Featured Trading Systems

I hope our regular users have noticed some of the new features that have been added to the Web site. As usual, I welcome your opinions – either here publicly, or by private email (matthew@collective2.com).

I want to let system developers know about a new area called “Featured Trading System.” You may have seen it: it’s the box on the home page that calls your attention to a particular trading system.

The Featured Trading System is a paid sponsorship opportunity available to many system developers (your trading system needs to meet certain qualifications to appear in the slot). If you meet the qualifications, your trading system can begin appearing immediately. I think the fee is reasonable given the exposure you will receive in the slot, and I believe appearing there will drive more subscriptions to your system.

To learn more about how to appear in the Featured Trading System slot, click the “What is a Featured System?” link that appears at the bottom of the Featured System window.

As usual, let me know if you have questions. -MK

This is just my opinion, but I think this could lead to a lot of problems. Assume more and more advisors pay the fee to have their system featured. There’s only so much exposure you can offer. So then does one advisor offer to double the fee to have double time? This could escalate into a bidding war, and lead to a lot of bad feelings, and the ultimate demise of the website. Keep it simple, just the facts, and keep the playing field level.

Theory comes inductively from experience. Do you know any websites that have gone this way and have been demised. Have you had prior experience regarding this? I think it is important to share yours and others experiences.

However, we can dream up any “theory” that tickles our fancy, provided they can deduce at least one consequence that might be observable sometime, somewhere, by somebody.

Real knowledge is the hard-won reward of a step-by-step process that takes us from observations to abstractions, generalizations and theories. In contrast, daydreaming requires little effort. That explains why theorists have been able to reach the “end of the subject” so quickly and easily. Unfortunately, their stories about make-believe worlds are of no value to people living in the actual world.

Are people to be viewed as passive victims, pushed helplessly into destructive behavior by advertising or do we hold principles of personal responsibility? Are we rational, self-responsible individuals entitled to make his own decisions–and take his own risks.

Regulating advertising is anti-freedom and anti-individual-judgment. Voluntary contributions are inherently a mode of free speech–more clearly so than many of the forms of “symbolic speech,” such as nude dancing and the filing of lawsuits, that have previously been protected–because they explicitly entail the expression of ideas. Your contribution to advertise your system is de facto the publication of your ideas. Giving money to a feature is no different from hiring a speaker or commissioning an author. You are using your money to have your viewpoints presented. The only proper “limits” are those set by your willingness to employ your money for this purpose. Even a legislated limit restricts in principle what you can say by restricting how much you can say.

The most radical proposals to restrict advertising contributions call for publicly funded systems which supposedly would “level the playing field” for all system vendors and will result in alledged “public good”. In fact, such plans would result in the moral obscenity of using taxpayers’ funds to support ideas with which they may disagree.

The right to speak cannot be implemented without the right to property. The right to acquire and dispose of your property makes it possible for you to express your ideas, be it by advertising on C2, hiring a hall in which to deliver a lecture, supporting a candidate with whom you agree, or, more important, criticizing one with whom you disagree. The right to use his property is the only protection private citizens have.

It is money–property–that makes freedom of speech possible.

In a free society–where art and literature are not monopolies of the state–the private sale and marketing of books, movies, music, systems etc., is the indispensable means by which artists and intellectuals express their ideas. The phrase “a free marketplace of ideas” is not just a figure of speech.

Liberty is an empty concept if we are not free to make these choices for ourselves–even mistaken choices that may turn out to be harmful.

We need to tell our system vendors that the only truly voluntary guidelines are those demanded by viewers/subscribers (who are looking for a profitable system(s) to follow), not those demanded by any particular individual(s). We need to tell them that the only way to safeguard freedom of speech is to keep the marketplace of ideas relatively free.

Restricting the individual’s right to contribute to advertising his own system, will be moving C2 in the direction of limiting individual freedom. Let reason, freedom, and material prosperity flourish – and the rest will follow…

rgds, Pal

Midas Value

Does that mean you will pay for an ad?

Maybe not at C2 because I don’t really have to, but the Ad doesn’t have to be restricted to just C2’s web site.

One should keep in mind that there are numerous ways to judge a system depending on the individual investors preferences. Most of it depends on the payoff structure of the portfolio and its sensitivities to various market factors and economic shocks (robustness).

rgds, Pal

Midas Value

Your points are well taken. And my choice of wording (demise of the website) was probably way overblown. However, a person selling his services on this site has the freedom to advertise from his own website, or by any other means.

My concern is that the way it is set up right now, the impression this gives is that Collective2 is attempting to steer would-be customers to certain system vendors. I know that is not the actual case, but perception is 90% of reality.

A simple revision to the way it is presented would probably suffice. It should be made very clear to the traders that this is a paid advertisement by the trading advisor, and that Collective2 is in no means sponsoring or offering their personal viewpoints on the validity or worth of any particular system. The numbers should speak for themselves.

I would take issue with your concern “that the way it is set up right now, the impression this gives is that Collective2 is attempting to steer would-be customers to certain system vendors” and your statement that "perception is 90% of reality."

For man, sensory material is only the first step of knowledge, the basic source of information. Until he has conceptualized this information, man cannot do anything with it cognitively, nor can he act on it. Human knowledge and human action are conceptual phenomena.

If a casual observer to conclude that a stick actually bends in water, such a snap judgment would be a failure on the conceptual level, a failure of thought, not of perception. To critize the senses for it is tantamount to criticizing them for their power, for their ability to give us evidence not of isolated fragments, but of a total. The function of the senses, Ayn Rand holds, is to sum up a vast range of facts, to condense a complex body of information - which reaches our consciouosness in the form of a relatively few sensations. Our sensations do not, of course, identify any of these facts, but they do constitute our first form of grasping them and our first lead to their later scientific discovery. Science, indeed, is nothing more than the conceptual unravelling of sensory data; it has no other primary evidence from which to proceed.

If a “valid” sense perception means a perception the object of which is an existent, then not merely a man’s senses are valid. All sense perceptions are necessarily valid. If an individual of any species perceives at all, then no matter what its organs or forms of perception, it perceives something that is. Conceptualization involves an interpretation that may not conform to reality, an organization of data that is not necessitated by physical fact; one can, therefore, “think about nothing,” i.e., nothing real, such as a perpetual-motion machine or demonic possession or Santa Claus. But the senses sum up automatically what is.

Although concepts are built on percepts, they represent a profound development, a new scale of consciousness. An animal knows only a handful of concretes: the relatively few trees, ponds, men, and the like it observes in its lifetime. It has no power to go beyond its observations - to generalize, to identify natural laws, to hypothesize casual factors, or, therefore, to understand what it observes. A man, by contrast, may observe no more (or even less) than an animal, but he can come to know and understand facts that far outstrip his limited observations. He can know facts pertaining to all trees, every pond and drop of water, the universal nature of man. To man, as a result, the object of knowledge is not a narrow corner of a single planet, but the universe in all its immensity, from the remote past to the distant future, and from the most miniscule (unperceivable) particles of physics to the farthest (unperceivable) galaxies of astronomy.

A similar contrast applies in the realm of action. An animal acts automatically on its perceptual data; it has no power to project alternative courses of behavior or long-range consequences. Man chooses his values and actions by a process of thought, based ultimately on a philosophical view of existence; he needs the guidance of abstract principles both to select his goals and to achieve them. Because of its form of knowledge, an animal can do nothing but adapt itself to nature. Man (if he adheres to the metaphysically given) adapts nature to his own requirements.

A conceptual faculty, therefore, is a powerful attribute. It is an attribute that goes to the essence of a species, determining its method of cognition, of action, of survival. To understand man - an any human concern - one must understand concepts. One must discover what they are, how they are formed, and how they are used, and often misused, in the quest for knowledge.

This requires that we analyze in slow motion the inmost essence of the processes which make us human, the ones which, in daily life, we perform with lightninglike rapidity and take for granted as unproblematic.

The (implicit) concept ‘existent,’ undergoes three stages of development in man’s mind. The first stage is a child’s awareness of things or objects. This represents the (implicit) oncept “entity.” The second stage occurs when the child, although still on the perceptual level, distinguishes specific entities from one another; seeing the same object at different times, he now recognizes that it is the same one. This represents the implicit concept "identity."

These two stages have counterparts in the animal world. Animals have no concepts, not even implicit ones. But the higher animals can percieve entities and can learn to recognize particular objects among men. It is the third stage that constitutes the great cognitive divide.

Having grasped the identities of particular entities, human beings can go on to a new step. In other words, they can grasp "relationships among these entities by grasping the similarities and differences of their identities.“

The implicit concept represented by this stage of development is : “unit”. A unit,” is an existent regarded as a separate member of a group of two or more similar memebers.

This is the key, the entrance to the conceptual level of man’s consciousness. The ability to regard entities as units is man’s distinctive method of cognition, which other living species are unable to follow.

An animal cannot organize its perceptual field. It observes and reacts to objects in whatever order they happen to strike its consciousness. But man can break up the perceptual chaos by classifying concretes according to their resemblances. Even though people, cats, trees and automabiles are jumbled together in reality, a man can say, in effect: "The similarities among people are so great and their differences from cats et al. are so striking that I am going to segregate the people mentally. I will continue to regard each person as a separate entity, but not as an unrelated entity. I will regard each as a member of a group of similars, ie., as a unit."

The result is a new scale of cognitive ability. Given the unit-perspective, man can pursue knowledge purposefully. He can set aside percepts unrelated to a particular cognitive endeavor and concentrate on those that are relevant; he is able to specialize intellectually. In addition, since he treats the objects in the segregated group as units of a single concept, he can apply to all of them the knowledge he gains by studying only a comparative handful (assuming he forms his concepts correctly); he is capable of induction. And these invaluable capacities are only some of the consequences of the unit-perspective.

When studying the unit-perspective, it is essential to grasp that in the world apart from man there are no units; there are only existents - separate, individual things with their properties and actions. To view things as units is to adopt a human perspective on things - which does not mean "subjective’ perspective.

The concept “unit” involves an act of consciousness (a selective focus, a certain way of regarding things), but that is not an arbitrary creation of consciousness; it is a method of identification or classification according to the attributes which a consciousness observes in reality. This method permits any number of classifications and cross-classifications: one may classify things according to their shape or color or weight or size or atomic structure; but the criterion of classification is not invented, it is perceived in reality. Thus the concept “unit” is a bridge between metaphysics and epistemology: units do not exist qua units, what exists are things, but units are things viewed by a consciousness in certain existing relationships.

Without the implicit concept of “unit,” man could not reach the conceptual method of knowledge. Without the same implicit concept, there is something else he could not do: he could not count, measure, identify quantitative relationships; he could not enter the field of mathematics. Thus the same (implicit) concept is the base and start of two fields: the conceptual and the mathematical. This points to an essential connection between the two fields. It suggests that concept-formation is in some way a mathematical process.

“Abstraction” is the power of selective focus and treatment; it is the power to separate mentally and make cognitive use of an aspect of reality that cannot exist separately. This is a power animals do not possess. An animal perceives the whole object, including some similarities to other things and some differences from them; it may even, in certain instances, be capable of a rudimentary selective foucs. But it cannot isolate or unite any group of concretes accordingly, it cannot do, anything cognitively with the relationships it percieves. To its consciousness, the noting of similarities is a dead end. Man can do something: he makes such data the basis of a method of cognitive organization. The first step of the method is the mental isolation of a group of similars.

But an isolated perceptual group is not yet a concept. If we merely isolated, we could do little or nothing cognitively with the group, nor could we keep the group isolated. To achieve a cognitive result, we must proceed to integrate. The tool that makes this kind of integration possible is language. A word is the only form in which man’s mind is able to retain such a sum of concretes.

Only concretes exist. If a concept is to exist, therefore, it must exist in some way as a concrete. That is the function of language. “language,” is a code of visual-auditory symbols that serves the … function of converting concepts into the mental equivalent of concretes. The word constitutes the completeion of the integration stage.

It is not true that words are necessary primarily for the sake of communication. Words are essential to the process of conceptualization and thus to all thought. They are as necessary in the privacy of a man’s mind as in any public forum; they are as necessary on a desert island as in society. The word constitutes the completion of the integration stage; it is the form in which the concept exists. Using the soul-body terminology, we may say that the word is the body, and the conscious perspective involved, the soul - and that the two form a unity which cannot be sundered. A concept without a word is at best an ephemeral resolve; a word without a concept is noise. Words transform concepts into (mental) entities; definitions provide them with identity.

What is the relationship of concepts to existents? To what precisely do concepts refer in reality?

There is no such problem in regard to percepts; a percept is a direct awareness of an existing entity; a process of observation. But a concept involves a process of abstraction leading to a generalization and a theory, and there are no abstractions in reality.

In order to validate man’s use of concepts, one must answer these questions. Otherwise, he leaves man’s rational conclusions, on any subject, unrelated to reality and vulnerable to every form of attack, from mystics and skeptics alike. The mystics hold that the referents of concepts exist not in this world, but in a Platonic heaven; hence, they claim, revelation is superior to science. The skeptics hold that concepts have no objective basis in any world,

but are arbitrary and subjective. The followers of these schools, wo are legion, do not hesitate to voice their disdain for the process of thought. I mean the mentalities who hear a rational argument, then shrug in reply: “That’s only abstractions; come down to earth” - or: “That’s only semantics, only a matter of how people use words.” The first of these bromides implies that abstraction are supernatural entitites. The second implies that words, i.e.,

concepts are a matter of social caprice. Both divorce concepts from concretes.

Men have to know the mathematical aspects of concept-formation in order to define the rules to guide the conscious aspects of a thought process, the ones that are given within men’s deliberate, volitional control.

So long as men remain ignorant of their basic mental processes, they have no answer to the charge, leveled by mystics and skeptics alike, that their mental content is some form of revelation or invention detached from reality. This kind of viewpoint can go into remission for a while, thanks to the remnants of a better past. Ultimately, however, if it is not burned out of men’s souls completely by an explicit philosophic theory, it becomes the most

virulent of cancers; it metastasizes to every branch of philosophy and every department of a culture, as is now evident throughout the world. Then the best among men become paralyzed by doubt; while the others turn into the mindless hordes that march in any irrationalist era looking for someone to rule them.

The fact that concepts are valid tools of cognition whether we know it or not will not save us - not unless we do know it. Concepts are based on and do refer to the facts of reality.

A concept is not a product of arbitrary choice, whether personal or social; it has a basis in reality. But the basis is not a supernatural entity transcending concretes or a secret ingredient lurking within men. “Manness,” for example, is men, the real men who exist, past, present, and future; it is men viewed from a certain perspective.

A concept denotes facts - as processed by a human method. Nor does the method introduce any cognitive distortion. The concept does not omit or alter any characteristic of its referents. It includes every fact about them, including the fact that they are commensurable. It merely refrains from specifying the varying relations they sustain to a unit(s).

What the window of mathematics, and thus concepts reveals is not a mechanics of deduction, but of induction and theory comes inductively from experience.

Definitions are determined by the facts of reality - within the context of one’s knowledge. Both aspects of this statement are crucial: reality and the context of knowledge; existence and consciousness.

A definition is not an arbitrary selection of several of the units features. On the contrary, a proper definition is a condensation, which implicitly includes ‘all’ the known features. A definition is the condensation of a vast body of observations - and stands or falls with the truth or falsehood of these observations.

Such condensation is indispensable if concepts are to achieve their cognitive purpose. The function of a definition, is to enable one to retain concepts (against floating abstractions) in his mind. To retain a concept, however - to keep its units clearly distinguished - and then to use the concept in a cognitive process, one must be able to retain and make use of the wealth of data one has learned about the units. But one cannot hold data in mind in the form of

an endless catalogue of unrelated items. What is required, therefore, is a deliberate cognitive processing of the units. What is required is a survey and analysis of similarities, differences, casual relationships, culminating in the selection of an essential characteristic, which serves to condense the total.

Such a characteristic, by virtue of its method of selection, is an invaluable tool of integration. It reduces a complex sum of features to a few relatively simple elements, expressed in the form of a brief, retainable statement.

A definition in terms of nonessentials achieves the opposite result. If one arbitrarily picks some distinguishing feature as definitional, then it does not proceed from any cognitive processing and does not carry with it the units’ other features. Instead of condensing and enabling man to retain data, such a definition splinters and works to obliterate data. It fosters a grasp not of a concept’s units, but merely of an isolated characteristic(s), one

unconnected in the definier’s mind to the other features of the units. If one were to define ‘man’ by reference to his thumb, for example, the concept would become equivalent in one’s mind to “some kind of thumb-haver” - while all man’s other characteristics would be relagated to a limbo of the unprocessed, unrelated, and ultimately unretained. Such an approach works to detach a concept from its units; it turns a concept into a floating abstraction. The result is not to clarify a concept, but to invalidate it, along with any proposition that uses it.

The truth of a proposition depends not only on its relation to the facts of the case, but also on the truth of the definitions of its constituent concepts. If these concepts are detached from reality - whether through lack of any definition or through definition by nonessentials - then so are the propositions that employ them. A proposition can have no greater validity - no more of a relation to reality - than do the concepts that make it up. The precondition

of the quest for truth, therefore, is the formulation of proper definitions. The truth or falshehood of all of man’s conclusions, inferences, thought, and knowledge, rests on the truth or falsheood of his definitions.

If one has failed to formulate proper definitions, then one would claim that a concept is interchangeable with its definition. This claim, widespread among men, is a confession which indicates that concepts, in such minds, do not stand for existents, but for random, floating characteristics. A concept is not interchangeable with its definition - not even if the definition happens to be correct.

A concept designates existents, including all their characteristics, whether definitional or not. As an aid to the conceptualizing process, men select from the total content of the concept a few characteristics; they select the ones that best condense and differentiate that content at a given stage of human development. Such a selection in no way shrinks the concept’s content; on the contrary, it presupposes the richness of the concept. It presupposes that the concept is an integration of units, including all their features. Varying definitions of a concept in varying contexts are possible only because the concept means not its definition, but its units.

Just as a concept is not restricted to the defining characteristics, so it is not restricted to the known characteristics. A concept is an integration of units, which are what they are regardless of anyone’s knowledge; it stands for existents, not for the changing content of consciousness. When we learn more about the units, we are learning about the characteristics that the units possess by their nature; all such characteristics are included in the concept from the outset.

It is crucially important to grasp the fact that a concept is an “open-end” classification which includes the yet-to- be discovered characteristics of a given group of existents. All of man’s knowledge rests on that fact. The implicit principle guiding this process is : "I know that there exists such an entity as a trading system; I know many of its characteristics, but the system has many others which I do not know and must discover. The same

principle directs the study of every other kind of preceptually isolated and conceptualized existents…

Since concepts represent a system of cognitive classification, a given concept serves (speaking metaphorically) as a file folder in which man’s mind files his knowledge of the existents it subsumes. The content of such folders varies from individual to individual, according to the degree of his knowledge - it ranges from the primitive, generalized information in the mind of a child or an illiterate to the enormously detailed sum in the mind of a scientist - but it pertains to the same referents, to the same kind of existents, and is subsumed under the same concept. This filing system makes possible such activities as learning, education, research - the accumulation, transmission and expansion of knowledge.

The file folder (the concept) is not the same as the label (the definition) that identifies and condenses the folder’s contents. Nor is the folder restricted to its present contents. The folder exists so that we can separate out as a single unit, and then study and interrelate, all the data ever to pertain to a given system. That is precisely what the concept enables us to do. The remark that “A picture is worth a thousand words” has many valid applications.

However, the theory of concepts teaches, in effect, that "A word is worth a thousand pictures."

rgds, Pal

Midas Value

I have a suggestion:

We need to select an essential characteristic of the featured trading system, which serves to condense the total vast body of observations about the trading system. It should includes every fact about them. A definition is not an arbitrary selection of several of the trading systems characteristics like Primarily trades, Trading Speed, and Subscription Terms which are non-essential features. On the contrary, a proper definition is a condensation, which implicitly includes ‘all’ the known features of the trading system.

The definition should condense and enable viewers/subscribers to retain data about the trading system. The definitions used now are unconnected in the definier’s mind to the other features of the trading system. All other characteristics would be relagated to a limbo of the unprocessed, unrelated, and ultimately unretained. Such an approach works to detach a concept from its units; it turns a concept into a floating abstraction. The result is not to clarify a concept, but to invalidate it, along with any proposition that uses it.

So, instead of the characteristics presently displayed, I request a proper definition, say for eg., Expectancy which is calculated as follows: E = W x WL - (1 - W), where W is Win % and WL is the Win:Loss (Payoff) Ratio.

rgds, Pal

Midas Value

Is this “Expectancy” a commonly-used statistic?

It sounds interesting, and I am willing to include new stats on Collective2, particularly if they are useful in the evaluation of Trading Systems. But I am hesitant to use a new, unfamiliar one in the ‘Featured Trading System’ box. That would give prominent status to something which essentially serves to confuse people. (“Expectancy?” most people will say. “What is that? And why is it being given such prominence?” You get the idea.)

In any case, if you have links to where this concept is explicated further, please let me know. - MK

Trader Mike says:

“Expectancy, position-sizing and other aspects of money management are far more important than discovering the holygrail entry system or indicator(s).” This quote comes from his article found here:


Alex Matulich says:

“Expectancy score is a better, more objective measure than the Sharpe Ratio for evaluating the relative performance of different trading strategies.” This quote comes from his article found here:


Here one can find a link to calculate Expectancy using a free simulator (calculator):


which should automatically redirect you to this link:


The actual lin for the calculator is here: hquotes.com/tradehard/simulator


Subject: Re: Ranking Best Systems by Annualized %

Posted by: Brian Schumacher

Date: 2/17/2005

Brian Schumacher at C2 says:

"Van K. Tharp uses what he calls an “Expectancy” factor to determine the value of a system. It takes into account % wins, average $ per win, max. $ per win, average $ per loss, and max. $ per loss. From this a person can determine expected rate of return, maximum drawdown, etc. based on statistical analysis. He stresses that most people risk too much per trade, leaving them open to very large drawdowns during a losing streak, and possible failure. Consistency is the key. I feel a system has to produce better than 50% wins to be good in the long run."

rgds, Pal

Midas Value

I would like to offer $10 for anybody who actually read the previous messa…, I mean essey.

Also I have $10 for anybody who can summarize what it said in less than 10 words. I mean I love philosophy but common on Pal, keep it under 1000 words for God’s sake! We have trades to make!!! :slight_smile: