Impact of Longevity on Strategy Ranking: A Case Study

The C2 Forum is littered with questions and concerns expressed relating to why this or that strategy isn’t ranked higher on the C2 Leaderboard. In general, the response from C2 and others to these puzzlements and complaints has been to indicate that strategy longevity has significant bearing on overall ranking. As indicated below, this would appear to be true–in spades.

Having this morning discovered C2’s Strategy Manager C2 Score Workbench in the Manager Tools section, I thought it would be interesting to see how my own Vesuvius strategy would be ranked over time assuming it continues to perform as it has to date. And it was! (Interesting, that is…)

Below is a simple table showing how Vesuvius would be ranked, ceteris paribus, altering nothing but its days of longevity (currently 130).

From the table it is clear that there is a ranking cliff at exactly 350 days of longevity. It is also clear that for Vesuvius to earn the top spot I do not have to goose its leverage or play games to tweak its reported profit factor or winning trade percentage or any other reported statistic; I just need to “keep on keeping on.” I find this reassuring, and it suggests to me that I may be well advised to gradually reduce the percentage of my assets allocated to the strategies of others (with a special carve-out for those of an increasingly select few) and to invest a higher percentage in my own. Unfortunately, C2’s peculiar practice of limiting/prohibiting upward scaling of strategy model accounts, together with that of prohibiting (without special permission) strategies with model account sizes over $125k from accepting new subscribers, makes this difficult to do. One possible approach, one might think, would be for me to follow my own strategy in a second C2 account at an allocation percentage of up to 1000%; however, C2 has advised me that my use of BrokerTransmit to submit my strategy’s trades precludes–for reasons which elude me–my use of this simple method. My alternative approach has been to create a non-C2 mirror account (together with a duplicate set of “behind the curtain” trading procedures) which I can scale to whatever size I wish. (Related fact: Once upon a time “premium” strategy developers were permitted to configure their strategies with an initial model account size of up to $250,000, later reduced to the current limit of $100,000).

Side note: I do find somewhat unreasonable the application of C2’s up-scaling limit to strategies such as mine that trade only highly liquid stocks and ETFs where slippage is unlikely to have a material effect on follower’s realized results; it does, however, make sense when applied to strategies such as those documented at Beware 'Found It' (and other fast traders) - #14 by DylanH and elsewhere, where too much success has bred a diminishment thereof, or where the already large bid/ask spreads of small-cap securities traded can be made usurious by even a small number of followers’ simultaneous trades. Fifteen people in a 12-man lifeboat may be survivable, but the amount of water sloshing over the gunwale will increase with each additional passenger, to the eventual detriment of all aboard.