred back into full lots by the broker, or not (eg. IB) depending on the broker).
Charles:
Admittedly forex autotrading is a bit confusing. Let me try to answer some of your questions.
The first source of the confusion is caused by the fact that, while C2 trading systems describe trades in “minlots” (i.e. 10,000 currency units), you have the option of autotrading using “big” lots (100,000 currency units) if you like. You set that preference during your AutoTrade setup here on C2. Of course, if you set “big” lots on C2, you need to make sure you have a “big lot” account at your forex broker, and vice-versa. So, depending on your preference, an order to BUY 23 EURUSD placed at C2 will be executed as either 230,000 or 2,300,000 Euros in your real-life brokerage account (assuming 100% scaling factor).
Forex AutoTrading is further complicated by the fact that brokers allow all sorts of leverage / margin levels. Indeed, you can request a leverage upgrade or downgrade on a whim at many brokers.
So the maximum number of Euros (or any other currency) you can buy in your real-life brokerage account depends on the private arrangement you have made with your broker. It’s completely non-standard – unlike futures, for example, where the exchanges set specific (and universal) margin requirements per contract opened.
Probably the most important thing an AutoTrader wants to know is how to “scale” his trades: that is, how to translate the C2 quantity to the brokerage quantity. Scaling is set on a percentage basis.
Here’s how scaling is applied in forex AutoTrading.
+ First the number of lots is scaled.
+ Then the decision is made as to whether the lots are “mini” or "big."
Example:
You set a 25% scaling factor.
Trading system places a trade to buy 40 EURUSD.
So an order to place 25% x 40 lots will be sent (i.e. 10 lots). As to whether those 10 lots are mini-lots or big lots? – the answer depends on a switch you can flip in your AutoTrading setup screen. This can vary on a broker-by-broker basis.
There’s one more important fact to keep in mind. When setting your scaling - particularly for forex - you want to know the answer to the following question: “If the trading system developer decides to max out his account, what is the largest trade he can place, given C2 constraints?” Knowing the answer to that of course tells you something about how much capital you will need in your account.
The answer is this. For forex systems, C2 allows only a very very low leverage level. Specifically, we allow only 33x leverage (i.e. we require 3% margin to be posted for a trade). Almost all forex brokers allow much higher leverage by default (the typical leverage is 100x, for even the smallest accounts). The implication is as follows. If the C2 trading system has $100,000 dollars in it, and your real-life account has $100,000 dollars in it, and you set 100% scaling factor, you probably will only user 1/3 of the margin available in your real-life account – even if the vendor maxes out his C2 account.
So: if you want to trade more aggressively, you can set your scaling factor higher. You can even (and we strongly discourage over-leveraging) set your scaling factor above 100% – i.e. place larger quantities in your real account than recommended in the C2 system.
Keep in mind that we strongly discourage over-leveraging your AutoTrading account. We instead recommend starting very small… much smaller than you’re used to, in order to get a sense of how AutoTrading works.
AutoTrading is powerful. Like all powerful tools, you need to use it very carefully.
Hope this helps.
Matthew
Wow - great answers. Now I’m clear.
Thanks guys. Nice one.
Charles.
One other thing you could look at, is the total number of lots that a forex system will trade over time in a single position. Also, you need to look at total positions open at one time that a forex system will have.
For example, in my system, I currently do not go beyond 150 lots in a single position. This may include multiple buys.
Also, I may have up to 3 currency positions open at a single time. However, if I have already maxed out a position, the other positions open may just be in 50 lot sizes.
You should also look at on average how many days does a system keep their trades open. On some former and current forex popular systems, the vendor may keep a losing position open for months while still sending out new trades so that they can maintain their high win % ratio.
Having a win ratio above 90% may fool alot of traders into thinking that the vendor has a perfect system. The problem occurs on a black swan day where they are in a losing position and the floor drops out from under them.
