Seriously.
I’ve asked this question of every book and system sold or taught. If the system is that good then why is the author selling it? Is it not obvious that, if a system was good enough to buy then why wouldn’t the author/owner just use it to their own advantage instead of selling it?
I can imagine a few obvious answers but I’d be interested in hearing how sellers answer this.
In trading terms, selling a system is like a call option. Limited downside (cost of listing fee and maybe some advertising), unlimited upside potential in subscription fees.
High reward, low risk.
Why ? Same reason that Kirk Douglas goes to the academy awards.
First of all when some ask me that question there is an implication about how good my stuff is…but I just laugh…you can imagine why.
Over the years I have taught seminars in Vienna, NY, DC etc. I have met a lot of interesting people. Its a great way to connect with your peers and meet a lot of people. If it were not for the Andrews Course techniques I would not have met the head of bond trading for citi corp and many others that have climbed quite a ladder.
In Vienna at one of my seminars one of the guys that worked for Hassenbichler ( Big time money managers) taught at my seminar and I probably gave him the thrill of a life time by letting him do it…He did not have a High school diploma and the average at the seminar was a VP with a masters degree. But the kid was really good so what the heck.
When you are really really good at something you can be a bit eccentric and people don’t mind. Heck one of the guys that I can call my friend is Scott Whaley…Breakthrough90.com He was the number 2 guy for Tony Robbins and will probably be even bigger.
Now I have a question for you. Why do you feel compelled to ask people that question?
Regards
Ron[LINKSYSTEM_50288258]
Why can’t selling a system also be construed as 'using it to their own advantage?'
It’s pretty simple.
Let’s imagine you’re smarter than your question implies and you develop a system that makes 24% a year.
You trade it with $100k.
You’re making $24k a year.
Then you discover C2 and think you could get 20 subscribers to pay $100 a month for your system.
But wait a minute, why would you sell a system if it’s so good?
Hmmm… let’s think about this for a minute, what should I do, continue to risk $100k of my own money to make $24k, or risk nothing and sell the system to just 20 people to make the same $24k…
Let me know when you’ve figured it out.
The real question is if you have such a system why on earth would you NOT sell it instead of trading it yourself? I see top traders like Larry Williams and Jake Bernstein and they develop systems all the time and sell them to several thousand people for several thousand dollars each, think about it.
Broadsword is right.
It all comes down to MONEY.
Any vendor who tells you he does it because he wants to improve the world, teach the less educated, leave a legacy, give back to the community, wants fame, doesn’t care about the subscription money, blah blah blah - IS LYING, unless he gives it away for free, or donates all his proceeds to charity.
He’s doing it for MONEY. And there is absolutely nothing wrong with that. He developed something of value, and if you want it, you have to pay for it.
“All men want to be rich, rich men want to be king. And the king ain’t satisfied, till he rules everything.”
Kevin,
It is always about so much more than money. Speaking from experience and as a high performance psychologist it is about filling needs. My buddy Scott Whaley (Breakthrough90.com) at one time worked for Tony Robbins and was sent out to big name traders to be their “coach” he tells me that the biggest problem is loneliness. Think about it, traders are in a business where they literally give orders and do not take them. When you take orders as a sales person you try to be accommodating and when you only give orders things are different.
For this and other reason I suggest to you that the money, like any job is only a part of the package. There is much more of a benefit. By the way I have actually been teaching systems…since the first article I wrote was published back in the 1980’s in Stocks and Commodities Magazine. It is called a Christmas story.
Ron
[LINKSYSTEM_50596177]
Like you say above, “the money, like any job is only part of the package.” But, many vendors try to say the money does not matter at all (the “I’m not in this for the money” ploy) - and THAT is a lie.
People who really believe that vendors don’t care about the money, while watching the vendor take money from their wallet every month, need some serious help.
And for vendors reading this thinking “Kevin is full of it” I offer this advice: Start charging $0 for your systems. Then everyone will know you are not in it for the money.
Well, yes I am in it for the money… there, I said it 
If I had enough capital to be able to live off of my trading, and grow the capital as well, then I may not have bothered listing on C2, except maybe to build a public track record just in case it came in useful later.
But the truth is that, whilst I do trade via C2 with my own real money, I do not have enough capital and therefore hope to generate a bit more income by selling my systems as well. At least I hope to make enough to pay the C2 listing fees and at best it would be nice if I could make enough to live off this 
Dean.
Even if a system is good and the vendor is altruistic, giving it away for free has its own problems
1) some people will not value something unless it costs something
2) having an edge is all about finding some kind of inefficiency. Almost without exception, the more that trade it, the less it works. It is called the "Deilmma of discovery" So charging for it keeps down the competition for that inefficiency. One could possibly even figure a formula for maximizing the returns on the edge, as compared to the loss of value of the edge through competition that uses it. Of course, this depends on it being a real edge in the first place, which few people actually have.
That is why giving stuff away is a good marketing technique. One snake oil salesman gives away a free “system” at his seminars. Problem is it used to work, but now it doesn’t (the audience doesn’t know this, though - they only see the guy giving away his free system).
So, people who get the free system think - "wow! If he gives this away, his $5900 system must be REALLY good I’ll buy it!"
Once again, it goes back to the money. And of course, warm and fuzzy feelings for the guy who gives away stuff. This has long lasting effects, as in "I don’t understand why his $5900 system doesn’t work anymore. It must be me. After all, he is such a great guy. He gives good systems away. He would never cheat me!"
LESSON: Buyer beware, in all things trading, all the time, and everywhere.
The legitimate reasons:
1. No guarantees. Any system, no matter how great, can quit working (or have periods of difficulty).
2. Capital considerations: not enough capital. This can take several forms, as in not enough capital to trade it at all, not enough capital to make more from it then selling it, or even not enough capital to trade it “with other systems”.
3. Supply overhead. If a system trades a liquid instrument and the vendor has enough capital to trade the system the vendor still may choose to sell the system if he doesn’t feel it would harm his performance or if he does not want to allocate any additional money to the system. Think about, trading the liquid futures – almost unlimited supply of product and demand is limited by your capital to apply to a system.
4. As indicated, social goals or other goals. Desire to be recognized, to leave a legacy, to teach, to establish oneself as the best.
But, I’d suspect most vendors are just full time sales people. They can’t make money trading. That is what you probably wanted to hear, and it is probably correct.
I would, also, add emotional and personality reasons. A system developer may have a great system but may not want to take any risk, any risk at all. No matter how great his system is. If he can sell his system for no risk then that might suite his personality.
Michael -
You’ve heard quite a few reasons why someone would sell a system.
I’ll contend that many vendors will NEVER sell their best systems - they will keep it for themselves.
Here is a real life example that I was telling someone about just yesterday.
A system trades ES (mini S&P), it can trade 100 contracts comfortably, but more than that, slippage becomes a killer. (So, most hedge funds and bigger CTA would never be interested).
Assume it makes $50 a day per contract after commissions (that is only 1 point, out of a 20 point average daily range - very achievable). That’s $1000 per month per contract.
So, let’s say I sold it for $100 a month (a reasonable 10% of profits) to 100 people. I’d get 100100.7 = $7000 per month, and Matt would get $3000.
Or, I could trade it myself. Trading even 50 contracts (so I’d completely avoid slippage issues) I’d make $50K per month. NO BRAINER on what I’d do.
Situations like this may partially explain why there are not a ton of great strategies for sale out there for subscribers.
I think that it is fear of competition that is whats going on behind the scenes Some time back a marketing intern was brought in to market a trading course. The problem was is, we see it, someone has a book and in their title they claim that the book contains essentially the best of what we offer. The book sells for 1/80 th of our product. People want value and buy the book and ignore our product. Later they become dissatisfied when they learn the techniques in the book are not what the author claims they are and to make matters worse they have lost most of their investment capital finding that out.
We brought in the marketing intern to find and implement a solution to this competition. She suggested that a survey of our customers be step one and in the survey they will be asked if they would be willing to host and spread their ideas on social media. The boss was rolling on the floor with laughter when he heard her idea. “If you are lucky a few might respond to your email” he said. "Investors are very private and the really good ones often do not want to encourage the competition."
An example was the head of Deutche Bank ops in Austria who was very please with his 40% return when his competition was in the negaitve double digits for the year. He would not give a reference on our product because he did not want the competition to make life difficult for him.
To help out the marketing intern, our boss sent out a request to our mailing list. He asked them respond to her email as a personal favor to him. Five people responded and they were very vague in their responses to her and not willing to tell the world on social media about how wonderful the product is.
Our boss likes to give people a chance to learn by doing when he sees solid potential, and she can’t do too much harm, so he is letting her do her thing to see where it leads.
Fortunately he put his part of the plan in place on this C2 site,that is helping out in the marketing of the product, so there is pretty much no way she can fail at seeing the products sales improve.
But what you need to take away from this conversation is that we are competitors and that is driving our actions.
Dave Scott
Opticalrectologist.
In my experience most persons have an innate ability to greatly under-appreciate the facts.
Take for instance the topic at hand.
Not to sound negative, but let’s view this soberly. How many persons involved with trading/systems/investing/managing actually capitalize with their efforts.
Those with assets under management, personal and otherwise, probably best participate using diversification. Some long-term, some short-term and some in-between.
Here at C2 and comparatively “Hedge Funds” focus on annual return & drawdown - higher calmar is considered better & higher CAGR is “king” - but at best these are mainly just a portion of all assets under management, hence one “diversifies”.
How much or what percentage should one allocate into these higher risk ventures (risk increases with higher gains - even if one system appears in a short-while to defy the odds, see MK’s e-book)? Probably not much…since ACTUAL participation - for the short-while - into these is a crap-shoot.
CRAP-SHOOT: how did you stumble upon the rare “gem”? Once engage, how long did it still “work” for you? What was the end or demise like (did manager or you cash out before a crash with gains)? More importantly, how are you going to successfully participate in the next high gain/low DD venture and will that participation be “successful”? I know…a lot of questions, but all SO critical in this game!
So you ask why charge if it is a great “system”? Put this on for size. The “best” hedge funds probably are only able to deliver good gains for a very finite time-period. In that period, they likely take in OPM to increase their return. If it was a truly long-term successful system they wouldn’t need to bother, since compounded high CAGR gains stack up just fine by themselves, with each passing year.
Personally (see http://hedgefundsguru.tumblr.com/) I did not inherit a legacy of managing personal family fortunes and am in this game only because I see great potential for my systems to actually achieve the unheard of: manage a large CAGR with high calmar with an established system that works for the majority of all years. C2 greatly helped in facilitating a bridge in a gap and no, when all things play out income from the system alone should be sufficient. But we aren’t there, yet.
Which brings us finally to C2 - not a shopping mall of professional managed hedge funds, but an assortment of also-rans (budding nevertheless). To think these would not possibly charge and to question why borders on adolescence! If they do well, just be glad to participate if costs/return are reasonable.
Of course this does not stop allowing people to expect the moon, but…be careful what you wish for.gA
[LINKSYSTEM_35446481]
OK, I’ll bite…
What in the world is an “opticalrectologist?”
Sorry Kevin, this is not as evident as you make it sound. This assumes you’ve a system that can make 50k every single month without any risk: that’s not possible. Let’s assume your system in question requires 15k and let’s assume the trader has 100k. Further, let’s assume the trader wants to “diversify” over only 2 systems.
That means he has 50k he can apply to either system. Assuming 10k per contract then that results in a maximum of 5 contracts.
Or another way to put it, if one can get a 50k upswing, it would be reasonable that one may take a 50k downswing.
Even a trader who has say 500k and wants to diversify over 5 systems would only have 10 contracts to commit. That’s a lot of risk-free money for selling the system. Honestly, it is more likely professional traders won’t sell their systems or services because of the hassle, scared money, unrealistic expectations, etc, etc versus the monetary issues. I know if I had the capital no one would ever know about my work but not because I don’t think I can make as much or more money selling products. More over, the big sellers do a lot more then 50k a month, they can bring in millions from seminars, dvds, books, trading rooms, etc.
I would say there are 3 distinct type of vendors:
1. The professional sales vendor: these people do not trade and do not study the market. When they have traded they are abject failures at trading. They focus 100% of efforts on selling. They are very successful and many of the biggest vendors are pure sales people. In fact, I know of several which are proven to be frauds. Again these are the biggest names. I don’t know of any big players at c2: not enough money here and again they don’t want a record. It is very hard to compete against these operations because they focus 100% focus on selling versus having to focus on winning, developing systems, teaching, etc.
2. The real/serious developers or traders: they sale systems for reasons I pointed out previously.
3. The self-deluded: I’m not sure what to make of these individuals but they do not seem to really be focused on performance, trading, or sales but yet maintain an active interest in the market. Perhaps enthusiasts is a better way to describe them.
Curtis said: "This assumes you’ve a system that can make 50k every single month without any risk: that’s not possible…if one can get a 50k upswing, it would be reasonable that one may take a 50k downswing."
Assumptions are a dangerous thing. I count 5 in the first 2 paragraphs alone. Faulty assumptions lead to faulty conclusions.
Looking at the bigger picture, that’s the funny thing about trading, and the role psychology plays in limiting or expanding trading performance: If you believe Curtis’ statement to be true, it will likely be true for you. If you choose to believe it is not true, you will find it is not true.
Some good response and it looks like I struck a few nerves.
I wasn’t suggesting that anyone should give away their system for free. I wasn’t trying to discover those who “aren’t in this for the money”, as I don’t think any of them are around here!
MarketPredictor you’re right. What I am getting at is the potential difference between two trading system goals 1) produces trading profits and 2) produces sales profits.
I’m not interested in cheap shots.
here are my back tests showing reward/risk ratio above 5 to 1-----------------Name Created Start
Date End
Date Win(%) Lose(%) W/L
Ratio Reward/
Risk ROI(%) Options
bestoptions 8/2/2010 7/2/2010 8/2/2010 89% 11% 7.78:1 8.39 409.79% delete · copy
edit · rename
long etf s 8/2/2010 7/2/2010 8/2/2010 85% 15% 5.50:1 5.61 234.94% delete · copy
edit · rename
now going from the spy <1 on my holy grail indicator(hgi)- to the next top at 99(hgi) on it- here is the back testing------------------------------------------------------Name Created Start
Date End
Date Win(%) Lose(%) W/L
Ratio Reward/
Risk ROI(%) Options
bestoptions 8/2/2010 7/2/2010 7/15/2010 100% 0% 0.00:1 0.00 1068.78%
then from the next bottom the next day bottom on 7-16-2010 hgi(7) to today since we havent hit a top yet--------------------------------------------- Name Created Start
Date End
Date Win(%) Lose(%) W/L
Ratio Reward/
Risk ROI(%) Options
bestoptions 8/2/2010 7/16/2010 8/2/2010 93% 7% 13.71:1 14.60 830.84%
