Mathew and C2 Team,
I was one of the unlucky few who recently started auto trading “Safe Capital” and got burned. Not as bad as some, because I scaled down and maintained a much larger capital account than recommended.
I also contacted the developer several times over the past week and implored him to limit his scaling. He was out of control and it was difficult from the subscriber perspective to see what was really going on.
Upon reflection, I would like to suggest one possible improvement to the C2 system that might mitigate the impact of developers gone rogue like this. It would also give subscribers better control of scaling in general.
One of the things that has always bothered me about the current C2 setup is that developers often scale the systems at their discretion to match the theoretical capital. This keeps things looking good on a percentage basis, however, it makes it very difficult for subscribers to start at any point and establish proper money management. So, first, it would be good if the C2 statistics tracked performance relative to INITIAL CAPITAL only. Then, I suggest that C2 place strict controls on developers who wish to scale up. For example, they must provide a 30 day notice to subscribers and highlight their intent in a prominent way on the system detail page for potential subscribers. If/when they do scale, the recommended equity must be correspondingly updated. Recommended equity might also be a system parameter that is vetted by C2 based on margin requirements, etc. All of this, of course, requires that the developer establishes scaling boundaries up front as part of their system and it would require that C2 prevent developers from taking positions larger than what has been established as a system parameter. With all of this in place, subscribers are free to scale according to their own capital level and situations like what just happened with “Safe Capital” would be far less painful.
Thank you for your consideration of these ideas.
Todd
Agree with Todd. That would be beneficial.
Todd-
I’m not sure that I follow the main point of your post.
C2 has never allowed developers to “scale up” their systems - for the reasons you touch upon.
In fact, on C2, developers can only “scale down” their systems. “Scaling down” a system is analogous to a stock split: at the end of a “scale-down” a system will have less capital in its Model Account, not more. The system chart is redrawn, but at a lower basis.
“Scaling down” a system was designed to help developers whose systems have grown so much that their Model Account equity has become too large to be meaningfully traded with reasonable trade quantities. No one likes seeing a system that trades 100 futures contracts, or 300,000,000 shares of stock. So by scaling down, a developer can make the numbers more easy to understand.
One incidental effect of scaling down a system is that AutoTraders of the system - if they take no action after receiving the announcement of the scale-down - will start trading smaller quantities than they initially thought.
This is the reason we never, ever allow “scaling up” a system - because AutoTraders might suddenly find themselves trading more than they expect. This is something we do not want.
A further point: when developers scale down their systems, their system’s stats don’t really change, since most stats are calculated on a percentage basis. (A system that makes $1,000 profit trading 10 contracts on $100,000 of starting capital is effectively the same as a system that makes $100 profit trading 1 contract on $10,000 starting capital.)
Since C2 does not ever allow “scaling up,” and never has allowed such a thing, I’m not really sure what specific problem your post is addressing.
You write: “Developers often scale the systems at their discretion to match the theoretical capital. This keeps things looking good on a percentage basis, however, it makes it very difficult for subscribers to start at any point and establish proper money management.”
I’m not sure I understand what this means, concretely speaking. Could you be more specific about the problem you think this causes? Once I understand the issue more clearly, I’ll try to respond here. Or feel free to write me an email, if you prefer.
Matthew
I believe Todd was talking about the developer applying martingal technique ie averaging down using maximum leverage…
You can set limits in autotrading setup, for example max 2 futures contracts.
Mathew,
I was referring to scaling of position size. (i.e. number of contracts) In the case of "Safe Capital," the developer tried to quickly compensate for mistakes by trading a much larger number of contracts than normal. (His system required 4 contracts, but he started trading 8 and 12 contracts at a time) This immediately caused much larger swings and lead to disaster. In my opinion, this should never be allowed to happen. It makes risk management on the subscriber side very difficult.
With this in mind, please re-read my previous post and let me know what you think.
Thanks,
Todd
Panu,
I did that and it certainly helped, but it is not a clean solution. In this case, limiting the number contracts messed up the tracking because of the way the system exited positions in increments that sometimes involved odd numbers of contracts.
If position sizes were kept consistent by the developer over time, then subscribers can scale up as their accounts allow.
Todd
The main thing is that the autotrade limit protects against system developer gone mad. To me the position increments are not important at that point.
If I understand correctly you suggest that system developer would have a same kind of limit and he could not change it without 30 days notice. I guess that means he would set also the initial limit himself. And the next question is why would he set limits for himself.
If that question can be sorted out then I guess this would provide an extra level of protection. But at least for me the autotrade setup is sufficient.
Makes sense… the original premise of the trading strategy took a 180 degree turn after a few losses and then the trader attempt to recover losses overnight, which we all know isn’t realistic. So, I as a an autotrader into this system and an early advocate, like some of Todd’s ideas. We place our bets under the assumption of a predetermined trading philosophy. When that changes changes by the Ago owner, that need to be stated so subscribers can determine if they want that added risk, etc.
Something to consider for sure… I was up $12K and in two days down $23K… *** happens, but that wasn’t the original premise of Safe Capital. The trader got a little stressed and tried to please everyone one, but dramatically changed his trading methodology. We’ve all been there and have done that and know the results are usually bad.
"But at least for me the autotrade setup is sufficient."
Agree , i don’t see the difference autotraders already have control over their own account settings , they can limit the number of contracts traded , they can also add their own SL … etc .
