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is not indicative of future performance or success.
There is a substantial risk of loss in trading. You should therefore carefully consider
whether such trading is suitable for you in light of your financial condition. You should read,
understand, and consider the Risk Disclosure Statement that is provided by your broker
before you consider trading. Most people who trade lose money.
I´m proud to present my strategy of trading volatility to you. As you will notice the strategy is very young on C2 so I don´t expect anyone to join soon. In fact I started the strategy before an expected drawdown so you get some real information about a bad period. This is the most important information about a system in my opinion so that´s why I didn´t hold on until that period is expected to be over.
I´m sending the trade signals from my broker account so the system is 100% TOS from the very beginning. Don´t mind the few mini sized trades in the track record. Those were done to get the TOS-Badge as soon as possible and have nothing to do with the strategy. (You have to do a couple of trades before the badge appears if you use broker transmit)
This thread is ment for questions, feedback, reviews and to inform you about my concept of trading volatility. That way you don´t need months or years of track record to get a good overview of what I´m doing and what to expect.
If you like the concept I suggest to put the strategy on your watchlist and join when it´s the right time for you to do so.
Strategy Description
This strategy trades only inverse volatility Exchange Traded Products like XIV or SVXY which hold short exposure to VIX-futures.
The system takes advantage of the strong underlying effect of contango and mean reversion of VIX-Futures to generate profits. Risk management, money management and equity-trading are used as key factors to enhance long term results and to control risk.
Opposed to common volatility trading systems which switch between short volatility / long volatility SmartVolaPlus is not designed to time the volatility market. Instead it fully concentrates on exploiting the inherent advantages of being short volatility while keeping the risk moderate.
Strategy features:
Long only trades
No leverage of the account
A steady kind of system
Stop-loss on every trade
Positions are held overnight, not over weekends.
Risk management focuses on low drawdowns
Low trade frequency (1 per week plus special situation trades which are very rare)
Performance boost through Money management and Equity trading
Clear cut rules when to switch the system off/on to avoid large drawdowns due to unfavorable market conditions like in 2008 or 2000-2002
No Human interference
100% TOS from the first trade on a 50k account
limited subscribers for appropriate support and evasion of slippage
Key statistics from the backtest on actual XIV Data since 2010 - including IB commissions, excluding C2 fees:
average annual performance of 27%
maximum drawdown of 21% (happened in 2011)
maximum drawdown length of 26 weeks until new equity high
annual volatility: 14.5%
largest 52-Week return: 74.79%
smallest 52-Week return: -0.96%
winning rate: 54%
Expectancy per Trade: +0.57%
What you need to trade this strategy:
This strategy is very well scalable due to the underlyings it trades. Example: If you trade with 15k and the model account currently holds 50k you scale down to 30% AutoTrade. If you assign 170k and the model account currently holds 50k you can (but don´t have to) scale up to 340%. This is true for cash accounts and IRA.
If you want to use leverage you can use higher ratios than above but I generally don´t recommend it because of the way position size is copied at C2. If you´re in doubt, send me a message.
Important: for calculating the correct value of AutoTrade scaling, use the current model account value (most recent point in performance chart).
I´m looking forward to work with you and if you have any questions please let me know.
If you strategy works well, you don’t need create too many. One is enough. If creating strategies is you habit, you will find out you are going to pay for it instead of milking from it.
@Chr1stopher as I mentioned these Mini sized trades were solely to acquire the TOS badge as soon as possible.
@RobertFisher developing new systems is certainly not the worst habit a trader can have. For me it means constant research and engagement with the markets on an intelectual basis. After all trading a system is a boring task after it’s developed.
Also since the 500% cap on scaling it was about time that I had to create a new strategy so that wealthier investors can subscribe and get some impact for their account. These clients wouldn’t even bother with my other system.
Due to the VIX-spike on Wednesday many volatility systems have lost substantially although it was a spike of smaller magnitude. Maybe you are one of those unlucky subscribers who jumped on one of these high risk volatility strategies just before this inevitable event occurred. Now, maybe you´re wondering if any volatility system can work in the long run or you´re simply angry that there are too many irresponsible developers out there.
Well, I got good news for you. Yes there are robust systems on trading volatility that work in the long run - possibly for as long as there is an open exchange for volatility related products. Also there are a good number of trade leaders who actually feel responsible for the gains and losses of their subscribers, thus tweaking their strategies for safety first.
If you´re looking for the combination of both - a developer who cares for his subscribers and offers a robust, risk-focused system - you don´t have to look any further than this. Please read my opening post for details on my strategy. You see my strategy is 100% TOS from the very beginning. So for the determined people who are able to decide fast I offer a significant discount for a short time.
If you join till the end of May your sub price will be reduced to only 50$/month for the next 6 months.
I offer this discount now because the strategy still has a short track record but I truely believe it is one of the best strategies around that will keep you from having a burned account while still performing very well in the mid to long term.
For further insights i´d like to share the key graphics of my backtest which I continue aside the real money trading to verify data. You can compare my C2 account with the recent development in the backtest and will notice how both graphs are matching quite accuratelyin the recent time. Personally I see it as an indication that my backtest comes very close to real trading conditions which is amazing. Of course you´re free to disagree.
Paul, thanks for asking. I´m talking about the srategy which I linked above but here it is again:
Maybe you´re asking because you don´t detect the similarity between my performance chart and the backtest which I was writing about? I see this can be confusing. So to clarify, the charts above are backtests on data from Dezember 2010 till last friday. The similarity between the backtest model results and the actual live trading can be seen in the very last small part where it goes sideways. I included the whole backtest chart to let people have a broader picture of my strategy´s behavior.
To have a faster comparison on first look, here is a zoomed in view of the theoretical model results since I started trading live (beginning of April):
Edit: I´m using daily data for my backtest so this is why the backtest chart is smoother than the real results. It´s still quite accurate.
That´s very nice of you, thank you Paul. However, I don´t believe that most people would see this strategy as holy grail due to its statistics. It´s possible - though very unlikely - to trade it for 52 weeks and end up with a small loss. Most people are to impatient to accept this.
Personally I have very much trust in this strategy because of its simplicity which makes it very robust. In my opinion this is why the model results and the live results are very similar and I don´t expect it to deviate much in the future.
So in a way I found my holy grail.
If you´re interested in following after the the May offer expires, just send me a message and we work something out for mutual benefit.
Thank you Alex, I will watch it for sure. With all the fees over here - it is puzzles me how ppl would make money. Yes if you put ur fate and a lots money on the line yes u may come ahead, but one losing trade and u will be on the losing end. Lets say your system - u r saying 15k will do. but expense ratio with all the fees and trading commissions (data feeds) with your discount is 150*12= 1800 12% This is very steep. Maybe it will work maybe for 50k not sure for 15k.
Well, the fees are indeed an issue for investors with smaller accounts especially when you´re paying the autotrading fee and only trade one system.
However, as a trade leader at some point I have to value my own expenses, effort and time I put into developing and managing a strategy with close client support. I don´t say this strategy is for everyone. In my opinion having a strategy on C2 is a business and I treat it that way so I have to make decisions that are economically reasonable for me. Investors have to make these kind of decisions for themselfes aswell.
12% fee for a system that is supposed to deliver 38% on average is still reasonable in my opinion so I stated that 15k is the bare minimum. The more the better, obviously, but ultimately it´s the individual decision of the investor.
On a side note: there are so many trading newsletters out there which charge more than what I charge and they don´t deliver anthing that could stand a comparison in regards of performance so I do believe my system is priced quite fair. And with the discount it´s a bargain, really. I don´t pressure anybody into anything, I´m just giving insights and make a good offer for anyone willing to take advantage of it now.
Alex, this is not about you. I had used the other systems that promising even more return and my results are bad and money is not an issue. On the top we had system malfunction, I was lucky that I didn’t have any open positions at the moment. I just saying very very difficult many money here. Results I would say close to casino.
Alright, 2 months since inception of the strategy and it´s still roughly at break even.
Ladys and gentlemen, welcome to the most boring volatility phase I´ve ever seen! I´m not surprised that my strategy hasn´t performed till now, nor am I worried.
As I mentioned in the very first post, I started the strategy willingly before a phase that I expected to be unfavorable for the strategy so you can observe what happens and compare to other volatility strategies.
However, I haven´t been idle while markets were boring. After intense research and testing I came to the conclusion that I want to modify the strategy in a way so it becomes even more robust and stable. To me the longevity of a strategy is paramount so I did accept a decrease in performance in exchange for less drawdown potential and highly increased robustness.
In essence I´m using multiple stop-levels instead of one so the optimum stop level can change in the future without hurting the strategy much if at all. Further more I transformed the integrated equity trading into a dynamic system instead of a trigger-based system. So since there is no trigger anymore there is no danger of a threshold getting invalid for future market environments. There is pretty much no single value left that could strongly influence the system if future markets differ from today´s. I don´t know about you but I call that an achievement.
The key statistics of the new strategy setup are as follows. The values of the old, optimized setup are in brackets for comparison.
average annual performance of 27% (38%)
maximum drawdown of 21% (27%)
maximum drawdown length of 26 weeks until new equity high (unchanged)
annual volatility: 14.5% (15%)
largest 52-Week return: 74.79% (82.71%)
smallest 52-Week return: -0.96% (-1.46%)
winning rate: 54% (55%)
Expectancy per Trade: +0.57% (0.75%)
Because the expected return was reduced by roughly 33% I also decreased the monthly subscription by 33% from 149 to 99.
In the following charts you can observe that the new system setup would have actually earned some money in the last 2 months instead of being break even. It also had a smaller drawdown of around 2.2% instead of 3.5%. That alone doesn´t mean it´s better but it shows the increased consistency.
(Charts date from 11/30/2010 to 06/10/2017)
Alexander, why not to charge 5% on last 12 months accounts profits divided by 12? I prefer charging for past performance instead for expectation of backtesting.
marekj, thanks for your suggestion. While this would be possible in a technical way I think it doesn´t do any good for several reasons.
One is that the 12 months returns vary so I would have to constantly adjust subscription price which is bad in itself. Furthermore since this method would lag behind performance I would start to charge more after the system performed very well alas when it becomes more likely to enter a calm phase. Investors would probably not want to pay high fees for earning fewer so they leave.
The other way around also applies hence I would charge very few just before the system gets into a strong performance phase.
In short I would end up paying the listing fee and earn close to nothing which doesn´t make sense to me. Keep in mind that I´m limiting subscriber number for evasion of slippage. I´m not going to get rich on subscriptions anyways but that wasn´t the plan in the first place.
Last but not least let me emphasize that the risk of any one system doesn´t lie in its subscription fee.
I designed the system in a way that it´s not unreasonable to invest high sums, just like I do, so the fee doesn´t eat away much. If you trade with a similar sized account as mine the subscription fee causes a drain of 2.4%p.a. That is… acceptable?
I understand, after all these “technical difficulties” charging for past performance, you did come with idea to make it simple and charging for backtesting expectation with addition “Last but not least let me emphasize that the risk of any one system doesn´t lie in its subscription fee.” to move focus somewhere else.
Somehow I’m finding on C2 that all strategy developers becoming marketing “gurus” here (Alexander, this is to most of developers here that advertise their systems talking about backtesting, not just you).
I made that statement you quoted because it´s true and to move the focus to what should be anyone´s real concern. Of course fees and performance have to be in balance but it´s never the sub fee that crashes an account.
If it´s really the sub fee that concerns you, feel free to subscribe to my other 100% TOS strategy, that I run FOR FREE. (oh wait, is that a marketing guru trick? )
PS: I don´t charge for backtesting expectation nor for past performance. I inform people about my system and provide clear numbers so they can make an educated decision. But I charge for the signal providing going forward, nothing more and nothing less.
I strongly suggest for C2 as company to forbid any strategy advertisement based on backtesting data. I do not have issues with advertisement based on C2 past trading data. Any use backtesting data in the context of future performance should banned.
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