Payoff Matrix and Backward Induction are both TOS (trades own system) now. Backward Induction started as TOS and Payoff Matrix got approval after the close today.
The TOS on both is broker transmit which means I can scale at exactly 100%. No more and no less. There is another TOS which you follow your own strategy like a subscriber would. With that one, you can choose to follow at 50% or over 100% or whatever you want. With TOS broker transmit, I am exactly at 100%.
The TOS badge does not show up until you have about 5 or 10 trades and you will at that point see the badge. But I am already taking trades in my personal accounts (two different personal accounts) for Payoff Matrix and for Backward Induction. Payoff Matrix just got the approval today so no trades in my actual account have been taken yet but going forward all Payoff Matrix trades will be from my personal account. Every single trade Backward Induction has taken has been in my personal account.
Here’s the difference between the two strategies. Payoff Matrix takes trades that are generally 3 or 4 contracts and sits in those trades on average for 3 1/2 hours. Backward Induction is designed to have quicker trades although we may sit in trades longer occasionally. All trades are closed by the U.S. CME close. I am always at my desk if a trade is on or an order is pending. Backward Induction will mainly trade ES and sometimes NQ and CL although all futures are available to trade. Payoff Matrix will trade all futures.
As far as risk management, nothing has changed. I risk on average 1% to 2% of my capital with an absolute max risk of 5%. In dollar terms, that means the average risk would be $500 to $1000. Every single position has a stop. There’s never an excuse why there’s no stop. There’s no martingale or any other monkey business. You will never hear that the stop is on a server ready to kick in. You will never hear that the stop is a “mental” stop. You will never hear that I hedge and that’s why there’s no stop. You will never hear that I will give you the stop the day after we get in. Every single position has a stop attached to the order. Period.
Generally, Backward Induction will have lower risk than Payoff Matrix with trades sometimes only risking a few hundred dollars but does have the right to risk just as much as Payoff Matrix. As far as the 5% absolute max, I have never take a trade with that much risk. It has to be really amazing. The most risk I ever put on in Payoff Matrix was 3.71% and that was the trade from 1/16/2018. I got the same signal across the entire equity complex. When everything lines up like that, I may push the risk a bit. That signal generated in ES/NQ/YM/and RTY. So a 5% trade has not been put on as of this point. That makes it even more unlikely that Backward Induction would take a trade with that much risk if Payoff Matrix has not ever done so.
Lately, Payoff Matrix has not taken many trades due to the increase in risk. Now that Payoff Matrix is TOS, it will take some of these quick trades if there’s no “normal” trades available so we’re not sitting on our hands. Here’s why this was not possible before TOS. To enter a trade, I would go to C2’s website. Find the symbol. Enter the price. Enter the stop. And hit submit. That’s not an issue for a trade lasting over 3 hours. If the trade lasted all of 3 minutes as a “quick” trade, the opportunity is gone by the time that process is complete. The way I enter trades now in my personal account is through a DOM (depth of market). It’s literally 1 click to enter and 1 click to exit. Much easier logistically. Again, for Payoff Matrix the priority is to take the “normal” trades it takes. When they are not available due to higher risk, it will take quick trades like Backward Induction to fill the gaps and try and make some money instead of doing nothing. We will see a higher frequency of trades for Payoff Matrix going forward.
It is also my goal not to be in the same trade at the same time in both strategies. That does not mean we will never be in the same trade but it’s a priority not to be. This is due to having some of the same investors in both strategies. There’s no point in doubling up the same trade on them.
This now means I have skin in the game. If investors make money, I make money. If investors get stopped out, I get stopped out.
If you have any questions, please send me a private message.