Feb 21, 2007 Reviewer: AutoTrader of system
2/21/07 (update) 30% drop in one day (after bad earnings news) b/c vendor held on to position described below. Back to zero now. 2/12/07 a 14% drop in equity in just 1 day for a stock system is too risky for me. Especially if this is caused by just one position (after averaging down into it heavily) in a portfolio of 15 stocks while the broader market is just doing fine. With one bad call the vendor gave away 2 months of profits on a single day.
Rebuttal by Brad Goldman - Posted on 2/21/07 11:38
Yes, we take large positions in stocks. This can cause a draw down when a position goes against us strongly. However, the strategy should allow us to recover by repositioning ourselves in another stock.
Somehow, a quick second, huge drop supports the reviewer’s thoughts, not the rebuttal. The strategy seems best suited to cough up months of profit, not “allow us to recover by repositioning ourselves in another stock.”. It took about 84 days to gain $35K, and about 21 days to cough it up. I would side with the reviewer. The rebuttal only makes the review seem more correct.
Its a darn shame we cannot involve in interesting reviewer comments for a system. Would be nice to ask questions and have some give and take; the reviewer can still remain anonymous.
You can still ask your interview questions here, but the answers won’t be anonymous. I’am not sure that anonymity is always desirable. I have done many evaluations for the statistics courses that I give. These included both anonymous and non-anonymous reviews. Generally, non-anonymous reviews tend to be much more balanced and motivated. People tend to believe that anonymous reviews are more honest because the reviewer cannot be intimidated by the reviewed party, but the disadvantage is that the reviewer has no incentive to think before he writes.
I’m not that reviewer but I agree that the 30% drop was avoidable. NFI dropped more than 30% in value overnight and I can understand that he didn’t see that coming. So I don’t complain that he still had that stock, but I think that the position was too large to hold it this long.
This is of course a matter of taste. If you want large profits then you must accept the risk of large drawdowns. In this case the risk seems to be above my tolerance level. Moreover, these “large profits” don’t exist yet, and that is not a matter of taste.
"People tend to believe that anonymous reviews are more honest because the reviewer cannot be intimidated by the reviewed party, but the disadvantage is that the reviewer has no incentive to think before he writes. "
That is true. I also think some reviews seem to be rather naive. But the biggest problem I have had is the rebuttals. Rarely does a vendor’s rebuttal seem to negate or intelligently addresss the points of a negative review. It often seems to be either self-denial or makes the problem worse.
Reviewers can raise really interesting points that cannot be discussed by others, only voted on. This reviewer touches on the fact that a number of systems throw all caution to the wind trying to run up their equity curve, ignoring the perils to any subscribers and/or ignoring their own description principles or demonstrating really bad money management.
Well… If you don’t mind let me give my point of view for reviews of Tango, as a fact.
Most popular is "After following for 4 month I lost ~10% " - Actually I cannot blame the subscriber. He/She exited from the system exactly on bottom of biggest DD. At the moment I calculated partial liquidation on 30% DD level. He/She might be right, but unfortunately for the subscriber ego I was right. It’s fear.
Second popular review is “I am quite disappointed in this system.” - The subscriber was smart enough to wait until recovery from latest DD. Only after that the review was written. Of course we don’t care that the subscriber didn’t loose 10% of his/her capital and the system recover loses. - greed
Best review “The fills shown in the closed trades are accurate, even conservative.” is from person who used the system signals only as a direction. Something as Lew is doing. - knowledge
My lovely one is “Got tired of receiving more than a hundred SMS trade alert messages on my phone”. hehe trading EOD system that manipulates with dozens of orders by SMS… It’s something… - funny
Eu
P.S. …and I have few scary stories when subscribers modified the system even without asking me and lost their money when the system performed well 
The real problem with my NFI position is that the company engaged in a Ponzi scheme where TI (taxable income) was only growing by them increasing the number of loans and by paying dividends all at one time, when they knew there would be losses that they would need to make reserves against in the future.
I did sell 1/2 the position, but am holding 1/2 since the stock is at current cash value.
My system as I noted before will not do well if the companies I invest in engage in fraud, since I am not an insider and don’t have that knowledge.
Sometimes that is why a system that buys or sells an index may be less risky. However, I still think that my system can generate enough winning trades to make back my loss. I am hitting for home runs, so I do have concentrated positions and will average down if I still believe in the company.
What is sad, is that I read messages from people who had all of their retirement money invested in NFI and lost all of their retirement savings. One person lost 15 years of investing or about $ 400,000 today.
My retirement portfolio took only a small hit on NFI since I am well diversified.
That is not sad, it is their own fault. If you don’t manage your risk to the market you have no one to blame, but yourself.
No, what is sad, is that you are not even aware how close you are with your system on here to also bankrupt someone following your system. You only need three NFI’s in your portfolio to wipe out an account.
I cannot see how anyone can even attempt to defend a 30% portfolio loss as a result of one position. What if you had two stocks like that at the same time? Or three? Would you still be confident that your winners will make up a 60% and 90% loss? To make up a 30% loss you need to return ~43% to break even. For 60% loss you need to return ~150% and for 90% loss you need to return ~900% just to get back to where you started. Only someone very naive with limited experience will think that is not a big deal as you are trying to portray it.
well said, Chris
Reminds me of the author who described an argument between a fundamental and a technical trader. At one point, the fundamental trader accidentally dropped his steak knife, and watched as it went into his foot.
“Why didn’t you move???” asked the surprised technical trader.
The fundamental trader said “I was waiting for it to go back up.”
The real story is even better and it goes like this. A big Fundamental Soybean Trader who accounted for nearly 8 percent of the daily volume in the pit was ready to go home one boring afternoon in early march of 1988, At the time, beans were locked in a trading range for over 4 years. His devout clerk who diligently works his orders and are his eyes and ears in the pit picks up the phone excitedly informing his master that the market is sitting at heavy resistance based on Stoch’s, Macd and a host of other “Sound Technical Indicators” that have never been seen in nearly half a decade. He also told him that the pit and many big speculators have been quietly amassing short positions through-out the afternoon. He proceeded to recommend to his master that he too should start shorting and take advantage of this once in a decade opportunity. As the clerk was anxiously awaiting for a short order to be given and the market was about to close in 10 minutes, the phone goes silent for several seconds, then the order came - loud and clear - Buy 4,000,000 (four million) bushels-, at THE MARKET. The clerk in disbelief asked his master if he really meant sell instead of buy. His master said Did you hear what I said then proceeds to hang up the phone. The clerk not wanting to get fired, rushes to the pit and starts shouting to get this monster order filled as quickly as possible. Within minutes, chaos filled the pit in what otherwise was supposed to be a calm and dull afternoon. His order managed to trigger an avalanche of stops that caused the market to go limit-up near the close and remained limit for several days. Within a few months, beans managed to make a new 15 year highs. The moral of the story
.well, I’ll let you be the judge.
My lovely one is “Got tired of receiving more than a hundred SMS trade alert messages on my phone”. hehe trading EOD system that manipulates with dozens of orders by SMS… It’s something… - funny
That review was written by me. At the time, C2 was advertising the slogan, “receive trade advice through your device.” It worked fine, until I hit upon a FOREX system that micro-adjusted every pending trade, several times per day, across a dozen currency pairs - to the tune of 100+ phone messages per day.
Still, I can’t complain - it is excessive signals like that which pissed me off enough to motivate me into writing my own trade management system.
I have removed that review for several reasons… 1) You unintentionally brought it to my attention; 2) I don’t see SMS touted as much on here these days; 3) Your system has a nice track record with steady profits and lower draw-downs and is deserving of a positive review; 4) Some subs might mistake the SMS irritation as a negative about your system, when clearly it has nothing to do with your system.
"I did sell 1/2 the position, but am holding 1/2 since the stock is at current cash value."
And now you added again to the NFI position, while it is still going south. You’re trying to catch a falling knife. That can be your trading style, but what I don’t like is that yesterday you suggested that it was an error to have so much concentrated on one position, since you sold 1/2 of it, while today you are re-purchasing it again.
> The real problem with my NFI position is that the company engaged in a Ponzi scheme
The real problem is you are still long. You can’t control the market. You
can control your position.
Brad Goldman
The real problem with my NFI position is…
(sigh) Please, don’t take it as criticism. Just 2c of my opinion that might not have the price.
IMHO the problem is in balancing trading capital in your portfolio, but it’s hard to say without knowledge of your system. So just my 2c.
E.g. You cannot imagine how much sh@t from subscribers I ate on one position. The stock lost 40% on overnight news and added 10% of loss during a session. 50% loss on one position (two open trades). Total drop was ~5% from trading capital in one day. Until I said that the stock will be traded by the system rules even if it goes to pink I had a lot of sh@t on my head.
Chris Morse
I cannot see how anyone can even attempt to defend a 30% portfolio loss as a result of one position. What if you had two stocks like that at the same time? Or three?
Agree. It’s known problem with stocks and portfolio. How many news losers you can have and avoid margin call.
Lew Payne
That review was written by me.
Aha
I have removed that review for several reasons…
Actually I smile every time when I read your review. I was trying imagine how somebody received 20-100 orders on SMS and sometimes it made my day
Eu
> A big Fundamental Soybean Trader who accounted for nearly 8 percent of the daily volume in the pit was ready to go home one boring afternoon in early march of 1988, (snip} the market is sitting at heavy resistance based on Stoch’s, Macd and a host of other “Sound Technical Indicators” {snip} He also told him that the pit and many big speculators have been quietly amassing short positions through-out the afternoon. {snip}
> The moral of the story
.well, I’ll let you be the judge.
Maybe the “Fundamental Soybean Trader” understood the technical aspect of a bearish consensus…i.e. if everyone is short the market MUST go up. To hell with “Stoch’s, Macd and a host of other “Sound Technical Indicators””, he pushed the market into the technical territory of “everyone’s” buy stops and let the panic begin. Perhaps the fundamentals were in his favor, but what you describe is a classic technical short squeeze.
And FWIW, better to be stopped out on day one than to be short when “the market (was) limit-up near the close and remained limit for several days.” IOW, when you are wrong (in NFI, the beans and for whatever the reason) just get out.
> the market is sitting at heavy resistance based on Stoch’s, Macd and a host of other “Sound Technical Indicators” that have never been seen in nearly half a decade. He also told him that the pit and many big speculators have been quietly amassing short positions through-out the afternoon.
FWIW, there are other technical gems if you read carefully. There is heavy
selling and the market is just “sitting” there. Moreover, the market is “sitting at heavy resistance {snip} that have never been seen in nearly half a decade.” IOW, the market has already broken out of a “more than four” year range. A classic trend following (channel breakout) buy signal.
> Buy 4,000,000 (four million) bushels-
For all you newbies a bean contract in 1988 was 5000 bushels, so although this is a big trade, it is 800 contracts. Our very own Pink Pig dwarfs the size each and every day.
Actually I smile every time when I read your review. I was trying imagine how somebody received 20-100 orders on SMS and sometimes it made my day
I’m guessing it would require two cellphones… one to receive SMS trades on, and the other to constantly dial your broker and place trades with. If you tried to do it all with just one phone, all your conversations would be constantly interrupted by SMS beeps…
“Hello… I’d like to [beep] to open 10 contract of ES[beep] limit fourteen sixty [beep]… thanks, bye”
