Jay
your idea is why most people lose monet on trading. trading is way more then simple single dimention buy sell signals.
Misses the point. People dont lose money because of a lack of position sizing. People lose money because few advisories provide a market advantage over time. Plenty of people do nicely on a one-lot trading system.
Position sizing is what makes it impossible to compare C2 systems. Most hot systems are way overleveraged or have an all-or-nothing approach, and they get lucky for a few months. Anyway, existing metrics already handle position sizers (best case, etc.)
sizing is a crucial part of successfull system.
For most C2 systems, their larger lot trades rarely outperform smaller trades. I have done some study on this on C2 systems - you are welcome to research this also.
Besides, sizing tells you little to nothing about whether the advisory service has a market advantage or not. This metric tells me, from entry to exit for their chosen instrument, what was the gain? The above suggested methods do a fair job on giving an independent read on that
As I said in a previous note, I am much more interested in a system that averages 2.5 ES (emini) points per trade for 2 lots, than one that averages 0.75 ES (emini) points for 60 lots. Sizing just masks the fact that the first one strongly outperforms the other.
I will apply my own position sizing to any advisory anyway. Everyone takes signals, and uses their own instruments, methods, money/portfolio management, etc.
most of my trades are losses but from time to time we get the mega trade
If that is your style, that is fine. I prefer systems that do not bank on a few large wins. I prefer a lot of singles and doubles to an occasional 3-run homer. But I do not see a correlation in C2 systems when the mega trade was the one that signal providers happened to be highly leveraged in.
I addressed Jay above - the best Case metric already addresses those concerns about sizing, etc.
I completely agree with Sam Cook. This metric strips an advisory down to its bare roots - signal providers cannot hide a marginal advantage by overleveraging or huge lot sizes. We see the pure percentage gains for each trade, and can how effectively it does.
I can see no reason to oppose something this approach - it is not replacing existing metrics, it gives another view that makes systems comparable. how do you compare Consensus-Trading (l-3 lots per trade) with Market Motion Detector (40 & 134 lots its last two trades) ?? On a percentage gain basis, it is much easier.
The problem is actually the reverse. Since all metics ACCOUNT for position sizing, we cannot actually determine how effective the underlying algorithm is.
Again, few advisories do much better on their large lot trades than they do on their smaller ones, anyway, so I think position sizing is mostly irrelevant
Ah Ross, I see where you are coming from now.
Besides, sizing tells you little to nothing about whether the advisory service has a market advantage or not.
I will apply my own position sizing to any advisory anyway. Everyone takes signals, and uses their own instruments, methods, money/portfolio management, etc.
My proprietary trading methods are designed specifically to create an average win size 1.5 times the average loser, and keep average risk per trade between 1% and 3% of account value. This means that when win% is 40% my trading is breakeven. Win% varies between 30% and 60% for my system with the average being just above 50% (i.e making money).
Subscribers can only acheive these results by exactly following my position-sizing and exit strategies as published (relative to their own account size) and the metric as you desribe it is irrelevant for my particular method of trading.
Paul King
PMKing Trading LLC
www.pmkingtrading.com
"Any metric that simply uses round lots or single contracts does not take into account how effective the positon-sizing is, and how much risk per unit is being taken (based on initial stops).“
True, but the idea suggested here isn’t to do away with the
"Best-case fills, no commisson” chart, but to simply offer a
profit per unit chart, right? This is good information for the
small or single lot trader. Moreover, it’s a means to spot
abusive position-sizing…not a rarity on C2.
"Somone who is making 1 point on one S&P contract with a stop 10 points away is obvioulsy inferior to somone who is making 1 point with 1 point stops. This suggested metric completely ignores this (and renders it useless in my opinion)."
I agree, but again C2 will still show “Best-case fills, no commisson” chart. It’s not being ignored. And some C2 vendors are consistently
risking 10 points to make a 1 point AND trading 100+ eminis or
1,000,000 shares (in a 100,000 volume stock) on a “$100,000” account. How realistic is that?
On the other hand 1 % profit on 1 NQ is $ 340, 1 % on 1 ES is 650, and 1 % on ER2 is 770.-
And 5 points on 1 NQ is $ 100.-, 5 points on ES is $ 250.-, and 5 point on ER2 is 500.-
So on a % basis 2 NQ are around 1 ES or 1ER2, but on a point basis for 1 lot you have quite a big difference from 1 to 5 due to the different multiplication factor on the different futures.
My all point is that 5 points are not equal to 5 points in $ on 1 lot depending of the future and that 1 % show something different again.
Charles
Average Win size compared to Average Loss size (and to available capital) makes it painfully obvious which systems are using ‘abusive position sizing’ (as you put it) or taking too much risk.
Realism factor will highlight systems that take large trades in low liquidity instruements…
Number of trades/age of trading system and win% will identify ‘short-term lucky’ systems, or ones that are trading some sort of anomalous (probably soon-to-disappear) pattern.
All these are exiting metrics you can look at right now.
Paul King
PMKing Trading LLC
www.pmkingtrading.com
I agree. Return/max DD (productivity) is not only a necessary element of a good system/method, it is the good system’s central purpose.
The worth of a system is expressed in the form of the Profit Factor (W:L ratio) and expectancy both of which measures the same worth (one in terms of a ratio and the other in terms of dollars) and this is vital to compare across systems.
But, in my opinion, all of the necessary factors to evaluate (not compare systems) a system is presently available at C2, except the expectancy, the calculation of which requires the 1-lot/contract calculations. Once one has this and expectancy calculated based on this, turning on position sizing will reveal that a good position sizing strategy will result in greater, more consistent profits on a high expectancy strategy than on a low expectancy strategy, even if the low expectancy strategy has a higher net profit on a 1 contract/lot basis.
"Average Win size compared to Average Loss size (and to available capital) makes it painfully obvious which systems are using ‘abusive position sizing’ (as you put it) or taking too much risk."
Sometimes. Sometimes the position sizes are so large the trades could
not even have occured. The “real” RF would be ZERO. Also, drawdowns
over 50% paired with “risk of 20% account loss” of zero do not compute.
This is very common on C2.
"Realism factor will highlight systems that take large trades in low liquidity instruements…"
I’ve seen “Realism factor’s” of 100% in systems using market orders. Anyone who has ever placed a “real” order knows market orders are not
filled at price 100% of the time…ever heard of MOC? Brokers call these
Murder on Close orders.
Anyway, I’ve worked the retail side for 20+ years. For sheer numbers there are far more $5000-$25,000 traders out there than $25,000-$100,000 traders. Why would C2 and its vendors not want to market to this group who more than likely would and should start out as one lot traders? The single lot chart is a useful tool for those traders. The idea is to talk real money for real traders, not position sizing theory for blue sky paper traded accounts. The more “real” C2 is the more revenue it will make in the long run.
You are right, but then it is up to the signals buyers to choose.
On 2 occasions I had requests from people wishing to eventually follow my trades, 1 with 10 K and the other with 20 K.
I simply answered that they could not do it and I referred them to vendors who trade 1 lot per 10K and that I find to be very good.
And the vendors who use larger unit sizes (I am one) know they probably wont have that many clients even if overtime they show a decent trading.
Charles
In my opinion this is easily seen on the P/L per lot.
I have seen one system in C2 trading heavy positions in ER2 with frequent trades. The equity curve is even very good if I remember correctly.
But the P/L per lot was $ 13.-
On the other hand I did not see that this P/L per lot is published for Forex traders that usually use even more levereage and also a higher number of trades.
It would be interesting to see even if the per lot value is
around 10 K !
Charles
"it is up to the signals buyers to choose."
So why not give them good information to make that decision?
"On 2 occasions I had requests from people wishing to eventually follow my trades, 1 with 10 K and the other with 20 K. I simply answered that they could not do it…"
Actually your system looks good for small lot traders. Indeed, your worst
DD’s were when you increased position size. One lot traders would have
better Profit Factors and lower % DD’s than your “Best-case fills, no commisson” track record shows. Your system would actually rank higher in many categories using single lot stats. Ironic, isn’t it?
Every trade I do on C2 is a trade I do in my own proprietary account with a similar amount of capital. That’s about as real as I can get. I can’t comment on how other people trade here.
The only trades that won’t scale down to a very small account would be the futures trades since you can’t trade less than 1 contract. I suggest that subscribers with small accounts don’t take the futures trades.
I agree that small accounts are the norm, but this is not a theoretical discussion for a paper-traded account, I have done everything I can to allow my trading methods to be applicable to whatever size account (large or small) with the caveat that my trading would be classed as ‘pattern day trader’ by US brokers so that a $25,000 account minimum balance is required to trade the short-term equity trades.
Paul King
PMKing Trading LLC
www.pmkingtrading.com
"Every trade I do on C2 is a trade I do in my own proprietary account with a similar amount of capital. That’s about as real as I can get. I can’t comment on how other people trade here."
In no way am I pointing a finger at you, nor have I anywhere referenced
your account/system. Nonetheless, I can tell you with 100% certainty, that many C2 systems are not traded and/or are untradable relative to their C2 “track records”.
"but this is not a theoretical discussion for a paper-traded account(s)…"
Yes it is! That’s the point.
I’m not saying yours is “paper traded”, but clearly some are. Everything C2 can do to “make it real” will only benefit C2 and its vendors. I hope you agree.
My system doesnt/should not look good for small traders if they read my short description that says I cannot have more than 12 lots directional at any one time, meaning that at times I build a position. And to avoid over leverage I specified clearly (even for myself) what my maximum position can be !
But to avoid misunderstanding I will clearly specifiy : not for small capital traders.
On the other hand, it should not be that difficult for “clients” to see
in the trades records of the vendors who regularly use a minimum of 20/30/40 and even 50 lots on a capital of 100/200 K.
As curious as it seems, I am more afraid to see some vendors who constantly use 1 lot only when they have a profit but add 1, add another 1, 1 more, 1 more up to 4 or 6 lots.
Because the 1 lot attract small capital. And when strategy is not disclosed…there we go with the problems.
A month or so ago, in the forum, there was a young guy who asked to a system vendor to please please not add, because his capital is too small. The answer of the vendor was…we will try to avoid adding or something like that ! And on 4/18 bingo he built 3 lots. And that is what is not fair.
Adding to position is nopt a problem as long as it is disclosed somewhere.
Not later that yesterday I contacted one of the star in C2 who trade a constant number of lots and asked a few questions.
This person not only answered my questions but added that at times, exceptionally, they may add to the original position.
When fully disclosed it is so clear !
Charles
Paper-traded systems are good for one thing - generating paper.
I would suggest you ask a system vendor to ‘put their money where their system is’ and show you brokerage statements with the actual trades made by their own trading of any system before you subscribe (even if the size is smaller than the $100,000 C2 initial account size).
Anyone who can’t/won’t do this should consider preparing a pretty convincing excuse/reason for not trading their own system(s) (at least with a minimal allocation) in my opinion or else how can they prove it is, in fact, actually possible to implement the system (with any size account).
Nobody is here to make ‘pretend cash’, it’s all about real money being made from real trading. I agree that anything that highlights the ‘real’ trading versus the ‘fantasy’ trading is a good thing, but I’m not sure the suggested functionality was designed to address this at all.
Paul
Hmm… Ross It’s more interesting. How about a little improvement for your formula?
So for 1000 shares of CompanyX starting at share price of $20, if the profit is $300, then return on equity is:
300/(20 X 1000) = 1.67%
Total percentage per position(TPP)=Profit/(PriceNumber of shares)
Representation of one lot in profit (RLP)=TPP/Number of lots
RLP=1.67%/10=0.167%
I think a system must be penalized for averaging down. Averaging down just shows that initial entry point wasn’t perfect.
Penalized RLP (PRLP)=RLP/number of legs per position.
In the example if 1K shares represents two trades with averaging down we’ll have.
PRLP=0.167%/2=0.0835%
I think it’ll give you what you want. Percentage based weight of one lot per position. It might be helpful. I can see weak point in my adjustments. It’s obvious that you have to put the one lot in first trade, but how to put it to the formulas?
Any thoughts/ideas? I’m not great in math you know lol
Eu
-------
Gentlemen,
Can we skip advertising of our systems and flame on others, pleeeeease?
"My system doesnt/should not look good for small traders if they read my short description that says I cannot have more than 12 lots directional at any one time, meaning…"
I missed the “short description”. Where would I find that? 
Anyway, let’s say someone traded one lots on a 25K account based
on your RESULTS. Do you understand they would have had a smaller
% drawdown and a greater % profits/DD than your results page?
You say:
"EQUITY CURVE AND DEGREE OF LEVERAGE ARE WHAT COUNTS. NOTHING ELSE."
So, using single lots on your system and scaling back capital accordingly produces a smoother equity curve with a smaller “degree of leverage”.
As Martha would say: “It’s a good thing”.
Don’t you agree?
King:
>Every trade I do on C2 is a trade I do in my own proprietary account with a similar amount of capital.
Well, not to make fun of you, but that might be not so good for you. One system is down 20% the other is only slightly up, mostly underperforming the S&P. You have a pretty bad C2 rating too.
I think you should be a subscriber instead of a vendor…
But to stay on topic, that’s why I count my gains in future points (relative number), instead of absolute numbers, because who knows how a subscriber leverages???
i hope that anybody that will use my system will maintain the same size of position to equity that it does or less. And that he/she will let the system do its job and not start choosing trades.
have no mistake I trade in my real forex account whatever i publish.
Customer does not want fortune teller if they would they would go to http://www.onlinepsychic.com people want to make money, as much as possible within a certain risk level.
I believe that Mathew should focus on finding the best way to measure this.
registering systems on the best system list as the best. systems with realism factor of 25 doesn’t serve that.
Writing on the main page which system did best in the last 5 hours also does not serve that. Having on the same page as losers systems that lost 0.1% in the last few hours totally miss the point. (yes i saw it few times)
I have many more examples.
the 1 lot/ 100 shares concept does not work, having binary positions is too big limit in system development.
Building a long term successful system is challenging enough without this limit. I understand what few people wrote about systems that use averaging down but eventually if you use this tactic with no stop loss you will lose big time.
In Sinzan Forex 1 (my system) There are set of currencies pairs that it trades in different sizes. for example GBPUSD i can open up to 9 lots while USDCAD up to 1 lot.
in futures you can not build a volatility based positioning with this limit.
and in stocks i believe it is even worse.
let me show you my real account holding and tell me how you adapt it to 100 shares system with reasonable risk profile.
this is my real holding
50% SPY
30% NOK
15% KO
1% DSCM
1% REDE
3% 5 X other small time very risky shares
putting it into one lots defies everything about portfolio management.
Pedro,
ModeX has not been trading long enough on C2 to make the results representative, and it is a 100% automated TradeStation System that is more agressive than my other proprietary trading systems (Alpha) and the performance is representative of that type of system.
As for my C2 rating, Alpha is operating within normal parameters as designed (Win:Loss 1.5:1, Win% 30-60, average 55% over long periods, Target 10-20% per year with max 10% drawdowns), so I couldn’t care less what my C2 rating is compared to other C2 systems or vendors (real or fantasy). My measure of success is operating as designed not relative to some artificial measure.
Paul
