This futures program is profiting by 40-50% in the last 3 months. There
have been very small drawdowns,with no averaging against the initial
position. Comments and questions are welcome!
I’d be glad to comment - thanks for the invitation…
Current win ratio is 37.9% versus the 50% the system talks about (and uses as the basis for other calculations as well). The APD ratio is low (.32), which requires further research and makes me want to sniff out draw-down. Speaking of which, the system experienced a 26% draw-down on the entire portfolio (not on a particular trade) - ouch!!! Looks like the vendor doesn’t believe in cutting losses before they trash the portfolio.
The fee is $300 per profitable trade, but there are many trades per month, many of which are losers. So, it is conceivable that I might have to pay for several winning trades per month, as well as take the loss of many losing trades for that same month - resulting in a negative account value. Look at February as an example (though I didn’t add up all the numbers… fair warning before you shoot me).
This system could conceivably execute 10 trades for the month, of which 4 are winners (thus, $1200 is due) and 6 are losers which wipe out all the profits… and I’m left with a $1200 fee for this. No thank you. The track record shows a low win ratio… making the billing method unfair.
I agree. A few months back we had a similar discussion where the vendor reasoned as if the subscriber can be sure that the system will maintain its current performance and has $100K to begin with. Was it WhyNot? Anyhow, that system asks a similar price, and at the time it seemed perhaps justified in that the account rised to $240K within a few months. Now it is back to $130K. If you started to trade that system at 100% on 1/1/2007 then you would have lost $43K in two months, and on top of that you should pay 12 * $290 = $3480 for the 12 profitable trades in these two months.
Lew- I appreciate your comments and let me address them point by point
The winning ratio (38%) as calculated by C2 is based on a loss of $1 or
$3,000. Either event produces the same C2 result. I don’t think these
two events should be calculated in the same manner. I have many
(what I call neutral trades) where the end result is a net change of +/- !%
to the total equity. If you calculate the win ratio in this manner (which is
more accurate) I think you will find you approach 50%.
The system could conceivably execute 10 trades for the month.
If 4 are winners and 6 are losers, based on $100,000 (BNAV)
Avg. profit =$4,760 x 4= $19,040 Avg. loss $2,000x6= $12,000
Thus a $7,040 profit is the end result.For smaller (BNAV) a larger
% risk per position is going to be required. ( It takes money to make money.) But if 2 or 3 of the 10 fall into the neutral category,which they
usually do, you pay nothing and you lose almost nothing nothing,
which keeps you very profitable after 10.
" If you calculate the win ratio in this manner (which is
more accurate) I think you will find you approach 50%."
Barely. Of the 201 trades that are publicly visible at this moment, 76 closed at a profit, 113 at a loss, and 12 were neutral. If you delete the neutral trades from this, the percentage profitable trades is 40.2%.
"Thus a $7,040 profit is the end result."
Like I presumed, you assume that the subscriber can and will allocate $100K to your system and that the performance is constant. There was also a month (Sept 2006) wherein you lost $10K and one would still have to pay $300 for the single profitable trade in that month.
I do not say that this is a bad system. The system is profitable over a relatively long time. But I don’t like the open-end fee scheme, and frankly, I think it is too expensive (even I had $100K, which I don’t have, so probably my opinion doesn’t matter to you).
There are already several other profitable commodities systems with nicer equity curves ranging from $150 to $250 a month. As Jules/Lew said, the price is a huge issue
Bradley - You forgot to address the twenty six percent [of total portfolio value] draw-down which the system experienced. I think, based on the observations I provided and evidence which others were kind enough to provide, that the system has a less than fair billing model. Until C2 can provide an adequate option that covers monthly billing (eg, billed only if the month netted a profit greater than the cost of the system, assuming $10K scaling), systems which are on the edge don’t look attractive under the billing option you selected. By “on the edge” I am referring to barely breaking even for the month, yet being charged for “winning” trades for that month… assuming a smaller than $100K portfolio value.
By the way, I would never try a system out with more than $25K to start… and even then, I’d either filter them through my own system or watch them like a hawk (and scale my trades even smaller for a period of time). You may want to reconsider how you compute the “profit point” for new customers - using $100K is unrealistic.
Lew, Jules, Ross-I appreciate your imput. Regarding the 26% drawdown,
you’ll notice it came when the system opened on C2. The format was new to me and some errors occured where losing trades were taken and profitable
trades were missed.Since that time however,for 10 months the program
has shown good profitability with very low drawdowns .Considering the
longevity of the record, I think I deserve the benefit of the doubt.
If you started with 25k-BNAV the risk taken per position would have to
be 6-7% i.e. ($1,500-1700).For example, if you want to trade sugar
with a 25pt. protective stop you would margin 11.2x 25=$280x 6 contracts
=$1,680.This same calculation is made for opening all new positions.
If we use the $1,680 as our example, with a 40% winning ratio, profits are
2.4 x greater than loses (based on C2 calculations for 100k)
1,680x2.4=4,032x4=$16,128- Profit
1,680x6=$10,080-Loss
The resut is a profit of $6048-1200(my fee)= $4,848. Let’s say comission and slippage cost $848-you take home $4,000, a 16% return for
the month.I might recommend more than 10 trades for the month which
would increase your monthly return.That would depend on the markets.
The more you trade with this program the more money you make.
Bradley,
It seems your system is very similar, in terms of performance and length of history, to Cheetah. On most advanced statistics Cheetah actually does somewhat better, for example the Sharpe, Sortino and Calmar ratios. It seems your system is riskier than Cheetah as judged by VaR and expected shortfall. On the other hand, many of these differences might not come out significant in a statistical test. Bottom line however is that Cheetah is only $29/month…
In addition, it seems Cheetah’s performance has improved over time, while your performance has worsened over time. You can check this by comparing Sharpe, Sortino and Calmar ratios for the last six months to the same ratios for the entire history.
“Regarding the 26% drawdown… [it was at the start of the system while I was still getting used to C2’s interface]” - Bradley
Bradley - I accept this as a completely reasonable and plausible explanation. The same has happened to several vendors. As for your profitability calculations (when using a smaller account base), I’ll take your word that you did the math correctly… and it would seem that your system is worthwhile under the conditions you describe.
I will follow, with interest. Thanks for the dialogue.
"I accept this as a completely reasonable and plausible explanation. The same has happened to several vendors."
I was about to write the same, but reading this made me look again. According to the advanced statistics the max DD was 23.8% and the mean of the two largest DDs (outliers) was 21.9%, so there must have been another DD of 20%. That is still substantial. Looking at the equity curve, I think this DD stretched out over a long time, so it might be caused by a number of stops hit, and it is not necessarily a sign of unresponsible trading. Of course, drawdowns happen, but what I want to say is that inexperiencedness with C2 is not the only reason.
Science Trader- I would agree Cheetah and Interlink on a stastical basis
are similiar. However, you overlook one major difference which woulld
account for the Interlink fee.That is, Cheetah day trades one market
and as a result,never can let profits run, never allows himself the opportunity
to hit the "home run" or to even "get lucky." On the other hand,Interlink
trades a diversified program (20-25 markets) where the opportunity
to capture a 10-15-20% return on equity by position trading (days-weeks) is
a distinct possibility and a program objective.
Sometimes paying a premium for "potential" can be a wise and profitable
decision.In closing, since Dec.06- to present-Cheetah +$40,000,Interlink
+$70,000.
Come on, no one is going to pay you $ 300 for a profitiable trade. This means that they would have paid $ 23,000 since the system started which would have reduced their profit factor to negative since most subscribers to these systems only have a $ 10,000 account in the 1st place.
If you really want to have any subscribers, charge $ 5 per profitable trade and you might get a few.
you are correct. Asking $300 a profitable trade compared to the other systems here, is not much different from him sniffing glue.
Even if I was trading a $100,000 account, I wouldn’t turn over $300 a trade to anyone here.
If ANYTHING, Interlink has very unremarkable numbers. Profit Factor 1.5, APD of 0.31, Realism of about 0.75. low Sharpe, and a rather boring equity curve.
There are better choices here.
Brad,Ross- Let’s exchange some ideas. On 100K-BNAV you would’nt
pay $300 per winning trade on an avg. profit per trade of $4,714? I think your being penny wise and dollar foolish. Remember,it’s not how much money
you pay but how much money you make. Let’s not let our egos
get in the way of making sound business decisions.
10k-BNAV is simply not enough startup, I don’t care what you trade
or how you trade it.Besides, how do you know how much money
people have to trade? Maybe for the right program people can find some cash.
This is a “What have you done for me lately?” kind of business.If you were
doin it before you should be doin it now.That’s how you separate the
sound trading programs, from the seat of your pants, fly by nighters who,
as soon as you invest dime one,they crash and burn! We all know how
that goes. If you’ve got better choices,let’s hear them. I’ll put Interlink’s
numbers for the last quarter up against any on the board!
"Remember,it’s not how much money you pay but how much money you make. "
Wrong. Costs are costs. That is why smart people try to get low commissions, keep slippage under control, and pay for what something is worth.
"Let’s not let our egos get in the way of making sound business "decisions."
The ego is thinking a relatively anemic system with not so impressive stats is worth $300 a prof. trade, when there are enough other options that are reasonable in cost. Enough people have told you this, but you seem only to hear your own voice.
Mind sharing how many people were stupid enough to sign up at your price? Case closed, in my opinion.
The P/L per unit is 60$.
For a fee of 300$ per profitable trade, the subscriber would have to trade with atleast 600,000$ to just break-even.
I am not sure whether it is a profitable proposition for a subscriber.
On 100K-BNAV you would’nt pay $300 per winning trade on an avg. profit per trade of $4,714?
“Avg Win $4,681
Avg Loss $2,030”
That’s average profit per winning trade of $4681 right?
Not an average “profit per trade of $4,714”.
Profit Factor 1.4:1
P/L per unit $60.80
after typical commission $58.30
So customers need to trade about five contracts to breakeven according to C2 stats. Just so we are clear, $300 per winner (x 79) translates to about $23,000 per year, per customer ($2100 so far in March). No books to keep, no NFA to deal with, no actual trades to make. Pretty sweet deal! Most CTA’s would kill for that… better than 20% on a theoretical $100,000 account.
