Follower guide to consistent profits

That´s a very interesting topic! Thank you for the valuable input @GonzaloLoayza2, I will find the time for reading soon.

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Thank you for taking the time to give this advice. One thing that I would like to ask you about is why a win rate above 90% is a no go for you. This would seem like it’s a good thing. Could you explain a little bit more about why you would consider a high win rate bad?

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Basically, it is indicator from the developer that he or she is always right in the market movement or volatility. He never accepts where market is always right. In reality, most developers and investors at C2 is retail traders, many times, you will lost all your capital before market go back into your direction.

Many customers from this style blow up his or her account.

Good Job with the detailed guide - we need more of this kind of thinking on the forums - I would also recommend C2 publish similar guides esp. for newcomers…

My strat is coming up to 4 months on Tuesday - so thought I would mention, as a potential candidate which ticks many of the boxes (8 listed below)…

Trades NYSE/NASDAQ stocks only (min marketcap 250m, min avgvol 50000/day)

(1) Fully Hedged by RWM (market-neutral, pure-alpha)
(2) Max leverage is 2x (including RWM hedge)
(3) Hedge is permanent, hence consistent control over long-market-risk.
(4) Max drawdown so far is -3.8%.
(5) Consistency of winners (def not one-offs) based on objective stock-selection method.
(6) Annualized compound return meets targets…
(7) Exp around 33% in first 12 months (and that is not the best year so far).
(8) So far only 4 months old - but I am expecting continuity.

Continual progress reports on the forum, and strong dedication to subscriber/followers (sims) to ensure continual education/learning/improvement.

A ‘liquid’ version of the strat is also on C2 (similar consistency/record) launched 2 months ago - trades only S&P stocks (to max liquidity/minimal-slippage)…

Hi @ElizabethTom,

thanks for your question and feedback.

A 90% winrate is a strong indication of unhedged convexity risk / tail risk. Due to the probabilistic behavior of any market you can not achieve such a high win rate if the reward/risk ratio of trades is anywhere near 1. It´s more likely that the trader uses risk management techniques that have a relatively high chance to work out for long enough to get subscribers. But those methods are bound to fail in the future.

To give you the most common examples to watch out for:

  • martingale or grid strategies (unlimited averaging down)
  • holding losers until they turn green and selling for small profits
  • selling far OTM options and hold them till expiry no matter what

In all of these cases you skew the probabilities towards a higher winning percentage. This would not even be a problem if you didn´t use leverage. But only leverage makes the returns attractive compared to buy and hold index strategies. As a result it only takes one catastrophic event to take you out completely.

The mentioned cases would lead to 100% win rate if you go to the extreme. But this unrealistic win rate is obvious even to the most naive investor so the designers of such strategies don´t stretch it that far. (I call them designers and not developers because they don´t actually develop a model. All they do is redesigning probabilities and using randomness to suck in subscribers.)

As a result you see limited martingale with SL, reward/risk trades of 0.2:1 or worse, option rolling techniques and probably some more creative ways if you think long enough about it. Those techniques go towards the 80-90% win rate area.

I hope that helped!

regards,
Alexander

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An important thread that should be revisited every now and then! If you are new to C2 and new to evaluating strategies, this may help.