After months of persistent, er, constructive feedback from some users, I changed the system to display plain Return %'s rather than Annualized Returns. Now, personally, I happen to prefer annualized returns, because, when annualized, you compare apples to apples, and - frankly - because annualized returns are the coin of the realm - whether you run a hedge fund, or invest your own money, or just shop for a bank CD, you want to know the annual return on your money.
But at least one person complained incessantly that my displaying annualized returns was a plot to hype systems unfairly, and thus reap huge subscription fees (if only that were true.) So last night I changed the code to display plain old returns - without annualizing them.
And wouldn’t you know it? – I’ve now received at least one complaint that Annualized Returns are better, and a request to bring them back.
So here’s the deal. I will open this matter up for public debate. If you have an opinion on whether I ought to display a system’s annualized return or its plain return, speak now. Please make a reasoned, cogent argument.
In the end I’ll weigh the opinions and make my own decision. But at least I will do so and then be able to point to this open, public discussion later, when people complain. Which they will. I guarantee it.
Matthew
I will make some arguments for displaying cumulative returns and let’s have a debate. So here are a few points to think about:
1. Why not display both? Matt said there aren’t enough space on the board, but I think there is at least one column what we could do without. Still, the ranking should be done by cumulative returns.
2. The main goal of this website is to attract subscribers. I am using it for practice, but eventually Matt would like to make some money out of it. Thus you have to understand psychology. When a person sails onto this website and sees an annualized return of 2000% he quickly clicks away and doesn’t even gives it a second thought. It smells like scam to an average investor, and I am talking from experience. When a few people who I know came over and had a look, they almost immediatelly dismissed the website as scam. We are talking about people here who are quite happy with a 30% annualized return.
3. There isn’t really that huge difference as ranking goes for OLD systems. Right now both annualized and cumulative ranking show the same 5-7 systems in the same order. By old I mean 8 weeks at least.
4. There is a huge difference for NEW systems. Any few days old system with a winning trade will show up in the top with huge annualized returns and that means 2 things:
a/ It scares away subscribers.
b/ It pushes down older but continiously winning systems in the ranks.
Thus it gives an unduly advantage as ranking goes. Obviously, as time goes by, the new systems will slide DOWN on an annualized ranking, and that is one more argument why it is not so objective and very timedepending. On the other hand, when your system keep making money, you will keep going UP on a cumulative ranking system.
5. People are bad at math, but it is really not that hard to convert annualized to cumulative or back. Nevertheless, quite a few people won’t be able to make the conversion. Thus we have to keep this in mind and help them by displaying cumulative returns.
6. I don’t agree with Matt that annualized return are all the same fruits. Traders use different strategies with different timeframes, thus when we compare systems just looking at one characteristic is very missleading. What is a good return for an investor is not necesserily good for a daytrader. The point is here that we have to let people visiting the website to spend a few minutes here and understand how systems work. But when you scare them away with a huge annualized display, they are not gonna study the systems and you are not gonna get a second chance.
7. We could display the annualized returns at the individual system features. I don’t have a problem with it. I just have a problem with using it for ranking.
As a summary, my 2 main points against annualized ranking are
that it is not objective because of the different lifetime of the systems and it scares away subscribers.
Now if you have a logically, psychologically valid argument against mine, let’s hear it.
Hi Peter
I like your arguments. Especially this one:
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When a person sails onto this website and sees an annualized return of 2000% he quickly clicks away and doesn’t even gives it a second thought. It smells like scam to an average investor, and I am talking from experience. When a few people who I know came over and had a look, they almost immediately dismissed the website as scam.
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I suppose that you are referring to my system THE SCALPER .
It reminds me, about my option trading system, that 5 years ago, I have leased to a CTA. After 1 month, they did not have 1 client for this system and I have been asked to change it to produce less profits, (the profit was approx. 15% per month) as they could not market it to their clients. They suggested to adjust it to a profit of 3 4% a month. I did so and in 2 months they had approx. $4 millions under management.
The same happens again with my system THE SCALPER. I have NO subscribers to my system. The last 3 weeks I scaled down the trading frequency and the lots size to make less profits.
Therefore I would appreciate your and any other persons opinion, what I should do to make my system believable and therefore marketable?
Happy Trading
Martin
P.S I do not intend to sell or lease this system.
Hi Martin,
Regarding your comment:
>The same happens again with my system THE SCALPER. I have
>NO subscribers to my system. The last 3 weeks I scaled down the
>trading frequency and the lots size to make less profits.
I am still very interested in your system. The reason I haven’t subscribed yet is that I’m waiting for a solid track record to develop since the beginning of March, when Matthew changed the fill algorithm from “generous” to more realistic – ie limit orders have to be traded through by at least one tick; stops just have to be touched; fill price = limit/stop price, not the most favourable price in the bar. These relatively “minor” changes can make a huge difference to the performance of a scalping system.
So far the performance through March of the scalper has been quite volatile, hence my hesitation.
I would strongly encourage you NOT to “scale down” your system to make less profits. I suggest you make the system as profitable as you possibly can. Then, when you get one or two satisfied subscribers (like me perhaps?), I’m sure you wouldn’t have any trouble getting positive testimonials that would add to the credibility of the system, thus attracting more subscribers.
Just my 2 cents worth.
Steve
Hey Martin, nothing like success right? 
Well, I wasn’t refering exactly to your system, but general. Even my system has 300% annually right now. Those guys who visited the website were fundmanagers and CEOs or something, happy to have a 20-30% annually. A new system with one winning trade always shows incredible annualized anyway.
So, I am not exactly familiar with your system but that’s what I would do with an overly succesful system:
(By the way, if your system works like hell, why do you need subscribers?? Why not just get rich the old fashioned way and trade???)
1. Make up different systems with different returns. Even if it isn’t so, you could say that the system with higher returns is riskier. Then people can comfortable choose between let’s say 5 systems.
2. If you are too good for a month, make some losing trades. Also trade less frequently.
3. Make your system very easy to follow/copy. Longer holding period helps, even if it hurts the profit. Most investors don’t want to trade for 10 minutes. A few hours or maybe days help and in your case takes away from the profit I guess.
4. Also I am not sure what do you use futures or big amounts, but you could adjust them to. Using the same signals or whatever using now, but changing the trading vehicle.
Well, those are just a few ideas. But again, why not just trade your own account???
i think the return weather anualised or just the actual percent , will always bring in complaints . the truth is if a system is creating a profit then it will show up either way . percent gain or loss to date
is the simplist in my opinion .
You trade many contracts to impress, now you want to know how not to impress so much, trade one contract to impress the least.
what I should do to make my system believable and therefore marketable?
Well, actually Martin, I don’t think most people are looking for a swingtrading/scalping system. That requires very good timing and quite a big amount of money.
But here is my advise to you if you really can make let’s say 50% a month on the long run:
1. Don’t worry about subscribers. Get a loan on your house.
2. Trade. After 3 months pay back the loan.
3. Trade more until you reach 1 million.
4. Retire to the Bahamas. Put that money in a fund and live it off.
5. Send me a few bucks for this advice.
