My advice to developers is never rescale equity

I recently rescaled the equity of Genefish Hong Kong from $80k to $40k. I did it under the assumption that it would not damage the true and accurate record of performance. I was totally wrong about that. To illustrate the Micky Mouse math involved I have put the subscription price up and suddenly a 65% return turned into a 27% loss.

The argument goes that the regulators require that the current comm and fees must be retroactively applied to rescaled historical equity. That is just ridiculous. It is like not adjusting dividends after a stock split and then claiming that Apple’s dividend yield is 500% per annum.


The reason is your subscribers monthly fees are fixed amount , lower your monthly fees the system will show some what better returns , maybe MK can confirm this …

Yes that is the reason. But think it through for a moment. If I do well and rescale from time to time the retroactive starting equity will approach zero. In fact when you half something over and over it approaches zero very quickly. And that means the returns get decimated. Already the starting equity after rescaling is down to $12k so on the next rescale it would be $6k and then even a return of 30% would be a down year. This isn’t just an unfair byproduct, it is totally false and misleading since I would never charge 30% to subscribe to my strategy.

It would be a huge step toward transparency if C2 would add further options to the drop-down box to show returns (and chart) with the appropriate rescale-adjusted fees and another option for no fees at all (per another forum discussion).

A bit tricky , you want smaller accounts to join you but they would pay the same monthly fee as bigger accounts , C2 cant rescale down your monthly fees that would imply different hypothetical results .

Why not just start a new system, and explain that you’ll trade the same way as the original, but for smaller accounts?

Yes, the history won’t be there for a while, but if your prior systems did well…

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There’s already a long thread about this where I outline how rescaled futures systems are actually very misleading to subscribers because the largest drawdown figure is rescaled even though fractional futures don’t exist, yet future volatility will always be based on at least 1 futures contract. Since there is no way to reconstruct the actual dollar drawdown I suggest avoiding rescaling for that reason as well since subs such as myself will be very wary of this once they figure out what’s going on.

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Take for example the system Genefish Hong Kong. If you just look at the equity curve you could assume that you can start the system with just 11K and the max dd was about 7K (if you click on Max Drawdown on the top statistical line it says $13,075), however, I remember that before the first rescaling the max dd was about 20K and the recommended starting capital was 50K. If the present picture of this system is not misleading I don’t know what is and I don’t understand why C2 allows this to happen.

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I’ve checked out trades on Genefish Hong Kong. It is a lot of fractional number of contracts in the trading history. Is it allowed to trade fractional number of contracts?

Ah, Strategy Rescaling - the conversation that never ends.

The point of rescaling is this: When a system has earned a lot of profits, it can be unmanageable for new subscribers to join it. So a system that used to trade 1 or 2 contracts two years ago might now be forced to trade 10 or 12 contracts because of the new nominal amount of capital in the C2 Model Account.

So we give strategy owners the opportunity to rescale their model account downward. Like a stock split, this adjusts historical results by some percentage. So, if you had $X dollars in your nominal account before the rescale, after the rescale you might have $X/2.

What this means is, you should read post-rescale hypothetical results in the following way: “Okay. If I had traded this system with $X/2 dollars way back in 2013, here’s how the results would have looked.”

Now, this doesn’t suggest you could have traded the strategy with $X/2 dollars back in 2013. And no, it doesn’t suggest you could have bought .50 of a futures contract. Of course, since you don’t have a time machine, and since you can’t actually go back to 2013, no one is suggesting that you should do so – i.e. no one is suggesting that you go back in time and start trading the system in 2013 with $X/2 dollars. You can’t. Because now it’s 2016.


What you can do is trade the strategy with the current amount of capital in the Model Account, post-rescale. The implied suggestion is: “For every $X/2 dollars invested in the strategy back in 2013, here’s how the results would have looked back then. I know I cannot trade the strategy today with $X/2 dollars… indeed, I see that the Model Account is much bigger than that… in fact, now it’s $X dollars, not $X/2… so I probably need $X to trade this. But even so, I can still glean useful information about past hypothetical performance on a per-dollar-investment basis.”

That’s the idea, anyway.

No one is trying to “mislead” anyone. (We don’t accuse Apple of “misleading” the public after they do a stock split… after all, you couldn’t really buy AAPL back in 2012 for $100 per share… you really had to pay more like $300 for a share back then. But dividends and returns are still the same on a per-dollar invested basis. I know, I know, like all analogies, it’s not perfect, there are issues with contract granularity, subscription prices, etc. - but it conveys the general idea.)

So, look, as is the case so often in technology… and in business… and in life, there’s no perfect solution here. There are trade-offs every time one makes a decision. (And every time one chooses not to make a decision.) I can only present to you the reasoning behind this feature, and ask you to understand that - while you personally might not like it - other people have requested it, and it seems to me like a reasonable solution to a problem some people have.


Instead of re-scaling, couldn’t there be some method of withdrawing capital from the developer’s “account” as an option, thereby returning to the starting amount after each month or so?

This would seem to solve ALL problems involving growing capital and avoiding increasing trade sizes. Month to month returns would remain truthful and subscribers would have no confusion about trade size. The trade history would also look normal, without fractional futures contracts.


I like this idea a lot. The biggest problem with rescaling is that the subscription fee DOESN’t get rescaled so it would show up as a bigger % of the starting account.

But your idea takes care of this problem…

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i dont think its a bad idea at all or at least give developers the option. maybe even, once hypothetical money is withdrawn c2 can display the amount taken out so people can see the profits. this also mirrors real world because if you are a trader making money you will withdraw. I like that idea. maybe not a requirement to do it but if developer wants to they can. or they can just keep doing like they are.

I didn’t know about how rescaling worked fully before I rescaled to 10% is my account worthless now since I can’t reasonably trade with my strategy? (I just barely paid to sign up).

Del - We’ll take care of you. Alen will reach out to you via the Help Desk.

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Thanks, it’s taken care of.