I know there are other threads like this out there, but I wanted to add my 2c to the topic.
Now that I’ve got about 1.5 years of active experience on C2 and I’ve been both watching a variety of strategies and also trading a few with real money, I’ve noticed some recurring themes, at least as far as avoiding risky strategies is concerned.
In particular, strategies that have blown up that I had some money invested in included Futures Wealth Builder, Volatility ETF Trader, and A Strategy for YM. Fortunately I was sized small and/or exited early on these so I wasn’t burned too badly by these failures.
Strategies that I’ve been following that have blown up are too numerous to mention, but a recent example was AlgoFolio Short.
Common themes amongst all these strategies:
- Lack of fixed stops or hedges, especially dangerous on leveraged instruments (futures) and instruments with tail risk (volatility strategies).
- Martingale-like trade entry (textbook example: A Strategy for YM)
- Any mention of overly complicated signal generation engines like A.I., neural networks, multi-factor models with 15 variables, etc.
- Regular large single-trade drawdowns. I’ll arbitrarily define that as >=5%.
It seems like any combination of 2 or 3 of the above will inevitably lead to system failure. All it takes is one really, really bad day.