i like that criteria - but am afraid we would be staring at an empty leaderboard
maybe 2 yr.
if require 3 yr of good performance? do we even have enough strategy to fill out the top 25 ?
This is certainly a good attempt to make C2 a safer place. The main issue with C2 is that strategies have short life cycles. How many of the hot futures strategies of 3 years ago are still alive? 3 years is not such a long time… so your intent is great. In terms of execution there are 3 things that will improve safety for everyone:
For futures strategies penalize when average P&L per contract traded is <$50. I can still see in the leaderboard futures strategies that have an average P&L per contract traded of $11. Slippage will get this to below 0 so the strategy is unprofitable but does appear in the top 10 futures strategies
Penalize all strategies that show spikes of leverage in history (the code can be found in C2 Explorer). Return per unit of risk is meaningless for highly leveraged strategies that encounter a 6 month low volatility environment. Just look at all “ES reversion to the mean” (highly leveraged) strategies the blew up on Feb 6th. They all would have been in the leaderboard until end of December. Leverage is a “hidden risk” and should be penalized otherwise we will still have hundreds of strategies blowing up accounts
Penalize VIX strategies that do not employ hedge for black swan events. VIX strategies can show high return per unit of risk during calm periods but, as we have all seen on Feb 6th, carry tremendous hidden risk if they are not hedged
These first 3 items are an absolute must in my view. I would also improve the leaderboard using advanced statistics:
Employ null hypothesis testing to determine level of confidence of future returns >0 . See my post here
Employ SPC (statistical process control) to predict likely of future returns and stability in the algos . See my post here
I think we need improvement, but let’s not make it impossible for up coming strategy to get in the leader board.
Have longer history requirement and another list with TOS only would be a good start.
I suggest that options trading strategies are allowed on the leaderboard only with TOS
is this LIVE ? @MatthewKlein
i see a bunch of new strategies are now on the “new” leader board. I’m trying to see how much i can trust the current list. I cant find any consistency to this list. I see a few very good strategies on there, and most of them have very low draw down, then i see a strategy just had a 90% draw down with only 22% annual return. so that threw my theory out the door.
I figure maybe most of them has long history of track record, and that is not true either. Then i try to look at Alpha score, that’s not true either. most of them are around 0.40 to 0.20 Jensen Alpha. which i have see many other strategy has 0.8 or over 1.0 on Alpha score.
anybody done some homework on how c2 came to this new leader list and you find it trust worthy ?
Strategies are selected by indicators - Risk of Ruin (Monte-Carlo)
I think the new leaderboard is not informative!
i definitely like the fact that no systems less than 6 month old is shown there
I’d agree with @DavidJuday. Just looked at this “VIX Community” strategy. Selling naked options on the VIX. Alot of them. Seems incredibly risky. Holds overnight. Even with stops anything can happen with illiquid options, when there is REAL MONEY chasing them. This strategy is a time bomb IMHO.
i cant seem to find any criteria of current leader board, can you ?
it seems like a bunch of random strategy with 6 month history, but their return% and draw down % and alpha/beta all over the place.
My feedback is that this is a improvement for the site. Approve of the 6 month rule, although there is only one strategy in the top 10 established before 2017, so this should really be on top
IMO, the leaderboard should be customizable to the individual. A simpler C2 ‘grid.’
What determines a “leading” strategy is subjective and personal.
Let the individual choose for themselves, via sortable/filterable columns (as is done in the Grid) the minimum age; the maximum drawdown; the minimum return; IRA compatibility?; Daytrades?; Broadcasts signals prior to the open?; min. Sharpe; 52 week high?; Shorts? … etc. … you get the idea.
‘IRA compatibility?’, ‘daytrades?’, ‘shorts?’: These type of categories should be determined based upon recent history…say 6 months, for example. This way, a system that may have had one short trade two years ago won’t forever be listed as a system that shorts.
Drawdowns represent the scary part of trading strategy. The drawdown number emphasizes the level of loss you might suffer while trading that strategy.
C2 measures account’s max drawdown, based on the value of the total equity which is made up of both closed (realized loss) and open equities (“open loss”). It might be cautious to treat “open loss” the same way as actual realized loss.
It is arguable whether the open equity (“open loss”) and its lowest point have much direct relevance to the system result if we agree that don’t count your chicken before they hatch. The open equity (open loss) does not directly affect the bottom line. What matters is how much loss is actually made.
Looking at the hypothetical trade example and its associated equity curve, it might not make the most sense to look at this system’s performance through the green total equity curve, if you compare it with “Closed Equity Curve”.
Would like to suggest C2 consider:
(1) Add an explanation of the headline drawdown and modify it as the following:
The largest peak-to-valley historical “total equity” drawdown of the Model Account (which is made up of both closed realized loss and open equities) was xx% and occurred between xxxx-xx-xx and xxxx-xx-xx. In terms of dollars, the largest peak-to-valley drawdown of the Model Account was $xxxx. Future drawdowns may be greater than this number.
(2) Add a realized closed equity curve, if possible, to reflect Closed Equity Max Drawdown.
Of course, this is a controversial point of view, not really advocating one way of measuring system performance over another but draws the attention to interpreting the right statistic for the right characteristic, for potential C2 investors.
I could not disagree more with what you said. The whole point of capturing the maximum system drawdown – whether it consists of open or closed positions or a combination of the two - is to give you insight into the developer’s sense of concern for your money. Knowing that sinking open position(s) reduced this system’s equity by 59%, only to turn back to a profit because the “leader” recklessly held onto them, offers cold comfort, don’t you think? This would have hit my pain point probably when it got to –20%, even if the developer had the greatest resume in the world and I knew him personally.
Showing some “closed equity” drawdown chart that looked pretty good would be worthless to me. I would immediately want to know how far those positions sank in real time.
Closed Equity Max Drawdown? That’s a totally meaningless statistic.
I have mixed feelings about this. On a related matter I believe C2 also measures the max drawdown as intra-day. During volatile times like now a tweet can cause the market (Dow) to open down 250 points but finish up 250 by end of day. If a system was in a drawdown period it would continue to measure (and add to DD ) because of that opening intraday down period. I think most some definitions or metrics of DD I have seen use the end of day metric. This sort of amplifies a systems DD by emphasizing a worst case scenario but maybe C2 does this for regulatory reasons.
All of us agree that the drawdown is an important indicator of risk, and every developer should keep it in mind. However, drawdown does not necessarily have to correspond with a loss in your original account principal, as explained by Ninja Trader in their web site. Just hope C2, in some way, can also help their investors / newbies understand and interpret it correctly. In real world nothing is ever perfect. There is no holy grail of investing to achieve high growth at no cost of risk.
I agree with this. A maximum drawdown, in my opinion, should represent the maximum loss a subscriber would have incurred if he/she would have been following a system.
The way a maximum drawdown is calculated now includes drawdowns inside winning trades; for example, in the hypothetic case you get lets say a +5% in a really good trade which you plan to let it run, and then it comes back to your entry point and you close it still in profit, you get a drawdown. I think that this drawdown does not really make sense unless a subscriber entered into the trade when we are already in that hypothetic +5%, when a subscriber is supposed to enter at the trade at the same time as the developer, and not some days after.
I agree that it is always important to be able to manage the profits when you get them, but for specific systems built around the concept of letting the winners really run, it could be bad for the long term performance to force closes to avoid those drawdowns.
I think that this way penalizes the concept of letting winners run and goes in favor of the concept of taking profits quickly.
I don’t know if I expressed myself correctly, of course we all play under the same rules here and it should be what the community and creators of C2 think is better, that was just my opinion.
It’s standard financial accounting practice to include open losses (and open winners) in marked-to-market equity calculations.
Both marking-to-market generally, and the method of calculating peak-to-valley drawdown more specifically, are specified and required by regulators.
Thanks for your answer Matthew.
I didn’t know that, but if that is the standard and it is required by regulators then I don’t have anything else to say.
It was just my opinion about the matter.
I think risk-adjusted performance should paramount. Crowd popularity can be misleading for new investors, so I think it should be down-played. It’s important that the causal as well as the seasoned investor be directed to strategies that perform well over time with performance results expressed with a close eye on risk and potential risks. Thanks for focus on continual improvement.