Selling trading systems

Simple question. Why would anyone who has created a winning system sell the system to others…? I believe if somebody really felt their system was worth anything, they would simply trade the system themselves. I will not buy the argument that they are incapable of trading the system, there are automated systems available to take the emotion out of trading. Not that all system developers are not trading the systems, but those that aren’t I’d be wary of.

Two possible answers.

(1) The less cynical answer: it’s a way of creating additional leverage for your own trading. IE If you only have $25,000 to trade with, then making an additional $5K or $7K a month on subscriptions is worthwhile. Keep in mind that you can ask the very same question to hedge-fund and mutual-fund managers: “If you guys know how to make so much money trading, why do you want to trade with other people’s money? Why not just trade with your own? No hassles, no regulatory oversight, no overhead…” The answer they would give (I think) is that (1) there is a market need for their services, and (2) they feel they can be fairly compensated for the service they provide, in exchange for their time and trouble, and (3) they are creating leverage on their own capital and expertise.

(2) More cynical answer. It’s a free “call option” for the system developer/hedge fund manager. Since the system developer’s own money isn’t at risk, he wins if his system wins, but loses little if his system loses. Again, the same cynical answer could be applied to hedge funds and mutual funds, who are far more devious in the way they handle this (i.e. starting multiple funds, folding losers into winners, touting blended returns, etc.)

You ask a fair question, Matthew. The answer is probably a little of both.

Finally, let me add one more point. Even though I am aware of both answers, I still invest my own money and follow some of the systems on this site (through C2’s AutoTrade technology). I am pleased with the results. My feeling is: the fact that people do things for selfish reasons doesn’t mean that what they do is valueless.


I don’t think automated systems would work in the long run, though they make a lot of money for the brokers who sell such systems in the form of commissions on those large number of trades generated by such systems which are made more popular by brokers for obvious reasons (the house wins most of the time.) Also, there is the danger of automating a system before it is made perfect, otherwise it will only accelerate the mess. The danger can be minimized by minimizing the initial position size and reducing the position size (full or partial exits which is similar to raising your stop loss) when the losses exceed the systems statistical boundaries along with a redesign of the system which may inturn involve abandoning it in favor of a new strategy/system. The stop loss is the core of any system. If the stop is vulnerable, so is the entire system. Revealing your stop loss is smilar to showing your hand in a poker game which any serious trader will assert to.

Afterall how much gold would one pay to buy the golden goose, or in other words what price would one set for the golden goose? It is easy to set a price for the gold laid by the goose, which is similar to setting a price for the timing signal produced by the system. If there are too many golden gooses out there, what would be the value of gold?

There’s no substitute for expert judgment (managed entirely at my discretion – using all my technical indicators and my own investment and trading judgment, applied across a broad array of asset classes) in investing. But technical analysis helps investors filter out all the blather and hype about stocks, futures, forex, options and the economy. It’s based on hard, objective data from the market itself – not the half-baked opinions of talking heads on TV who have their own axes to grind.

rgds, Pal

Here are 3 more possible reasons besides Matt’s 2:

1. Not everyone here is a trading pro here. Some people are just practicing or testing different strategies.

2. This is a cheap way to build a track record, if one wants to work later in the trading industry. Sure, it is not real money, but better then nothing.

3. Some people can not handle stress. But they still could be good traders, provided that they don’t exactly know just how much money is really risked based on their trading…

Why does Bill Gates waste his time selling xbox games when he makes a fortune on software?mo money mo money