For those systems that have real time fill information available, it would be great to see a break-out of the real trading results. Like others, I’ve wondered whether Defiant is profitable. I broke out the trades by hand that have real brokerage fills and found that there were 287 winners, 168 losers, and a total profit of $57,309 (I think that’s close, I used a hand-held calculator, so it could be a little off).
That’s an average of about $126 per trade which means the system definitely makes money if you can get a flat-rate per-trade commission brokerage firm.
I then compared it to the trades that weren’t auto-traded to see how it holds up when money might move the market. There were 904 winners and 263 losers, for a total profit of $263,507 per trade. That’s a winning percentage of 77.5 percent compared to a winning percent of 63 percent on the executed trades. And the profit-per-trade for those trades was $226, almost double that of the executed trades. It looks like Defiant is profitable, but the amount of money that can be placed on each position can’t be that large.
I think if C2 breaks out the information in a similar way, it would be easier to compare systems.
One more point, this whole analysis should have been done on a percent-profit-per trade basis rather than a dollar per trade basis. The position sizes have grown as equity has grown so it’s really not “apples-to-apples” as it would be with percent-profit-per trade. I’ve asked Matthew before to add percent profit per trade as a metric for equity trading, but maybe if others request it as well, it will move up his “to do” list.
Agreed that %profit/trade is better than showing absolute gains/trade. Absolute gains/trade is useless because equity values do not start at the same amount for every system. And, as you said, when equity climbs, the absolute value of gains & losses seems more extreme - a misleading signal.
I have asked for a way to subtract trading commissions from claimed returns. Defiant is an impossible system for us bread and butter E*Trade and Ameritrade brokerage users. Exotic $0 fee commissions are unavailable to me or anybody I know.
There are far too many systems like Defiant that bubble to the top of the screening systems while truly solid performing systems remain hidden in the masses.
Keith,
Great post and research - keep it coming. I also think Defiant is viable if you set it up correctly.
I second your suggestion reporting profits as a percentage rather than in absolute terms.
While we’re on the subject, I’d like to add some thoughts of my own.
Is there really a need for the hypothetical/real trades separation? The current “real” table already shows C2 hypothetical price. We would only need the “drawdown & risk” info on the real trades list, and we would have everything on the same table.
It would be useful to also show real-life slippage as %, as sometimes $0.10 is a lot, and sometimes $10 is a little. Also, at the bottom of the table, I’d like to see an “average slippage %” for the real-life trades listed on the table.
Cheers 
"Defiant is an impossible system for us bread and butter ETrade and Ameritrtade brokerage users"
I went to ETrade’s webiste and their worst transaction rate is $12.99 on accounts with assets less than $50,000 and taking 0-29 trades a quarter. That’s $25 a trade, leaving you about $100 a trade with Defiant.
Ameritrade offers “unlimited shares” for $9.99 a transaction.
Am I missing something?
I would like to put a caveat out for people who might want to jump into Defiant after reading the posts here:
At some point, when there are too many subscribers and the volume for each transaction increases dramatically the system won’t be profitable anymore and it is always hard to know or estimate when this point is reached. What if a big hedge fund jumps in and spoils it for everyone?
If the fund is really confident enough about the system such that it chooses to trade it on a large scale (i.e. with millions of dollars capital allocated), it will simply offer the vendor a job or exclusive deal.
The point at which there are too many subscribers is evident in the difference in the stats between the executed trades and the C2 hypothetical trades.
The developer says he trades the signals so in addition to him, whenever there are any real fills, performance drops by about half.
The interesting part of the real/hypothetical track record is the number of starts and stops in real-time trading. There can’t be many subscribers at any given point, and the fact that they quit, even after 7 or 8 winning trades out of 10 shows me that they aren’t doing the recommended size. In that case there’s no way to make up the commissions with profits.
– Am I missing something?
I’m not sure I understand your question. Yes, those are the rates for E*trade and Ameritrade. Running the #s, you’ll see what I mean. Here are the numbers for Defiant: 228% annual return, 1380 trades/year, $500/mo service fee. Let’s use Ameritrade’s lower rates for the math at $10/position (one way) or $20/trade.
With $10k initial investment
Pre-fee account value at EOY = 10k * (1+228%) = $32,800
Less trading commissions = 1380 * $20 = $27,600
Less service fees = 12 * $500 = $6000
Total EOY value = -$800, a less than stellar 100% loss
With $100k initial investment
Pre-fee account value at EOY = 100k * (1+228%) = $328,000
Less trading commissions = 1380 * $20 = $27,600
Less service fees = 12 * $500 = $6000
Total EOY value = $294,000, for a 194% gain
Arguably, if you have infinity money to play with, defiant could work. C2’s ability to set any starting amount possible simply makes it difficult to compare systems. Maybe I should say it this way, defiant is an impossible system for people like me with <$100k to throw into one trading system and an Ameritrade account.
The point at which there are too many subscribers is evident in the difference in the stats between the executed trades and the C2 hypothetical trades.
There are two points:
1. It’s nearly impossible to simulate market order in stocks. However C2 shows estimated slippage.
2. The system is “flip-flop” for few cents on good sizes in very short-term time frame (few minutes) and it’s nearly impossible to do it on retail accounts due to commissions and bad executions of market orders and C2’s “real-life slippage” shows us previous experience of followers of the system.
In two words the kind of systems is used in prop shops.
Eu
"With $10K initial investment"
In fairness to the system author, he recommends a minimum of $15K traded at 4 times margin, or $50K account minimum.
I agree that slippage is a major concern for a system like this, and that’s what I initially was looking at. Turns out that the “real trade slippage” was lower than I expected. There were 271 fills with positive slippage, 277 fills with no slippage, and 369 fills with negative slippage. Across the 917 fills, there was $5.82 of negative slippage, about 0.6 of a penny per fill. In and out, about 1.2 cents of slippage per trade.
But including that slippage, the system made $126 per trade. Sure you need a big account to trade it, but the author is up-front about that. The only issue in my mind is how much total equity the system could support before it breaks down.
"In fairness to the system author, he recommends a minimum of $15K traded at 4 times margin, or $50K account minimum."
Yes, but that’s exactly the issue that makes it nearly impossible to compare systems here. Authors can recommend initial capital anywhere from $1k to $100k with the stroke of a key. But, author’s recommended initial capital and investor’s actual available capital are completely unrelated. For C2 to be useful for comparing systems, it should be able to normalize to user’s starting capital and subtract out real-life trading fees. Otherwise, results are purely academic.
"For C2 to be useful for comparing systems, it should be able to normalize to user’s starting capital and subtract out real-life trading fees."
I agree that C2 makes it difficult to compare equity systems (I don’t believe this is the case for Forex and Futures systems). With only a $ per trade metric, you have to break out the trades by hand to find out how equity systems compare. Book-keeping the trades by percent profit per trade would enable a much easier comparison. And breaking out the real fills would allow the potential subcriber to see how much the system is impacting the market.
How about it Matthew?
Keith,
Mainly I referred to “and real-life slippage ($144,291) for 1564 separate trade executions” stats. In general it shows negative average slippage. I’m not sure why there is some confusing difference between the stats and fill by fill stats.
Anyway, there is only one way to check the kind of systems for yourself. Trade it with one lot (100 shares) and calculate average execution slippage of your broker, because flip-flop systems highly depends from executions.
Sure you need a big account to trade it, but the author is up-front about that.
10-20K shares for few cents flop with market order on retail account? There is practically no way that you can achieve it. Current size recommendations looks very unrealistic.
Just my 2c,
Eu
I agree, and I am working on some upgraded functionality along these lines. I think they address many of the shortcomings and feature requests mentioned here.
I decided to test Defiant and Persistence {similar system but offers only a 2 day trial) for a few days. Today both had large slippages which turned a hypothetical profitable day for Defiant into a loser and a hypothetical loss for Persistence into a much larger loss. Of course, one day does not mean much but I am not sticking around with Persistance longer than the trial period.
This is the second and last time I am reporting the performance of
Defiant and Persistence.
Defiant had a hypothetical losing day but because of positive slippage I had a small gain for the day. Persistence had a hypothetical winning day but because of negative slippage I broke about even, all before taken commission into account.
Persistance did not respond to some questions I asked and also did not send me their performance statement for their last 5 years even though on the System Description page they say they would.
In fairness to Persistence I have to add that they offered me now another 2 day free trial for next week because of an unusually unfavorable stock environment this week.
This is the second and last time I am reporting the performance of
Defiant and Persistence.
No problem. It’s not very useful without your broker name anyway. However you shows us that C2’s flip-flop systems have little correlation between reality and C2’s track record.
Eu
