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I did a sort of the Grid to try to understand the quality of systems on this site and to gauge what is a realistic long term return expectation for a moderate level of risk (max DD of 20% or less). Here is what I found.
Grid Sort of Systems with 20% Drawdown or Less
System Age, # of Systems, Avg Return of Top 5 Systems, Average Sharpe of Top 5 Systems
6 Months, 137, 211.0%, 4.41
1 Year, 73, 97.4%, 3.11,
2 Years, 23, 32.4%, 1.69,
3 Years, 15, 23.1%, 1.71,
4 Years, 9, 16.1%, 1.64,
5 years, 6, 10.5%, 1.11 (1 beating the S&P500 Return),
6 Years, 4, 6.7%, 0.486 (None beating S&P500 Return),
Interesting. However, since you’re not forced to follow a system proportionally it can be argued that the drawdown of the actual system is not that important. So you could increase the maxDD filter and compare the riskadjusted returns (CAGR/maxDD) to the S&P. IMO that would yield a more practical outcome.
That is about what most of us expected I think. Great to actually see the numbers. The index investor in me says, “see just hold the index.” However, the Trade Leader in me says there is a chance that some of the best systems eventually go off C2 because they either get asked to join a hedge fund or they start making enough money for themselves that subscriptions are not necessary. For example, if I had enough of my own money I likely would just invest it and live off the gains. However, I don’t so the subscriptions are certainly worth it for me. Again, I think it is more likely that on the long term most systems on C2 will under perform the indexes.
Sometimes I think that C2 is all about jumping into right system(s) at its(their) early age and then jumping out in couple months. Repeat until you get rich of file bankruptcy.
It will be nice to see the long-term results of a robust and stable system that is properly scaled and/or compounded to adjust for growing account size.
It is possible to maintain and even increase the growth rate over time with good personal discipline, a stable and robust trading system, good risk and money management and a commitment to stay with C2 for the long-term.
Please reply with a link to the C2 system page if you know of any such examples.
Thanks for posting the results of your research. Your findings are very interesting and it is important for all of us to understand and heed the warnings of the phenomenon that you verified with your searches:
Pursuing high returns by following the latest and greatest rocket trading system (low initial capital requirements, high apparent return, short track record) inevitably leads to crash-and-burn types of failures.
Thank you for your compliment about the Lighthouse system.
Lighthouse will get a lot more attention as time goes by because it is stable and robust with a proper emphasis on an appropriate reward for a reasonable amount of risk in the long term.
The 25k starting value is based on a Monte Carlo analysis of out-of-development and out-of-sample trade results (no data mining bias, no optimization bias).
Two years of live testing after development and validation have convinced me that Lighthouse will be around for very long time.
I cannot see the future so I do not brag or make ridiculous claims about future performance in order to hype up interest and draw subscribers.
Thanks again for your hard work uncovering the few good long-term systems on C2.
Every now and again someone does a similar analysis on here. It’s especially disturbing when you consider we’ve been in a bull market for 8 years! So even in a good market it’s difficult to find a long term performing system. Also concerning–essentially NONE of the systems on C2 have been challenged with a bear market. When the current bull market turns, there will be big changes on the current leaderboard.
Here’s an update to the GRID sort:
Grid Sort of Systems with 20% Drawdown or Less
As of 10/23/17
System Age # of Systems Avg Return Average Sharpe
of Top 5 Systems of Top 5 Systems
6 Months 137 211.0% 4.41
1 Year 73 97.4% 3.11
2 Years 23 32.4% 1.69
3 Years 15 23.1% 1.71
4 Years 9 16.1% 1.64
5 years 6 10.5% 1.11
6 Years 4 6.7% 0.486
As of 8/30/2018 System Age # of Systems Avg Return Average Sharpe
of Top 5 Systems of Top 5 Systems
6 Months 142 354.4% 4.33
1 Year 79 81.0% 3.05
2 Years 31 32.2% 1.86
3 Years 14 16.8% 1.456
4 Years 11 16.3% 1.466
5 years 10 15.7% 1.455
6 Years 7 10.7% 1.1
There is only one 6year old program that meets the above criteria and is beating the S&P500 over the same period.
Which is a long only strategy and goes up to 1.5x leverage. Put differently, you just have to trust the bull market and go 1.5x leverage all the time to get higher performance, for example by holding 50% cash + 50% SPXL. This way you´d net a performance of ~326% with MaxDD of approx. 16% in the same period. Number crunching rarely pays off because the big institutions simply can do it better… On the flip side most discretional traders burn their accounts because of overleveraging or mental pressure. Draw your own conclusions.
