Hey guys…
My name is Mark, I am a new user to C2, and really a new user to any type of trading systems. I had this crazy idea with the stock market that lead me to hiring a programmer and testing it out, anyways it failed miserably, but in the process I found C2, tradebullet, interactive brokers…and in a sense automatic trading using subscribed systems. I was a web developer, made a little bit of cash on the internet, and now I want to invest and focus on being a good trader.
To be completely honest with you, I lack a lot of knowledge and lingo that a lot of you have. I understand the stock market, I was a web developer and a computer guru so understanding the technical things is easy.
In any case, I am interested in getting started. If there is anyone that might be interested in chatting with me regarding these systems, and how I can best start with the money I have, that would be great. Otherwise I am on my own, and its a bit scary when your talking a couple $xxx,xxx. Thanks!
Newbie,
Mark
Hi Mark,
I asked about the same questions a year ago in a thread with the title “No experience”, that you can still find on the forum. I got very good answers. See
http://www.collective2.com/cgi-perl/board.mpl?want=listmsgs&boardid=12606129&threadhilite=1377&displayblock=&sorttype=&session=115277383304660872161663076354832#FIRSTSTAR
The most important thing that I remember: Always start with small trades, e.g. 1 share per trade. The markets won’t go away.
What I would add today, and that was perhaps also said there: Don’t try to get rich fast, because you’ll probably be toasted. Aim at steady and reliable, and be patient.
Thanks Jules! I am definately in the same boat you were in around a year ago, and I am sure the same boat many others were in as well.
I have a good chunk of change to invest, but I want to take it slow. I would be happy with small percentages in the range of 30% a year, and I know that is not to hard with c2 and autotrading. So being able to stay safe is my main priority, I don’t want to jump in and get rich, I am trying to be smart about it =).
From what I understand, autotrading can be a bit risky because of some of the glitches, bugs using a PC based with Cable or DSL internet. Should I not autotrade?
Thanks for your help…
Mark,
Here’s some advice, fwiw:
1. Use 1-Click searches to browse C2 systems (including the ones no longer active). Observe the equity curves, and understand that the odds that a randomly selected system is a winner are pretty bad. IOW you’ll need to invest time in figuring out how to select a system.
2. Make yourself familiar with the advanced statistics and the guide Jules wrote. This will help you to select a system.
3. Once you’ve selected a system you need to figure out how much capital you need to trade it and offset the subscription fees. You want to keep an eye on slippage, which for some systems can deteriorate profits.
4. If the system requires auto trading, take ample time to become familiar with auto trading and any problems you might encounter, for example using an IB paper trading account and TradeBullet, or signing up for a demo with the server-based vendors.
5. Don’t risk all your money on 1 system but diversify (including cash). Start out with 1 system and keep a large part of your money as cash. Once you’ve proven your ability to select a winning system (and one that doesn’t suddenly blow up), gradually select additional systems for your portfolio and allocate capital to it.
6. Before subscribing to a system, define and write down some hard exit criteria (i.e. unsubscribing) if performance deteriorates. Stick to these criteria.
7. Communicate with the vendor either through the system’s forum or by PM about any questions you have.
8. Keep a log, documenting your decisions, emotions and experiences. This will help you to understand if your approach to trading/investing is sound and objective or mostly determined by fear and greed.
Autotrading is much improved since that time. It also depends on the kind of system you trade, your broker, and the time you can spend to it.
I trade extreme-os now for about a year and it took some time to experiment with the settings, but after that I have had no serious autotrade problems. Usually I check my positions about 15 minutes before the close, and only very rarely there is a problem. And if there is a problem then it isn’t always a loss.
There is also a synchronization feature in Tradebullet, but I cannot use it because only an older version of Tradebullet works with MBT at my computer, for some mysterious reason.
The most serious problem happened last week. An order to open a position was not excecuted (although Tradebullet had transmitted it, so this was not an autotrade problem but a broker problem). I did the order again manually, but then it was executed twice. This was the day that China caused trouble, so I didn’t want to have this double position. So I sold the surplus part, but then this was my fourth daytrade within 5 business days, while my account had just fallen below $25K, which is not allowed. So my account was reverted to cash trading the next day. I was so fed up with this that I didn’t notice that another order wasn’t executed either, which was an exit order. I noticed this only the next day but at that time the damned thing had lost $270, which is about the value of my present car. 
Apart from this, I remember no problems. The same is true for some other systems that I trade. These systems usually hold at least one day and only stocks or options, and use simple market or limit orders at the time they should be executed. With some other systems I had problems, particularly if the vendor sends signals overnight, or when he uses stops.
If you use a more rapid system with a leveraged instrument like futures or forex, it may be important to spend more time on checking the trades. OR you can use one of the server-based solutions, but I have no experience with that.
When I start trading a new system I usually wait untill I have vacation, so that I will have enough time to babysit Tradebullet in the first days.
Alltogether I would certainly not discourage autotrading. I think it is very convenient and relaxed for some systems, but perhaps it is too slow and unreliable for some other systems. I try to avoid these other systems.
Science,
Thanks for your response! I will definately keep all of these things in mind. I am going to start with around 4 programs, diversifying around $40k among all of them equally. I will pick my top 4 programs, across Stocks and Forex…and then later on I will get into futures. I am going to manually trade the signals for now, because for the most part I have a lot of time during the day to devote for this.
I will look over many of the subscriptions and find the 2 best for me in forex and in stocks.
Does this sound fine?
Suggestions:
1) Stay away from leveraged investments (futures, options, forex), until you master trading UNleveraged investments (as Jules said above).
2) The more of a hurry you are in, the faster your money can disappear
3) For every 50 currently-active systems on C2 you see, maybe 2 or 3 are truly interesting. There is a huge difference between a system that LOOKS good due to a short period of lucky trades, and one that IS good.
4) Paper trade for a few months. (see #2). There is a lot more to this than following a system. Emotions can make you do the opposite of what a good trader does. Be a Vulcan.
I put a bunch of things for new traders in my forum (Futures-Systems.com) about using Collective2 & other topics (the system is not active).
Welcome to C2. Just avoid scalping systems (low P/L per unit). There are also some other guidelines for selecting systems mentioned in some of my methods description. Avoid auto-trading other than your own system and you will do fine. All the best.
sounds reasonable, but:
- for certain systems $10K will not be enough to offset fees and commissions (assuming you use the same leverage as the vendor does on C2).
- manually trading forex is tough as signals can occur 24 hrs a day
- some systems are tough to trade manually, as they require fast order entry at speeds you typically only get with autotrading software.
>manually trading forex is tough as signals can occur 24 hrs a day
Not at all. There are many that trade EOD.
- some systems are tough to trade manually, as they require fast order entry at speeds you typically only get with autotrading software.
I would avoid trading such systems…
All of your responses have been appreciated! It seems a lot of people want to look out for the beginner to not make some really big mistakes!
Is it a consensus that I should not autotrade? I don’t want to do anything too risky…!
Also is it a consensus that I should papertrade for a couple of months to get the hang of things?
I am not in any rush, but I want to make sure that no time is wasted. What should I be doing to maximize the amount of knowledge I can bring in?
Let me know what you think! Thanks!
Mark
>All of your responses have been appreciated! It seems a lot of people want to look out for the beginner to not make some really big mistakes!
I have seen several beginners, but frankly by far you seem to be a cut above the rest…
>Is it a consensus that I should not autotrade? I don’t want to do anything too risky…!
Not really. Actually, most wants to autotrade. I seem to be a minority, but that doesn’t make it rational…
>Also is it a consensus that I should papertrade for a couple of months to get the hang of things?
I papertrade those systems of mine that are on test mode…
>I am not in any rush, but I want to make sure that no time is wasted. What should I be doing to maximize the amount of knowledge I can bring in?
Start a system at C2 and learn the ropes before risking real money and maybe autotrade a demo account. You can meanwhile follow some of the systems that interest you by starting a watch list. Take a look at The Grid, it is the secret weapon against ignorance…
If people advise you to go right in and autotrade and avoid papertrading, they are NOT doing you any favors.
Don’t seek consensus, you are likely to get votes from people who do not really grasp the problems for new traders. For every well-seasoned trader, there are 5 clueless people out there waving money and expecting to get rich quick. Do you want them telling you to come on down and jump in; the lava’s warm?
Any seasoned trader will tell a new trader that the most important thing is preserving your capital, not seeking profits. A well known saying is, the best way to make a small fortune, is to start with a large fortune.
If you are in a hurry, and plan to dive into forex and other investments you are not well acquainted with, then you might as well take your money and go flush it down the toilet now.
Take a look at some of the recently high flying systems - Rocket Science, Primetime Reloaded and some others. Watch how 4 months worth of profits are pissed away in a week. Do you want that to be your brokerage account? Have you any idea how many different ways there are to lose a lot of money? I once lost 1/3 of my account at Xpresstrade, because their computer was unable to cancel the other side of an OCO order in a 30 minute time span - I hit both the stoploss and profit target, but of course, in the wrong order. Talk about an expensive lesson in learning the definition of “not held.” In other words, their limitations is my loss.
So I ask you, are you so eager to get started that you are willing to lose half your account in a couple of months???
Ross, I think you may have the wrong impression…I will do whatever is necessary to make sure I preserve my capital. No, I dont want to lose my portfolio, thats why I came into this forum. Its why I am asking questions now, rather than later. I could have started autotrading any system that was showing positive gains almost immediately, I didnt think that was much of a good idea.
I am seeking the guidance of well-seasoned investors and intermediates alike…
SO to answer your question:
"So I ask you, are you so eager to get started that you are willing to lose half your account in a couple of months???"
YES, I am eager to get started, and in this case I dont think thats a bad thing. I understand you probably see a lot of schmucks come in here and try and double their fortunes. They probably have a better chance down at the casino.
I am eager to learn, whether I am trading or papertrading or just reading a wealth of information before me…I am starting.
Mark -
I agree 100% with Ross. From your description you should not be trading any leveraged instruments and probably not auto-trading unless you find a stock system that can be practically traded scaled down.
I have been around a long time and if I had started stuffing money into mutual funds 25 years ago I would be living on easy street now. But speculating was in my blood and I payed the price many times over.
The biggest thing I have found that contributed to poor results in my past was under-capitalization and lack of a solid money management/risk management strategy.
Many people here don’t realize that when you sign up for a margin account that you can lose not only your trading capital but you are on the hook for any additional losses which can be substantial. The broker doesn’t care about optimizing your cash when he is liquidating your account. This is not to say you shouldn’t have a margin account but you should use the power of margin cautiously.
Also, when you start scrutinizing C2 trading systems, understand that just because a system may have a high realism factor doesn’t make the system results real. Many systems can’t practically be traded. In other cases great results were achieved using leverage that no one in their right mind would ever consider in real life.
To put things in perspective, the stock market turbulence we had last week was one (1) on the richter scale. It was a fairly minor blip. Yet it practically knocked out several good looking systems. At some point in your life you may experience an eight (8) on the richter scale. Imagine what that would do to some of these C2 systems!
The final thing that I have to say is that trading in real life is very different than analyzing back-tested results or paper trading. It is fine to look at a backtested system equity curve that reaches up into the stratosphere. And then say, yep, that 25% drawdown wouldn’t bother me at all. But it is a completely different situation when you have your hard earned money on the line. Because in real life the drawdown will come sooner than you expect, be larger and there is no guarantee that the system will recover to become profitable.
> Is it a consensus that I should not autotrade?
No, on the contrary, my opinion is that it is best to autotrade. The probabiliy of an error is much smaller in autotrading than in manual trading. The only restriction is that you should do a system that can be autotraded without too much risk. That must be a slow (no daytrading), unleveraged (stock) system.
Since you portray yourself as a beginner I would anyhow start with an unleveraged instrument, i.e. stocks. And since your account will be < $25K you are not allowed to daytrade with stocks; that is a SEC rule.
Only if you have never traded at all I would recommend to start doing a few manual trades, just to get used to concepts like “limit order”, “market order” and “stop loss”. My interpretation of your first post is that you have already traded a little and that you know these concepts.
You also want to trade forex, which is leveraged. This is riskier than stocks, because in principle you can end with a negative account value. I would not recommend it to begin with, but if you do it I would recommend either manual trading and baby-sit it, or server-based trading (BulldogFX).
> Also is it a consensus that I should papertrade for a couple of months to get the hang of things?
I don’t agree with that either. I may be enough to papertrade one day. The clue of papertrading imho is to set up the program properly. After that it is boring and I don’t see what you would learn from it. The reason is that some brokers in a simulation account just recycle the same hour of quote-data again and again, so you will still have no idea of what would happen in a real account. Also, the psychology of a papertrade is quite different from that of a real-money trade. Compare it with learning to drive a car. I suppose you learned that by driving a real car very slowly, not some computergame car very fast.
Instead of papertrading very long I think it is much better to trade with a very small amount of real money, e.g. 1 share per trade. Then at least you will know whether the order is executed properly. At IB this will cost you $1 per trade, but so what? If something goes wrong it will be only one share (unless that goes wrong too of course). You can afford that.
In fact, I would suggest to learn autotrading with extreme-os. I don’t mean this as a trade recommendation, but as an easy system to get the hang of autotrading. (Probably some other system can do that too, I just happen to know this one). It has a few trades per day at a few days per week, so you won’t have to wait weeks and you don’t have to attend it every minute either. And even if you do something wrong and buy 100 shares instead of 1, well, there is still a fair chance that you can exit without a great loss.
While I was writing this post Ross and Steve wrote posts with partially different advice. That is the usual course of events here… At least we agree that you should not start with full scale autotrading
Thanks Jules, advice appreciated!
Although I usually agree with Jules, this time I am a bit hesitant to do so re: extreme-os. If you look at the entire history, it might work out well. But over the past 6 months, performance was not that exceptional, while cost are substantial:
The min. monthly cost of trading this system are:
- fees: $100
- commissions: 20 trades x $2 = $40 (using average of past half year)
- TradeBullet fee $50
Total: $190
The compound annual return is ~70% (again, estimated over the most recent 6 months), which will probably turn out to be ~50% after slippage, or ~3.5% per month.
Let’s assume you don’t want your monthly cost of $190 be larger than 10% of your expected monthly profits. IOW you want to make a monthly profit of $1,900. In that case you’d need to allocate ~$55,000 (actually even more, as your commissions and slippage will go up with size). Even if you’re willing to pay one-third of your profits back in terms of cost, you’d still need $16,000.
So, if you want to allocate your $40K across 4 systems, choosing extreme-os might be an expensive option. Of course, you could hope that extreme-os picks up its higher returns from the early days, but you have to realize that these early returns were in part due to leveraged positions.
Good analysis, Science Trader. I suspected that much. If it is too good to be true, it probably is…
