The story started in " Any C2 subscribers here for more than 3 months?" thread. Initial idea was from Pete.
Pete 12/23/05 12:36
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C2 needs to offer a pay-for-performance option like real hedge funds do, the subscriber pays a percentage of net new profits (above the previous highwater market).
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Me
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C2 will recommend your payment accordingly percentage that is setted by system vendor and scaling parameter that is setted by subscriber. If you agree with C2 recommendation you’ll be charged automatically if not you can correct your payment accordingly your real account status. "
Even as system vendor and I use most fair type of subscription in C2 I’m tired to explain about the so-call hypothetical trades. I know that the trade is total BS, my subscribers know that the trade is total BS. What’s the f@king hell subscribers should pay for C2’s paper money if both party except C2 are agreed that the money is paper?
Yeahh… standard subscription generates more money for C2.
From other point the kind of paper trading adds more to my negative reaction as well as subscribers negative reaction. I don’t think that both sides need additional pressure if it’s possible to avoid.
My system doesn’t generate enough money for C2, but I’d like to have the subscription model in place. Instead of unending explanations to subscribers about heavens of paper trading.
So please vote if you’re interested. It doesn’t matter subscriber you or system vendor. Maybe it’ll be possible to move it from current dead point.
Eu
P.S. It’s not advertising of my system and it’s not invitation to theological/philosophical exercising.
Eu:
If I am understanding you, your message makes two points.
One: You suggest adding to C2 a new way to charge subscribers – a compensation system based on the hedge fund model (i.e. 20% of profits above the high-water mark).
Two: You suggest this model is currently unavailable because C2 would not benefit from it.
Actually, there are significant problems with your proposal, from a logistical, business, and regulatory point of view. First, I am not entirely sure such a scheme would be legal, since it may cross the gray area from “publishing advice” (perfectly okay in the U.S.) to “money management” (highly regulated, requires registration, etc.)
Further, assuming such a model were legally okay, how would you propose to implement it? On C2, all hypothetical accounts start with $100,000. Let’s say you have a subscriber who trades with a $50,000 personal account. Now, at the end of 2006, your C2 account is up by $10,000. Under your model, you would charge your subscriber 20% of 10,000, or $2,000.
Of course your subscriber would say: "No, I trade only with $50,000. I owe you only $1,000."
How would you know for sure? In fact, what would stop any subscriber from proclaiming that he traded only with a $5,000 account, and that he owes you only $100?
Let’s take this thought experiment a step further. Why would anyone pay you anything? How would you collect? It’s hard to charge a credit card more than $1,000 dollars or so. What would you do if you had a really great month and the subscriber owed you $50,000? Would you send a bill? Would you expect him to pay? I believe you would have a hard time receiving money from anyone. The point is, it’s not much trouble to get people to pay a $200 subscription fee for services rendered. But to ask them to pay tens of thousands of dollars based on the honor system is a challenge indeed.
The reason hedge funds can do this is because they hold the customer’s money. They give back the customer’s money less any fees they are owed. No collection problems there.
Do you want to do the same thing? Unfortunately, you can’t. It is illegal to hold customers’ money (and trade with it) without becoming a hedge fund yourself (and registering, and complying with the various applicable regulations).
So: If you want to be a hedge fund, go for it. More power to you. I wish you luck.
But C2 is not a hedge fund management company. We are a publishing company that helps you find subscribers interested in receiving non-personalized trading advice.
The reason C2 doesn’t offer this business model isn’t because of a dark conspiracy to make more money than C2 deserves. It is that I can’t see how to implement this in the real world.
I know there’s a model based on charging if any trades were profitable that month, but the system could still be down for the month. How about a subscription model that is a flat fee per month, but the fee is only charged if the system is profitable that month? Maybe this would be a decent compromise to Eu’s suggestion?
Incorporating a high water mark would be more difficult because it’s possible that subscribers will start with different account balances, but it might be possible if you track profits as a percentage of the C2 model’s initial balance. So the percentage profit would set the high water mark instead of the actual account balance. Of course, this only works if subscribers maintain a trade size that is equivalent to the percentage of their account balance to the C2 model account balance…
My apologies if such a model already exists; I’m not a provider and haven’t researched all the available subscription models.
Cheers,
-lcg
Loren, I agree that to do the highwater mark idea that it would have to assume a fixed account size that the fee would be calculated from (rather than each person declaring their own account size in some sort of honor system).
Also I believe the pay for profitable period (month) is actually already available @ C2, in addition to pay for each profitable trade model. Its actually a little confusing how its described:
"Pay for performance. Subscriptions cost $xxx at the end of each month, but only if the system has made profitable trades."
I once asked MK if this meant do you pay if it made any profitable trades that month or is net profitable for the month and I’m pretty sure he said it is the latter.
I think hedge fund model is pratically hard to implement at C2.
Matthew,
If I am understanding you, your message makes two points.
It’s correct.
One: You suggest adding to C2 a new way to charge subscribers – a compensation system based on the hedge fund model
Not exactly, I suggest to adjust experience of big guys to C2. (pls, read bellow)
Two: You suggest this model is currently unavailable because C2 would not benefit from it.
No. C2 was made to generate a profit. Most profitable system vendors suppose to have better attention. It’s logical and I don’t see any conspiracy there. I had an intention to have a public opinion about new subscription model. From small system vendors, from subscribers. As you see nobody is interested, so maybe you should not waste your time on it.
Further, assuming such a model were legally okay, how would you propose to implement it?
There is exist a legal model, but you first time asked about an explanation 
Let me give an example it’ll be easier for me.
System price: $1000 if it’s profitable
profitability is calculated by overperforming previous high at end of billing period for a subscriber.
Vendors take: 5% from profit.
From previous high the system makes $1000.
Most interesting part:
C2’s discount: C2 will offer discount from the system price.
%5 from $1000 and discount is $950
Vendor’s discount: A subscriber checked his/her records and found that it’s only of $300 profit on an account. Because $700 winner was from buying on day low (hypothetical one). Subscriber puts a request for vendor discount with explanation why some of recorded profit unrealistic. If it’s approved by vendor, the subscriber has vendor discount.
C2’s part: $1000-$950=$50. It’s minimum payment when everybody is happy.
Vendor’s part: 5% from $300=$15.
Final bill after all discounts is $15.
Max. price is $1000 if a system outperforms any expectations.
Scalable factor will be a requirement, because it’ll be used in C2’s calculation of initial discount.
Of course you have to speak with lawyer to give a proper names for initial numbers, but the schema is perfectly legal in US, because you’re manipulating flat fees for a signal and discounts on the flat fees. It’s not “gray area”
What does it give to C2? It cannot be blamed for hypothetical trades.
What does it give to a subscriber? More realistic billing if a system vendor isn’t BS.
What does it give to a system vendor? More risk, because the model isn’t monthly paycheck and depends from a system performance in real life, but the risk will be covered by better payment.If , yeahh…, his/her system is profitable and can make new highs.
How would you know for sure? In fact, what would stop any subscriber from proclaiming that he traded only with a $5,000 account, and that he owes you only $100?
First step I would recommend a subscriber with $5K account to not gamble with the system. It’s stocks and stocks never ware cheap game, it’s portfolio based that make the system even more expensive, so for a subscriber money’s safety it’s better to not trade it. I won’t hesitate to recommend it From other point as a system vendor I can unsubscribe anybody, so if I catch that a subscriber is cheated I just ask explanation and unsubscribe him/her if I won’t any of course after closing current opening positions. But I rarely met a person, who can put 50-100K in trading and cheat for few bucks, but it’s my risk, not C2. I think, that subscribers deserve some trust as well as system vendors.
Matthew, I think I’ve answered on most of your questions. If I missed something pls ask.
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It’s off point, only my bad taste to the kind of humor.
So: If you want to be a hedge fund, go for it. More power to you. I wish you luck.
[record on] If you think that I violate C2’s policy or US laws, please let me know privately. At my best knowledge I’m only offering public discussion about C2’s models of subscription.[record off]
Loren,
How about a subscription model that is a flat fee per month, but the fee is only charged if the system is profitable that month?
We’re arguing about improving of the kind subscription. You cannot see “Pay-per-Performance” very often, because majority of system vendors prefer to have monthly paycheck with disregarding of your real account status. Understandable.
Even if “Pay-per-Performance” is best and honest subscription model in C2 at the moment. It has two bad points:
1. “Hypothetical trades”. Do you want to pay your real money for something that exists only on paper?
2. DD issue. Let’s assume that a system vendor put you in DD for 20K in few trades. And after that in 10 months the system recovers. And from the point you have to pay for recovery if there will be any, but recovery isn’t a profit, because you’ve got the DD from your system vendor in first place
Eu
You cannot see “Pay-per-Performance” very often, because majority of system vendors prefer to have monthly paycheck with disregarding of your real account status. Understandable.
This is so skeptical and betrays a cynical mind.
Question: The fact that your system results are “hypothetical real-time” results has made me a bit skeptical. Does it mean that the system won’t work in “real real-time”?
Answer: Published results should always be marked as “hypothetical”, even if they have been achieved in real real-time trading. Heres why:
It is impossible to predict the slippage when using stop or market orders. Two traders, lets say you and John Doe, place an order at the same time, and John might experience 1 tick slippage, while you are filled right on your specified entry price.
You dont know whether a limit order will be filled or not. If your trading system requires the use of limit orders, you might experience the following situation: your order is filled, Johns isnt, and the market retraces. While you took some profits using a limit order, John is still in the trade and sees his profits shrinking, and in the worst case turning into a loss.
Another factor is the account size: If John is trading a rather small account, then his broker might liquidate his position because he experiences an intra-day drawdown that issues a margin call. Many electronic platforms are set up in such a way that they immediately liquidate a position, even if the market turns around and he would end the trade with a profit. John then experiences a loss, while you might realize profits on the same trade.
What about the ability to withstand losses and your discipline to follow the trading strategy no matter what? Lets say that after a couple of losses John decides not to follow the system any longer, and thats exactly when the system produces some winners. You strictly followed the system and realized these profits, while John is missing them.
Published results are always past results. If more traders would have been trading the system, the prices might have behaved differently. There could be a difference in price movement when 100 traders try to enter the market at a certain price point instead of only 1 trader. And what if 1000 traders placed a 2-lot order at a certain entry signal?
All these factors cannot be fully accounted for when publishing the results. Thats why every serious system vendor should mark his results, whether “real” or “imaginary” as being “hypothetical.”
Back to your question: Does this mean that the system won’t work in real time?
No. It just means that you should be aware of the limitations of past performance results.
No serious vendor can guarantee that a trading system will make profits in the future, but professional development and thorough testing of a system increase your chances of making money dramatically.
I just checked on the site, and found the following definition:
'Some trading systems charge only if they’ve proven to be profitable for a period of time. Here’s how it works: at the end of each monthly or weekly period, Collective2 measures whether the trading system was profitable overall during that period. (Because we have no way of knowing if you actually place a trade with a broker, we assume that you place all the trades that are recommended to you.) Only if Collective2 determines that a period was profitable will a charge be made.'
With a definition like that it should be up to every subscriber to evaluate if this model is working for him…It usually only takes a free trial period that can be used with a demo account to figure out if the fills are attainable anywhere in the neighborhood of C2 fills. This trial period should offer enough time to check out a system, 4 days for an EOD system which holds trades up to a few weeks are just is not enough. If the fills cannot be replicated, like it is the case with many of the 1/4 point chasing limit-order daytrading systems, then well, maybe it’s better to stay away anyway, no matter which way of payment is chosen.
If the fills are identical or similar, I consider this a good model. For the few EOD systems, where fills are pretty much guaranteed very close, and the trades strive for longer holds and higher per trade profits, I think this is a very correct way to charge.
I only want to make money if my subscriber makes money, otherwiase I am in the wrong business.
Peter
I would be interested to find out if any subscriber to any system offered on C2, trading that system for a time period of three months or longer, has shown positive returns in a real trading account over the period. Anybody?
I view subscription to a system as similar to subscription to a magazine, and when I buy a magazine I want to pay the same price as everyone else - not some percentage of my income or my assets. There are already way to many people who claim the right to ‘adjust’ my income by asking more money, or to ‘protect’ me from trading with a small account by adding all kind of barriers. So I’m against the proposal.
Jules
I have traded my system, although not to perfection, from 06-16-2005 to now. Unfortunately I cannot copy a word document here, but if you send me your email address via private message on my system page, I am happy to forward it to you…
I also do not offer my system here ‘for subscription’ at this time, because I started with my worst trade in a few years and want to have a better record before offering it…for less…just my ethics…
if I can’t make $$ with it, I won’t charge…
Peter
ooops, sorry, I overlooked, I am not a subscriber, although I am the only subscriber to my system right now…
Peter
Randy,
Thats an interesting question - I would like to see some other subscribers reply as well.
I personally have tried a number of futures systems and a few stock systems (no options or forex) since August, and I dont think I stuck with ANY for 3 months, due to losing money with them all - which may be partially my fault for “pulling out” when they go into a drawdown period. Be that as it may, the only system I currently subscribe to is Bender’s Crossover System, and even with the horrible drawdowns of 2 weeks ago I have been using his system for almost 2 full months and am slightly net positive in real-life, I believe, without actually adding up the details…although C2 shows him up by tens of thousands in the same period. When I say “slightly positive” I am talking about something under $5k net profit over 2 months or so at 100% scaling…and that is a rough estimate of the top of my head. Unfortunately, the risk/reward ratio of that system seems kind of steep (at 100% scaling, we often have 50 contracts open, and risk all of that unspeakable loss to eke out a few dollars!) even though as I have posted before Craig is masterful at managing the legs - but his efforts can only go so far. The actual direction of the signals and the accuracy of them really seems to me more like throwing darts at a board.
W
W
Ponderables:
1. Although the title of this thread has the word “vote” in it, but C2 is not a democracy. We can make suggestions to Matt, but any change is eventually up to him. Keep that in mind.
2. Let’s not overcomplicate things! The original poster didn’t think of, that any loss on a monthly base is usually far greater than the subscription fee. The first 20 systems has an average of $269 subscription fee, but since I doubt many subscribe to systems with fees over $500, practically is less, let’s say $200.
Now, if you lost $2000 for the month, what do you regret more, losing $2000 as a drawdown, or losing $200 as a fee? Not to mention even cheaper systems, where the fee can be really minoscule compared to your losses (let’s say 2% of it). So let’s not overbear Matt with this kind of complications.
3. As for Randy’s question, I have a subscriber since 12/12 and although I don’t know how he played my signals, but he should be still comfortably in the green even including the recent losses and supposed he only got HALF of what my system got.That is 2 months and not 3 but still a good record I think…
4. One way to avoid big losses is to start out gradually with ANY system. First start with a small amount of your money, and see what happens. If you lose, you only lost a little, if you make money, you have built a cushion before comitting more money and accepting more risk. Only if you keep making money keep increasing the risked amount the same way as your account builds up.
Don’t try to get rich overnight, just because a system has a wonderful chart, because that can change anytime!!
Walter … sounds we’re in about the same boat. I’ve tried a lot of the “good” systems during the past 6+ months (about a dozen so far with good equity curves and W/L numbers, etc.) and have yet to make a dollar. Some I did subscribe to just before a monster drawdown [Hawk-fx, V2 Forex, Options in the Green, TPS Emini Russell, Future-Pro (boy did that one tank … and shows that hanging on for a recovery can be fatal)]; others just didn’t produce any profits despite the stellar C2 record (Extreme-os) or went sideways to down slowly (Russell 2K Intraday Emini Aggressive, Aggressive, Momentum Buys …).
I now have Steady-II which is only slighly down after about a month, and Bender’s Crossover which I caught just in time for the bad Wednesday a week and a half ago so am down about $4K with 100% scaling. Both of these seem worth sticking with though, so I will continue the quest.
There is a huge lack of participation by subscribers on these forums in terms of specific performance reports, etc. I would sure like to see more information from real world system traders.
Thanks Peter … I was tossing out another one of my periodic prompts for more subscriber response. Given the number of systems advertised on C2, and (presumably) at least several hundred subscribers in the subscriber universe, I would expect more chatter on actual performance results than we see here. There are lots of posts on the various system-specific message boards, but precious few of these relate real world trading results to the posted C2 results. Can’t figure out why.
One hypothesis for the non-response is that subscribers who made profit don’t want to tell too many others because, if many people join the system, it may ruin their own fills.
Another hypothesis is that those who make profit don’t need to read this forum every day.
Jules
Another hypothesis is that not everybody may be brave enough as Randy (very much to his credit), to see the consequences of their silence, too clearly (though sometime back there were quite a few who came forward with their experiences.)
Equity curve trading is a great way to monitor a system as to when to subscribe and trade it. It would also be a good idea to restrict new subscribers to a system until the closed equity curve crosses above the 30 closed trades simple moving average.
ps: A negative verdict (that one was wrong in the choice of a system resulting in self-doubt or self-hatred) is a sort of punishment.
Jules … I’d have to disagree with both of these hypotheses. The first one assumes that subscribers exist who are regularly making net profits from a C2 trading system, and the second one implies that the forums are read regularly only by people who are not making net profits.
I’d bet that if there were a decent sized pool (>100?) of profitable system subscribers at least some number of them would want to talk about their good results, and there are always general discussions in the forum concerning the web site itself, autotrading issues, etc. which have nothing to do with trading results.
