Okay!
PropTrader and I exchanged emails. What I wanted to confirm – the most important thing – is that there is not some secret “exploit” that allows someone to maliciously post a super-profitable strategy on C2 with 100% certainty that each trade is profitable, and no risk of failure.
That is not the case here. 
What PropTrader has described (to add more detail to his previous post) is simply this:
For strategies without AutoTraders, Collective2 assumes that – in the case of limit orders – you will get filled at a bid (for Sells) or at an ask (for Buys).
In real life, this doesn’t always happen, because orders that do not “trade through” the limit (i.e. go above or below them) may not have sufficient volume in the marketplace to fill all bids or asks that are posted. Yes, some orders will get filled, but it is not guaranteed that all will be filled, nor (more importantly) that all C2 Members’ orders will be filled.
(Just an aside: the fabulous chart PropTrader posted was indeed unrealistic in this specific regard, but it could have been unprofitable, too. His simulated trading enjoyed a bit of luck in that prices didn’t move down during the time he entered his trades. In other words, this is not a software exploit.)
The problems of limit orders that do not “trade through” the limit price is a well-known problem in simulated trading, and there is no perfect solution. After all, it’s conceivable that there might be enough volume to fill many or even all AutoTraders, even if the limit order does not trade through.
So, sure, C2 could absolutely require a trade-through to fill a limit-order in cases of no AutoTraders. However… Strategy Developers could make the reasonable argument: “Look, while it’s true that there is no guarantee that all people would be filled, it’s equally not true that all people will not be filled.”
That is why I really like C2’s use of real-life AutoTrading fills to determine the fill prices of strategies with AutoTraders. We actually show you how many orders really got filled, at what price, etc. The problem is solved automatically through the use of real-life fill data provided by real brokers from real accounts.
The challenge is: C2’s solution is only possible when a strategy has AutoTraders.
For now, what I suggest to members of Collective2 is to always remember C2’s admonition that results displayed on C2 are hypothetical. Even in cases where our data is based on real-life fill prices, remember that there is no single account that looks exactly like the C2 Model account.
More important than that: I think subscribers ought to strongly discount results that do not include AutoTrade data, particularly if the trades are limit trades and the profits on those trades represent are not much bigger than the bid/ask spread of the instrument.
This is yet one more reason to strongly encourage all Strategy Developers to actually trade their own strategy, either through the use of BrokerTransmit, or by AutoTrading your own strategy just like a subscriber would, in a real broker account (that is, if you do not use BrokerTransmit to generate your strategy’s orders).
Another possibility I am considering is somehow visually flagging on the C2 Strategy track record those trades that seem less likely, and when there is no AutoTrading data.
I should caution that this opens its own can of worms, and I’m not 100% sure what the regulators will think of this idea (does flagging a trade a “less likely” somehow imply that other simulated fills are “more likely” …yes, we always need to think about UI in these terms…)
But I will noodle this and see if there is some kosher way to visually flag “scalpy” limit-order simulated fills.
