Two words: DEFINED RISK - believe it or not risk can be limited without the use of stops if you understand how to use options. I have been agitating for collective2 to broaden its support for option-spread trading because currently it doesn’t support a trade where you are buying and selling options in a single transaction, which is something one can do in the real markets.
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Would love to see C2 implementing futures spreads as well …
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How can you tell? There is no way you can tell either the number of subscribers or the number of contracts traded in real accounts…
Money management is also a stop loss in a way, just use less leverage. If I use a 100 pts ES stop loss I would be fine by you, but could wipe out subscribers money. So your proposal is unreal, unless you set up the stop loss in % or money lost…
What proposal ? Didnt make any …
Sounded like a proposal, but if it was just a theoretical question, ignore my response.
C2 has a lot of information to estimate trading style, risks, profits etc for each system. Everything is very transparent for followers. If people wants big & fast money with big risks, why C2 should limit this opportunity? It is their choice.
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Will add zip4x to the list :
12/30/15 14:13 BUY 1,000 GBP/JPY 172.420 1/28/16 22:40 173.495 96.69% $88,454
It’s not exact but you can get a rough idea by looking at the contracts being filled-- There were about 40x contracts per position been executed in real accounts, so the $62k drawdown stat equates to $2.5m of real money wiped out. Of course there could be more traders using manual execution, and some could have stopped trading towards the end, but it’s good ballpark number I think.
With all due respect, that is incorrect. If the system has a positive expectation, it will eventually come back after a drawdown.
Thank you for the polite answer. Martingale Systems have a positive exp. only under the assumption that You have an infinite size account which unless you are a Central bank that can print money appear not feasible in the real world.
Perhaps a visual graph of a system that I have developed years ago using the Martingale approach will clarify better the big assumption behind this method:
The EC trade to trade:
and Here the detailed EC meaning what you see intra trade (specifically in your account):
Now you see that spikes on the detailed EC? I let you arrive at your conclusions…
But hey as Andrey point out if people like fast money and eventually blow their account…
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No difference between martingale systems and over leveraged systems that trades at fixed size lots with no stop loss . They are all martingale , the only difference is that martingale systems starts with small sized trades then increase the size , however there are many systems out there that trades at max size from the start without a stop loss which leads to a disaster as well. After all martingale systems have limited capital which means they are tied to a max number of lots because of margin requirements .
System A : $100K , trades 1 ES lot and increases after a loss to 2 lots 4 lots … etc up to 10 lots - because of margin requirements there is a number of lots that they will stop at -.
System B : $10K , trades 1 ES lot all the time with no stop loss .
I dont see the difference between both systems they are both risky and will fail eventually .
I agree that both example are highly risky. But the whole point here is that through a martingale money management everyone is able to show outstanding performance only to fall down later while with an highly leverage contract traded with a fixed size we are not able to show the same brilliant performance except the nearly impossible case of a holy grail.
Look at the grid here you will see many type B systems with a wonderful beginning . Both types will have a good start but will burn eventually . In fact type B systems are more dangerous hence they always trade at the same big size and the fact that they dont average down which will mislead potential subscribers under the pretense that they are safe and “dont average down” .
To say type A and type B are similar and type B are more dangerous is simply false. Type A has no stop either except utter blowout. How can you suggest ramping up leverage to the max limits where even the smallest market move can wipe out all your capital is less risky to a system using a reasonable and consistent amount of leverage? All else being equal lower leverage is safer than higher leverage, period. To argue the reverse is insane.
Hard stops are not needed on many sorts of systems and usually cause losses on those sorts of systems. Take for example an S&P500 index swing system with no leverage… typical daily volatility is a few percent max. What stop is needed there? Just close the trade at your next trade point if the trade goes too far bad. A 10% daily move is an extremely rare crash situation that often rebounds higher by the close. Will an exremely rare 10% loss kill you? If you think so put in a stop and test it at different levels, you will find hitting that stop occasionally causes more losses than the very rare 10% crash loss.
You cannot generalize the statement that systems without hard stops are bad. However IMO systems that add to losses multiple times, ramping up leverage/risk exactly when the system is having problems (which is when risk should be REDUCED), can be generalized as very, very dangerous.
Read what i said again , type b systems are over leveraged as well and are using the same amount of leverage as martingale systems , read the example again . Both are trading 1 es lot per 10K so no difference between both systems , however a martingale system wont trade 1 es lot per 10K capital all the time , sometimes less . Type B systems as per my example - over leveraged and no stop - are far more dangerous .
And yes hard stops arent really needed all the time , just proper money management with any sort of protection - manual stop , options , hedging … etc - . I merely was talking about systems that hold and hope aiming for 100% win rate with no protection at all .
You slam systems without hard stops all through this thread without clarifying you are only talking about overly leveraged systems. Obviously a system that starts at 1 contract and can scale to 10 contracts is less risky than a system that trades 10 flat out (all else being equal). But that’s not really the issue being discussed in this thread. The problem here is systems that average down losses until risk/reward is completely out of balance. Those systems WILL one day blow up–and not with some 40% drawdown, they will cook 80%-100%+ of system equity when they blow.
Read my post about hard stops just above yours . And systems that trade at fixed size with no stop or protection will blow out eventually as well . And if they dont use leverage or use little leverage then they will give everything back to the market and may avoid blowing out obviously .
See the problem isn’t in adding to a position or not , its about over leveraging and trading without money management which can be done even with 1 lot systems .
