Matthew,
Is there a way that I can view all the systems on a post-commission and post-membership fee basis? All of the systems today are stored and sorted on a pre-commission and pre-membership fee basis.
Ideally, I want to enter my own starting capital ($15k) and my own e*trade brokerage commission ($9.99/stock trade). And I would want to see the account equity start at $15k for all systems (not the random $10k to $100k that each vendors chooses). Subtracting membership fees would decrease system returns and make the vendors think about subscriber ROI differently. If C2 was set up this way, I can compare historical returns personalized to my own real-life account, and make an apples to apples comparison.
Today, C2 shows cumulative returns “after typical commission” on the side bar which is helpful; however, I have to click on each system to find this number and also I don’t know if “typical commission” = $9.99/ stock trade. But most importantly, the comparison between systems on System Finder is pre-fees and uses random starting capital. So it’s apples and oranges. A system like Defiant is undesirable for my personal account even though it shows high theoretical returns - commissions and membership fees would deplete my account to $0 in less than a year. I’m searching for a realistic way to sort through the thousands of systems here. Some mid-tier systems will float to the top and some theoretical high flyers will sink on System Finder when real-life fees are applied.
Thanks for any thoughts.
We were having a thread about this a while ago. I think it came up with the issue of charts. Right now, to see a “realism + commissions” chart, you have to specifically go to the system page and click the option. You can’t have it as default on The Grid or anywhere else. The issue of personalized commissions and available capital was also discussed.
One problem would be for systems that don’t support down-scaling too well, mostly futures systems. Maybe those could display a warning or something. There’s also the problem of systems showing much more capital than is really needed. There are plenty of systems that, for example, show an account of $200K but really trade on $40K. Someone with $40K may think he needs to scale down to 20%, but he could actually trade full-size.
I would also like to see charts reflect real life autotrade fills, when they are available. I don’t know if they already do that when I select realism factor, or if it’s just some generic calculation. Stats could also be based on real fills when available, upon the user’s choice.
Yes, thanks. I’ve seen and participated in the discussions before but I couldn’t find the “answer,” if there was one. As it is today, it remains difficult to compare systems apples to apples.
1) as you said, you have to click on each system, one by one to get the “realism” returns. Was there a reason you can’t have realism as a default on the grid (besides that it’s not programmed that way today)?
2) One primary purpose of personalizing to personal accounts is to filter out systems that don’t work for that person, i.e. systems that don’t scale down well. Systems that rely on $0.01/share gains are not realistic. Lower initial capital investors will find that filter useful.
3) When I click on realism and see typical commission, it is not immediately obvious what is being done in the calcs. C2 doesn’t know what I pay for commissions so assumptions exist which are surely different than my personal acct. Also, is realism subtracting out the vendor’s membership fee as well (I doubt it)?
4) Autotrade vs theoretical fills is a good point too; however, I’m certain that the difference between autotrade vs. theoretical fills would be negligible relative to the losses due to membership fees and commissions.
New techniques to view realistic historic returns, i.e. theoretical returns less our personal brokerage account commissions and less system membership fees, would make C2’s comparison grid and filters more useful and practical for the individual investor.
This is a great idea. It would make it easier for potential subscribers to find signals that are not going to eat up their accounts with commissions and subscriber fees. For a subscriber that has a smaller account they could find signals that dont trade as often and have a lower monthly subscription fee. A $100 a month subscription fee can easily eat up a $5,000 account.
Rick Haines
[LINKSYSTEM_27416498]
"systems showing much more capital than is really needed. There are plenty of systems that, for example, show an account of $200K but really trade on $40K. Someone with $40K may think he needs to scale down to 20%, but he could actually trade full-size."
I think that is an extremely dangerous assumption. The system could have a perfectly acceptable drawdown and the subscriber trading full-size will get wiped out.
Well maybe I exaggerated, I didn’t mean making it so tight. But certainly there are many systems where you don’t need the full C2 account size to trade at 100% scale. Particularly in futures systems, where scaling is difficult.
And your reply also takes me to another unrelated problem. As systems grow, they tend to have a decelerating growth curve and smaller drawdowns, because the account size is growing but the vendor still trades with the same amount. So larger dollar losses are reflected as smaller percentage drawdowns, and vice-versa for profits, which can be misleading.
I like the idea of personalizing to personal accounts. But including the fees in the statistics and charts sounds rather complicated if I try to fill in the details:
1. What to do if the fee changes? Should the new fee be used for the entire equity curve or only for the part to which it applies? At first glance I would prefer the latter, but then it becomes hard to distinguish a change in performance from a change in fee. This option also means that data about the fees have to be stored along with the equity data.
2. When should a monthly fee be subtracted from the equity? I suppose it would be subtracted once per month, but that creates artificial drawdowns (e.g. a day with a drawdown while there were no trades). And at which day of the month should the fee be subtracted? In reality this is different for each subscriber.
Although I believe that these are only minor, technical points, I am afraid that whatever choice is being made in these points, there will be vendors who are strongly against it.
Jules, great point here: "I am afraid that whatever choice is being made in these points, there will be vendors who are strongly against [subtracting membership fees to calculate returns]."
And I respond to the point above with … exactly the point. C2 is exploiting a classic marketing trick. Companies commonly maximize or minimize one feature at the expense of other, more important features, in this case total post-fee return is the most important feature. Imagine if doctors were publicly rated on % success curing patient’s cancer - some would exploit this by taking on easy cases to boost their statistics (and ultimately, their fees) while truly talented doctors with tough cases would statistically appear to perform poorly. People change their behaviors based on what they are graded upon. If you grade upon unrealistic pre-fee returns, people will exploit that and find techniques to maximize that one feature. And this system gaming all comes at the expense of the buyers looking for attractive, realistic trading systems.
Some vendors are generating high pre-fee returns at the hidden cost of fees + commissions. Then the C2 filters sort by pre-fee returns which cannot be replicated in real life. All the while, potentially higher return systems under realistic conditions are hidden in the middle.
To your point again Jules, a change such as this could impact Matthew’s revenues. Putting myself in Matthew’s shoes, I would probably set up C2 to maximize C2 revenue, meaning more subscribers for the high-fee systems. Any technique that drives down the subscription fees would probably be frowned upon, and for that reason alone, we may never see this feature.
Regardless of the drawbacks, a reasonable goal is to sort for systems including all costs of ownership. So you’re right, the people who are gaming the system by maximizing pre-fee returns at the expense of commissions and fees are not going to like it. And yes, I can predict that additional “regulating features” such as this will come with dissention. But for the sake of us all, please bring in more regulation. C2 still feels like the Wild West.
I have been here > 2 years, and consider Matthew as not someone who plays games or cheats. We may not always agree with the C2 decisions, but he also has to walk among dozens of various opinions, the intergrity of this site, his own sanity, and marketing realities.
This is not a ministry but a for-profit site. But who knows, maybe it is Rev. M. Klein. 
You have to also consider the alternatives - many of which don’t even give systems stats, just equity curves…
Sorry, I was not trying to imply that Matthew plays games or cheats. All I said was that he is running a business and has to factor in how changes might impact his business. And changes that improve our experience at the expense of C2 profitability may not be implemented.
By the way, ebay had this same problem for the first several years of its existence. Sellers realized they could maximize clicks & views onto their product by minimizing a meaningless metric, the product price. Sellers would charge $0.01 for a circular saw but $99.99 for shipping, obviously moving the product cost into the hidden shipping field. Sellers began to all charge $0.01 to get seen so the product price became even more meaningless. Ebay eliminated the marketing exploitation by listing product price and shipping fee next to each other on the search screen.
My argument is that C2 could move the way of ebay and eliminate marketing exploitation opportunities. Sellers here exploit the meaningless pre-fee returns to get maximum views and subscribers. And high return post-fee systems remain hidden in the muck. How can investors find high return post-fee systems?
I rarely see timing tracking websites that include fees in the systems they track.
I rarely see vendors discussing or backing out fees in their track records
The fees compared to what one is trading depends on the subscriber;'s account size and leveragee. One size does not fit all.
So C2 is really not doing anything questionable. It is an interesting idea, but I don’t think it is all that critical. A user must do SOME due diligence…
I would think the commission idea to be more important as far as its easier to see once you do click on it that it has a “high” fee. The commission part can vary so widely, that being able to plug in what you have should be most important. As far as it changing, well whatever you are currently paying should be what you look at. Past results are well past results. If you were paying $10/trade and now are paying $8 then who cares about the $10. If I pay 500 per month and I it looks like I’ll make 1000 per month, well that’s pretty obvious.
Craig
TJW, sorry, you reacted only to the last sentence of my post. My point was not<i/> that vendors may not like the inclusion of fees. My point is that the idea is too vague, unless you specify which fee should be subtracted and at which days it should be subtracted.
Furthermore, as Ross pointed out, this is meaningful only if the user can also personalize the account size. I know, this is something you want too, and I would also be very happy with it (!). But I think this is not something that can be programmed overnight; it would rather be a major redesign of C2.
Oops, my apologies for all the italic…
Jules, I re-read your posting. At a best case scenario, an ability to subtract out any trading related fee would bring more clarity to actual historical returns because theoretical pre-fee return is a meaningless metric. The most important changes are a) subtract broker commission fees from returns and b) to fix starting capital at the same (customized) amount for all systems.
Second most important, subtracting out monthly membership fees is desirable but it would create an interesting dynamic as increased rates would decrease post-fee performance, thus enticing vendors to balance low membership rates with their trading performance. Think of all the information that would come out of these changes!
With either of these two capabilities implemented, C2 would have an entirely different, personalized filter where everyone would have a different ranking between systems. Challenging to implement? Most definitely.
Index, good points and I agree in most cases.
“I rarely see timing tracking websites that include fees in the systems they track.” - True today, but tomorrow the tracking systems would be more transparent if they showed total cost of ownership.
“I rarely see vendors discussing or backing out fees in their track records” - Some vendors (whom I prefer to work with) are forthcoming with their fees. See the mvp-3 site.
“The fees compared to what one is trading depends on the subscriber;'s account size and leveragee. One size does not fit all.” - If we were able to sort all systems by setting personalized initial capital and commission rates, everyone would have different system ratings/ranks and yes, one size would not fit all. But isn’t that the point? Right now, everything is ranked on a metric which is not meaningful for an individual investor nor a large institution.
“So C2 is really not doing anything questionable. It is an interesting idea, but I don’t think it is all that critical. A user must do SOME due diligence…” - Sure, C2 is not doing anything questionable. It is simply set up for vendors to exploit a gap between theory and reality. The gap between theory and reality is enormous and in my opinion, critical, because the rankings/ratings don’t come close to finding decent systems for me. On one extreme, I could take all 5,000 systems and individually subtract out commissions and fees to determine actual historic returns. That sort of due diligence is possible but would take weeks and is not realistic.
I agree with you TJ. And I would think that it would be in the best interest of the C2 principles to try to shed light as best as possible on systems so that users can make the best informed decisions as possible.
Simple fact is brokerage commissions are a big part trading, and the ability to take those into account is a good idea IMHO. If a vendor is legit, he should also want to take this into consideration. What ethical vendor would want to be trying to charge for a system that a user couldn’t use successfully once taking out the vendors fee + brokerage commissions.
…
If these were ideas to potentially be implement into C2, what is needed is a few fields in the C2 user record to hold some user specific data such as user inputed brokerage commissions. Stocks (allow user to select / trade or / share commission structure), futures (same as for stock transaction), etc…
This data could then be extrapolated with the rest of the data to give C2 users a more specific data personalized for each user broker data that he has plugged into C2 - making C2 more user friendly which is always a plus for a web service such as C2 is providing.
I don’t think it would be that hard to implement, as long as C2 has extra fields available already, which would have required some upfront foresight when the C2 user database was implemented, in the user database to store the extra data values. Otherwise redoing / converting the user database would require some hours of work from a development stand point.
Subtracting out vendor fees is an easy calculation to be performed whether C2 does it or the user manually. Preferably have C2 doing it, then it accounts for all fees to present the system in the best light possible for a potential subscriber to see apples to apples.
TJ was talking about system fees, not broker commissions.
Broker commissions are already available in both the statistics and the equity cuve
Right … but not on an individualized user basis.
