Re-posting original message:
Just having taken a very quick look at this, I would say that I do not agree with the nomenclature attached to each trade… “reckless”? Do trades have such characteristics? Reckless is foolhardy, impulsive etc.
I would agree with ‘degrees’ that it took for a certain payoff, (i.e., numbers, levels, MAE or MFE etc), but not use of adjectives.
One could just as well attach any other adjective to the systems trades, brilliant, stupid, lost-in-a-fog.
My systems are none of the above, just algorithms. Please consider changing/removing the nomenclature… the bar graph AND $$ amt on each drawdown, risk, whatever you want to call it, is clear enough without having to add ‘character’ to the trade.
Re-posting original message:
Agreed. I changed the nomenclature a bit.
Note that the system assigns a 1-5 riskiness rating for each trade (risk being a measure of the largest adverse move from trade open versus account size at time of adverse move). Then a different “word description” is assigned for each numerical score.
Based on your feedback, the five risk ratings are now:
As you can see, I have removed the value-laden word “reckless.”
Why don’t you try the Dept of Homeland Security color codes? Everyone understands those.
Seriously, the rating of Drawdown for each trade is helpful, but the % doesnt make sense. Drawdown should be a percentage of amount invested in that particular trade not a function account size. The old overall Drawdown of total account is very helpful.
I disagree. The point of the measurement is to answer the following question, which a trader might have when deciding to subscribe to a trading system:
"Ah, I see a profit on this trade. But how much drawdown did the system allow – as a percentage of the overall account – before the trade turned the corner and became profitable?"
So the current measurement takes the max drawdown as a percent of the account size. A drawdown of $20,000 is very significant in a $40,000 account. A drawdown of $20,000 is less significant in a $400,000 account.
Will you change “no calc” to “no risk” or some proper description? Subscribers want to know that calculation did take place and the risk factor is zero.
Dexter: One problem with what you propose is that in the case of futures, the “amount invested” in quite minimal. ie - for an “investment” of under $500, you can buy a Eurodollar interest rate contract that controls $1,000,000 size. You can’t compare this directly to stock investments - which allow some leverage - or to options - which, altho inherently leveraged - are ‘cash’ instruments. If C2 were only ‘stocks’, or only ‘forex’, or only ‘futures’, then what you propose makes sense. But “amount invested” is apples and oranges with the different investment vehicles.
So why don’t you add a new column showing the max. % drawdown of every systems?
That way, we could chose to sort the systems : lowest drawdown on top of the page.
It is without any discussion the best way to tell well risk-managed systems from gamblers systems.
Until now, we have to open every systems one after the other to compare their max. drawdown, it’s very boring.
Wouldn’t it be a valuable improvement of the C2 website?
A column for max drawdown is a good idea, Jerome. But niether drawdown stat we have now is ideal. We have system drawdown on a daily close basis, and trade drawdown on an intraday basis. System drawdown on an intraday basis would be the best stat, but I assume that is beyond what is doable.
As to adjectives; I notice that system devlopers do not seem to mind the use of ‘best’ and ‘hot’ on the site.
I have already weighed in on the “Best” and “Hot”. The Hot list I do not agree with…a system that made $200K in a week is interesting at best.
Best systems, well it should be sortable from the very first page, it is confusing as to what criteria it takes to be a ‘best’ system. Best is subjective, give users a few clickable options first.
Seems as if there are not many ways for subscribers to find systems…
The risk assessment is interesting but is it based only upon drawdown?
Most systems on C2 do not have enough history to tell whether there is an underlying money management issue. Examining intraday drawdown on a trade-by-trade basis is enlightening but will not give the whole picture.
The risk assessment should (must) not only include the drawdown but the money being placed at risk. In other words, regardless of drawdown, if a system is max’ed out on margin then it will ultimately have a significant problem, maybe not this trade but some time in the future.
The margin requirements that are assigned for each trading instrument are the best indicators of risk since they are generally updated as market conditions change.
Another point that I would like to make is that the risk assessment needs to included in the Realism Factor. If a system is trading 5x higher leverage than is rational then the Realism Factor should be 0.20 before slippage. This will level the playing field and discourage those advisors out to attract attention with unrealistic money management.
Also, risk is dependent upon the individual. For some, extreme risk is complete loss of account or bankruptcy. For others, 10% drawdown constitutes extreme risk.
When you sign up with a brokerage firm they usually provide a questionaire regarding your investment goals and risk tolerance. I think the same is needed for this web site and then the risk assessment is tailored for each individual, along with the rating for each trading system. Otherwise you will see many unhappy people at C2. (Already happening).
As a subscriber, I would be interested in seeing the percentage of the account risked on a trade. As it is, one has to do the math himself to figure out what a $5,000. open order drawdown would mean percenatgewise to his account, as I don’t think anyone trades with accounts of $170,000., $400,000. or more as some of these systems do. The $5,000. may be a high drawdown when related to what that trade ulimately obtained. But, since most everyone is using scaling, I feel that the dollar amount should either be eliminated, or in addition shown what that amount is as it relates to the account size. This may not be possible, but if it is, I’d like it. Because, I’d sure steer clear of systems that have open drawdowns of, say, 30% of their total account size, no matter if they ultimately recovered in the trade. I can easily relate what 30% of my account would be, while I can’t relate to what $5,000. might be.