There are many good systems at C2. What makes some exceptional?
Hi Reinar,
I am a bit confused by your question. What do you mean by “good system”?
Just high profit? Low risk? Good Risk/Reward ratio?
And what data basis do you use for that i.e. how long must some system survive before you look at these numbers? How many trades?
If I apply my own measures and limits I don’t see too many “good systems”.
I require more than 100 trades, more than one year of history. Then I look at the sharpe ratio, for example.
If you use age > 365 days, #trades > 100, Sharpe > 1.0, MaxDD < 50 in the Grid you end up with 56 systems today.
If you look through their equity curves you’ll notice, that most systems had just a short successful period, being flat or down most of the remaining time - not good.
Remain about 20 systems with a “nice” equity curve.
Do you think this counts as “many systems”?
Then your second question: “what makes them exceptional”.
First, I agree, there are a few (probably 5) systems which look exceptional. They show good values for all criteria mentioned above.
What do you mean by “makes them exceptional”?
Inner workings? performance stats? Religuos believe of vendor?
Please clearify.
Rene,
Before a vendor comes to C2 they may have already have several years of tests and years of real time experience. All of it can exceed the standards that you set.Whether they have the experience at C2 or elsewhere …does it really matter? A good example is one of the Ultimate ETF systems that was up nearly 100% on the first trade. Several months later things look different.
An examination of one of the popular futures/index systems shows that it takes small bites out of moves. It gets into the move when conditions are very over bought and sold. This to me is a bit dangerous as the over bought/sold will continue in cases.
In one Forex system there is a lot of averaging down. This shows high profits. What would need to occur for all to be destroyed?
An examination of one of the stock/etf systems shows that it gets long often near 1% of the low for the period. This indicates to me that he is finding the end of various trends and the start of a new one.
The later approach is one that I favor. I think that using a multiple trend approach for trade selection is a basis for a better system. Another very important factor is that he spreads out his risk amongst various unrelated instruments.
Reinar
Hi Reinar,
you wrote:
Whether they have the experience at C2 or elsewhere …does it really matter?
Here on the C2 site the only reliable information about a system is the history and performance stats shown on C2. Past history is not too trustworthy.
I used to publish long and carefully crafted backtest results but stopped to do so. Why?
Because even the best of all backtest simulations may have serious problems with "forward looking" or similar phenomenon even if the author is not aware of these glitches. After all, these simulation results are not too useful.
So we have to look at historical real-time performance (like they are displayed by C2) and decide:
"Will this system perform in the future?"
This is the relevant question and unfortunately it is very hard to answer…
Rene’
You said…So we have to look at historical real-time performance (like they are displayed by C2) and decide:
"Will this system perform in the future?"
This is the relevant question and unfortunately it is very hard to answer…
The very relevant question can be answered by asking that all important question…What is this system based upon?
If the answer is " The system uses AI to determine each trade, this brings one to wonder.
Another question is …How was the system developed? This would give a lot of insight.
Another and perhaps the most important question is : What is this system designed to do, which will of course result in favorable statistics?
Reinar,
When you wrote "In one Forex system there is a lot of averaging down. This shows high profits. What would need to occur for all to be destroyed?" Were you referring to Enchante?
Thanks
Dean
In my opinion…
Good systems:
Age > 30, Ann return > 100, Max DD < 30
Very good systems:
Age > 30, Ann return > 300, Max DD < 10
Regards.
[LINKSYSTEM_55660543]
Dean,
Thats one of them.
When someone finds a system that has positive performance… ignore that stats here on C2. IF you can… down load the data and run your own stats and add in all of the costs.
People need to get a feel for a system. Down load the data and look at where the trades were taken and note this on a chart. It will give you a lot of insight.
Reinar
Age > 30??
I’ll assume you are joking!
Those criteria are still too optimistic in my opinion:
Age should be at the very least > 180, better 360 or even two years. That already weeds out the majority of poor systems.
Annual return > 100 is unsustainable. A system displaying such a growth rate after a month will either settle down to a more realistic up to 40% or 50% longer term or it will crash. Sometimes the former but more often the latter!
Annual return > 300 with max DD < 10 is impossible. I say that categorically.
How come so many people believe they can bung some money into a system a few months old and outperform George Soros or Warren Buffett by an order of magnitude as retail traders?!?
Very roughly:
A good system will return > 10%, Sharpe > 1, max DD < 15%, over years on average.
A very good system up to 50%, Sharpe > 1.5, max DD < 60%, over years on average.
Then look at the equity curve, trading costs, tradeability, vendor attitude, your own psychology, etc. Running a good system requires study, thought and experience; so does picking one.
In my opinion, anyway.
There are many cycles in price movement. Most of these cycles are ever changing or cycling in and out, what makes for an exceptional system is when it has been created based on the cycles that will remain constant, will always be found. Anything other than this will result in something less than exceptional.
And then there is this other most important aspect of a system and that is the trader and the traders state of mind. With a poor state of mind which unfortunately most of us have, even an exceptional system can be turned into something less than exceptional. This applies mostly to manually traded systems but even automated systems can be tinkered with by their creator and therefore can be lowered all the way to a losing system.
(Trading is a great place for people to come who want to practice the art of self sabotage and many do just that.)
What makes for an exceptional system is a trader in a correct enough state of mind and a trader who has found consistent cycles.
1) A correct enough state of mind for trading can be achieved through meditation which
is merely to empty or quiet the mind as an empty or quiet mind is self correcting.
2) Consistent cycles can be found by studying and understanding price movement. Also
empty or quiet minds are more aware of receiving answers to problems.
This may not be what anyone was looking for in the way of an answer to this question but for anyone interested in some thoughts about developing a system there it is.
Futurm, that’s a very good point you make about state of mind and danger of turning a winning system into a losing one. I agree with you that it is possibly the most important aspect of trading, as a system creator or follower likewise. That is what most of the traders interviewed by Jack D. Schwager also say in various ways.
Managing a state of mind at C2 is different than elsewhere. Subscribers are encouraged to give a "review" of a system after a few days. Most reviews are rants or BS from the developers. The one that had me LOL…LMAO was the one from Enchante that mentioned the low draw down and the caring developer.
A system here at C2 needs a comfortable experience for most subscribers. One needs to create a system that has a chart that pretty much looks like a stair case.
The idea of meditating to develop a system is interesting. Could there be further discussion of this?
Reinar
"Managing a state of mind at C2 is different than elsewhere"
There is no difference. We can use events at C2 or anywhere else to alter our mind or we can remain quiet and observe what unfolds before us unattached to any particular outcome. That is always our choice.
I am not joking.
There are systems that with only 30 days in C2 and at least 30 trades too you can figure out if they are good systems and if they will be in the future.
Agree that people tend to rely more on mature systems, but this is no guarantee that the system will work. In addition, the market is always changing and many mature systems begin to fail over time.
I invite you to see the numbers of my system [LINKSYSTEM_55660543] .Although it is young in C2, I think it deserves a vote of confidence.
I see you are not joking. Have you heard of catching a short ride on a trend? My guess is many potential subscribers haven’t.
I am not a developper but a potential investor and after some good/very long times analyzing/investing and yes, being very lucky (as I could have lost a huge amount of money), I can honestly say 30 days to judge a system is a pure Joke… You can’t.
I have been with some systems on C2: from stocks to Forex etc… And somehow, when I always decided to pull the plug (yes, I taught myself how to recognize ‘awful’/scam/‘bad’ system), the systems confirmed and when busted.
I recall my start at C2 - there a video from Matt where he mentioned that each time he talked or (adviced) about a system, the system failed 
(TBC). Anyway, my story is quite similar but somehow, in total I have benefited/learned a lot at C2 and THIS IS THE BEAUTY/FREEDOM at C2.
I feel that somehow, you have to learn or even lose money to be taught how to recognize a ‘good’/very good/excellent system.
So what I believe (according to my criteria), I will never ever in my life invest in a system without a least 6 months to a year or even 2 years observation - one year is better.
I also add other factors like subscriptions. DD etc… After doing all this analysis, I come up as per now to 4 systems which are for me excellent:
one (yes only one in Forex)
two in Stocks
one in Futures
one in Options
—
The key factors being the track record and if it can help someone, the rating of the developpers. But definitely not more than 5 systems according to me.
Your system need time and these huge winning in percent/month means nothing - on the contrary, it is worrying…
I would even go further in saying one of my criteria is no more than 3 to 5% a month for a system on average to be a winning system. 15% or 10% is for me a no go area!
Good luck everybody!
T
Let me ask you. Was Long Term Capital Management (LTCM) driven by a good or exceptional system/strategies?
Or was it just a scam, as some folks on C2 would, probably, call it, if it was listed on C2?
As you are aware, it had crashed âspectacularlyâ too. And it was bailed out with the help of the Federal Reserve Bank of NY.
It was led by Nobel Prize-winning economists/Ph.D. mathematicians and renowned Wall Street traders . It did maintain a high Sharpe Ratio for a couple of years.
Koch claims to be a Ph.D. as well. I am not sure whether he has won his Nobel Prize yet for his systems yet.
However, he has scored 1000 on C2.
Does the score insure his systems from possible âspectacular â crashes?
Koch, in your ultimate Ph.D. wisdom, what is the best protection against this kind of crashes/scams like LTCM, etc?
From what I have read, LTCM’s undoing was the huge leverage they used and some institutions whom they approached for the initial investment declined for that reason. Their algorithm worked great in normal times but when the “Black Swan” came around in form of the Russian default everything fell apart.
On C2 we see it all the time that some new systems - particularly forex systems - take on huge leverage and risk and by shear luck initially appear fantastically successful - until they crash.
Rene’s systems, as far as I know, work only with 2:1 leverage, a tiny amount compared to what LTCM was using and therefore are, in my opinion, much less likely to crash.
