Setting Allocation - what exactly is scaling?

C2
21

Yes, your “Scaling %” is applied first to the BUY/SELL signal quantities, and then to the overall position held by the strategy.

Example:

Assume you set your AutoTrade Scaling to 50%.

Now assume the strategy you follow does as follows:

Strategy: Buy 12
(you Buy 6)

Strategy: Buy 7
(You buy 3, because 3.5 rounded down is 3)

Strategy: Buy 1
(You buy 0, because 50% of 1 is 0.5, which rounds down to 0)

Ah, but now the strategy is long 20, but your broker account is long only 9. C2’s AutoSync process kicks in and says, “Customer is trading at 50% Scaling Percentage, and strategy is long 20, but customer is only long 9. So we need to buy one more unit to get customer synchronized.”

Ideally, then, you want to trade at multiples of 100% scaling, or a percentage that leads to integers given the strategy’s trading pattern.

To understand what I mean, look at these examples.

A strategy that always does this:

Buy 5, Sell 5… Buy 5, Sell 5… Buy 5, Sell 5…

can effectively be traded at virtually any Scaling %.

A strategy that trades this this:

Buy 20, Buy 10, Sell 30

can be traded at 10%, or 20%, or 30%… etc.

But a strategy that does this sort of thing:

Buy 2, Buy 3, Buy 4, Buy 5, Sell 14

can really only be traded at 100% scaling (or 200%, or 300%, etc).

Matthew

3 Likes
22

Thanks Matthew and Andrey for your detailed answers. Appreciate it!

23

I looked into Zip4x’s recent trades and there were some trades as small as 50 contracts which at a 1% scaling results in a scaled order of less than 1, so no order would be placed - resulting in break of sync, a potential big money losing situation.

A sync of 2% provides a correct sync on trades greater than 50 (resulting in an order of 1 for a 50 lot).

2% requires $20k to cover $1 million of capital utilized, which Zip4x says is the upper limit normally used. But if the entire $1.8m account had to be used - in say a draw down situation - that results in a capital requirement of $36k, so if you didn’t have that kind of cash, your account would blow up.

I have to say, C2 doesn’t make it easy to get a handle on these numbers and make solid decisions.

How many accounts get blown up as a result of this? The recommended minimum allocation doesn’t begin to explain the complexity of making a good decision regarding required capital and is actually very misleading.

At the minimum an FAQ should be created for this topic, and some kind of worksheet showing the variables of the vendors account size and capital used, trade size, etc. would be useful. Based on what I have read, a lot of people don’t have anything close to a handle on this topic.

1 Like
24

It won’t be any harm to your account if the order will not be placed due to scaling reasons. Just no profit or no loss, nothing breaks in this case.

IMO the best way to get scaling level is to download all system trades to .csv and play with the numbers in excel: set scaling, calculate position size, p/l size and dd size based on this scaling. This will help you to come to conclusion.

1 Like
25

I think the problem is when a position is built in a series of trades (and some of these which might not go through due to scaling issues), if it is closed in one trade - that would be more sold than the contracts bought; wouldn’t that be a big problem?

2% scaling works a lot better on contracts more than 50 (resulting in an order of 1), but still doesn’t divide to whole integers in a few cases, such as 520 resulting in an order of 10.4, which couldn’t be placed.

And - as I’ve noted above - is the issue of 2% having a lot more capital requirements of up to $36k at full account size.

If anyone can help me with selection criteria to get around these issues I would greatly appreciate it. Other than monitoring all the trades (which I can’t do) what is the solution to having reliable trading with these scaling issues at play?

26

The position on your account will be closed as soon as it will be closed on the model account. Nothing remains, auto-sync does its job.

27

Does that truly work that well, given the mess of trades - both opening and closing - possibly not going through?

If it can handle that, I would be very impressed!

28

Check out couple messages above in this thread, the situation with series of trades is described.

29

Yes, it works.

The important thing to remember is that C2 handles closing trades with different logic than opening trades.

Closing trades are treated as a percentage of the open position.

So, when the C2 Model Account issues a signal to close 50% of the position that is currently open, that’s what will happen in your broker account, too - regardless of which opening trades you “took” or “didn’t take” due to your personal Scaling % preferences.

Similarly, when the C2 Model Account issues a signal to close the entire remaining position (i.e. to go flat and close 100% of the open position) then that is what will happen in your broker account, too, regardless of whatever crazy-assed scaling percentages and trade-minimums you chose to use on the opening side of the equation.

Then, lastly, C2’s “AutoSync” technology acts as a fail-safe, cleaning up any (unlikely) discrepancies that might occur due to signals that cross each in the Internet ether other due to latency, lost broker connections, etc.

30

Thanks, thats a lot more sophisticated that I would have thought. That makes auto-trading much more do-able.

I still have issues with the capital requirements of a profitable trading level with Zip4x.

1% isn’t profitable and 2% has an all in capital of $36k due to his large $1.8m account. Is there a way to include account size in the search criteria, or should I be looking at other criteria to keep total capital requirements in line? The suggested trading allocation doesn’t seem give the whole picture - at least in this case.

31

This field is not available in the Grid at the moment but I have already wished (as well as some people here on the forum) that the Current model account size is available as a search field. I agree the minimum capital requirement is not always the best indication which system you can afford to follow with your account size.

Zip4x is a perfect example. 10K minimal required account size indicates you should be able to follow it “easily” but the model account size of 1,8M USD makes the correct scaling hard.

32

Hi Matthew
Let say the developer has 400 in c2 for 1st position, 50 for 2nd position, 30 for 3rd position n 10 for 4th position.

How to set up if I want to participate every single position but I want to limit my maximum size is 2 in c2? Is it possible ?
This will help for someone who has limited capital.

33

All this talk about a system with 90% drawdown? Is that where subscribers flock on C2, to the system with the highest return here and ignore the risk? Does everyone think they can get out before their accounts are wiped out, or are people not even thinking that far ahead? Seriously I’d like to know what the thought process is. Maybe I can make a huge return system too if people don’t mind that it blows their accounts out occasionally… you won’t see me trading it myself but I’d be happy to collect subscriptions on it.

3 Likes
34

@BBTC:

You can set a “max trade size” but you need to keep in mind that the same “max” setting applies both to per-signal opening buy/sell quantities, and overall position sizing.

So, for a system that legs into trades – that is, that adds to its initial position – there is no way to tell C2: “Follow all the trades, but only allow each individual opening buy/sell to be 2 units big.”

(You could do such a thing for a system that does not leg into trades.)

The reality is that strategies that leg into trades - particularly those that do so at varying quantities (i.e. Buy 400, Buy 50, Buy 30) - are not tradable at C2 if you want to limit the trade size to some number smaller than the overall position size you are willing to take.

An alternative (not exactly what you asked for), would be to set a low Scaling % that is sufficient to take all the trades, and set your Max to the largest aggregate position size you are willing to hold.

So, to use the example you proposed above, you could set your scaling to 10%, with a Maximum Size setting of 49. Then your trades would look like this:

Buy 40, Buy 5, Buy 3, Buy 1

Your overall position would be 49 at that point.

Again, not exactly what you asked for!

In summary, not all trading patterns are supportable at all scaling percentages.

35

Is it possible to incorporate per leg entry size limit?

Looks like here at c2 we have a lot of systems that use series of entries per position, intentionally or ocassionally. With per leg size limit subscribers will be able to follow such strategies more precisely from one side, and with limited risk - max size per entry - from another side.

36

DavidStephens

All this talk about a system with 90% drawdown? Is that where subscribers flock on C2, to the system with the highest return here and ignore the risk? Does everyone think they can get out before their accounts are wiped out, or are people not even thinking that far ahead? Seriously I’d like to know what the thought process is. Maybe I can make a huge return system too if people don’t mind that it blows their accounts out occasionally… you won’t see me trading it myself but I’d be happy to collect subscriptions on it.

I agree. Whenever you reach an extreme level of machination trying to figure out a way to trade a system in your account, whatever the limitations, is more often than not a sign you should move on. It usually never ends well.

1 Like
37

While Zip4x has had a big drawdown he immediately corrected and recovered. Although the account is $1.8M, the capital typically in use in 25K up to 1M. Not many strategies generate the kind of returns this system generates and it has been producing high returns for 900 days, one of the longer track records on C2. With a high return strategy like this one, in a few months your capital is returned - then you are playing with the houses money and it doesn’t get safer than that. While the Monte Carlo simulation looks scary your actual exposure is limited to a few months to obtain potentially obtain many months or years of risk free high returns. Enzo is an incredibly talented trader so I wouldn’t be so quick to write Zip4x off. He is trading a $1.8M account very skillfully.

38

Absolute non sense because you will join the system now not b4 3 years so nothing safe or skillful about it just another martingale system i wouldn’t touch with a bargepole .

39

When the first time I saw the developer’s record has high DD, I stay away from this model, but I saw, why this has high profit trading factors, sertino, etc. Please see how he manages his capital when he trade in. He only put Small percentage of his capital in his trade. That’s why when you have small capital such as 2 % from his capital ($1.8 million) and you want to scaling 10 %. You better give me check to me for charity, just PM me I can give you acct # :smile: .
I always put very small contract in C2 for the first position, and I limit open market at the same time. Meaning, if he has 3 different markets at the same time, I will choose only 1. Once he finish that trade, I will consider another market for the next opportunity.
It is always for your benefit as investor, you also understand how to read the market, I am talking how you read and understand the chart and not news. That’s your money and your responsible to your money.
Combine together with his work, u can minimize you DD and increase your profitability. The bottom line, I always put small contract in the first position such 1 or 2 in C2. (when I use 5 %, I will force to reduce my position to become 1-2 in c2, you bet I will loss/gain some money but I can survive/limit if the market against me )

40

Thanks Matthew for the answer.
I have another question, when the developer has position in market A and market B in the same time.
I closed intentionally my position in the market B while he still have open position in the market B.

After I closed my position in market B and he still have open position in market B and I want to enter a new position in market B.
How does C2 system work after I put manually a new position in market B from IB platform?
Will C2 still work properly into my account when the developer add a new position and close his position in the market B?