# SK Small Caps Q&A **URL:** \ **Category:** Trading and Markets\ **Created:** [August 20, 2024, 11:18am UTC](https://forums.collective2.com/t/sk-small-caps-q-a/16590 "2024-08-20T11:18:20Z")\ **Posts on this page:** 20\ **Page:** 3
**Author:** ![SeanKelly11](https://yyz2.discourse-cdn.com/flex028/user_avatar/forums.collective2.com/seankelly11/32/19323_2.png) [@SeanKelly11](https://forums.collective2.com/u/SeanKelly11)\ **Post date:** [September 28, 2024, 6:07pm UTC](https://forums.collective2.com/t/sk-small-caps-q-a/16590/42 "2024-09-28T18:07:01Z")
The latest post: > **[The Calmar Ratio: Your Secret Weapon for Managing Investment Risk](https://theseankellytradingedge.substack.com/p/the-calmar-ratio-your-secret-weapon?r=2ubwr5&utm_campaign=post&utm_medium=web&triedRedirect=true)** > > Forget just chasing returns—here’s how the Calmar ratio helps you protect your portfolio from devastating losses while still racking up gains. ---
**Author:** ![SeanKelly11](https://yyz2.discourse-cdn.com/flex028/user_avatar/forums.collective2.com/seankelly11/32/19323_2.png) [@SeanKelly11](https://forums.collective2.com/u/SeanKelly11)\ **Post date:** [September 28, 2024, 6:12pm UTC](https://forums.collective2.com/t/sk-small-caps-q-a/16590/43 "2024-09-28T18:12:46Z")
![Screenshot 2024-09-28 at 2.11.56 PM](https://canada1.discourse-cdn.com/flex028/uploads/collective2/original/3X/0/9/09bbd69c3243a472a68d8b46d0e452bd89352a16.png) ---
**Author:** ![SeanKelly11](https://yyz2.discourse-cdn.com/flex028/user_avatar/forums.collective2.com/seankelly11/32/19323_2.png) [@SeanKelly11](https://forums.collective2.com/u/SeanKelly11)\ **Post date:** [September 28, 2024, 6:28pm UTC](https://forums.collective2.com/t/sk-small-caps-q-a/16590/44 "2024-09-28T18:28:12Z")
I’ve received a few questions about the risks involved in trading a strategy like SK Small Caps, so I wanted to take a moment to address them in a professional and transparent way. When investing in or trading a strategy like this, it’s crucial to understand the inherent risks. The main risk we face here, particularly with how the strategy is managed on C2, is if one of the stocks I’m long on experiences a significant decline. Believe me, these things can happen, and they have—just like the situation with SPWR not long ago. This strategy is designed to maintain long positions in four stocks, offset by a hedge using TZA. This setup generally holds up well during a broader market correction, but the concern is when **just one stock** takes a major hit. In a portfolio with only four stocks, if one collapses, that’s 25% of the portfolio, which is a significant blow. One way to mitigate this risk is to **increase the number of stocks in the portfolio**. For example, expanding the portfolio to 10, 15, or even 20 stocks would help dilute the impact of any one stock underperforming. In a 20-stock portfolio, if one stock drops, that’s only 5% of the total portfolio, rather than the 25% impact we’d see in a smaller, more concentrated strategy. It’s a key difference that helps manage risk more effectively. **However, it’s also important to note** that adding more stocks to the portfolio will **diminish potential returns**. With fewer stocks, we focus on the highest conviction ideas, which often leads to higher returns when those positions perform well. By spreading the portfolio across more stocks, while we reduce the risk of any single stock dropping significantly, we also reduce the potential for larger gains from concentrated positions. This is the trade-off between **risk mitigation** and **return potential** that every investor needs to consider. So, while this strategy is well-positioned to handle overall market corrections, it’s always important to weigh the balance between **diversification and return maximization**. Thanks for bringing up these questions, and I’m always here to provide further clarity on the risks involved. Let me know if you’d like more details, or if you have any other questions about the strategy! ---
**Author:** ![SeanKelly11](https://yyz2.discourse-cdn.com/flex028/user_avatar/forums.collective2.com/seankelly11/32/19323_2.png) [@SeanKelly11](https://forums.collective2.com/u/SeanKelly11)\ **Post date:** [October 1, 2024, 12:44pm UTC](https://forums.collective2.com/t/sk-small-caps-q-a/16590/45 "2024-10-01T12:44:57Z")
The success of trading a system like this lies in maintaining a balanced portfolio. When one or more assets experience a significant move, whether upward or downward, it’s essential to rebalance your holdings to preserve stability and ensure long-term growth. Keeping your portfolio aligned helps manage risk and capitalize on market fluctuations effectively. ---
**Author:** ![SeanKelly11](https://yyz2.discourse-cdn.com/flex028/user_avatar/forums.collective2.com/seankelly11/32/19323_2.png) [@SeanKelly11](https://forums.collective2.com/u/SeanKelly11)\ **Post date:** [October 2, 2024, 12:19pm UTC](https://forums.collective2.com/t/sk-small-caps-q-a/16590/46 "2024-10-02T12:19:31Z")
Yesterday showed a great example of how a hedge can help cushion a drawdown, even if it doesn’t eliminate it entirely. The system’s ability to rebalance during a broader market move, in either direction, is key to keeping things steady and on track. ---
**Author:** ![SeanKelly11](https://yyz2.discourse-cdn.com/flex028/user_avatar/forums.collective2.com/seankelly11/32/19323_2.png) [@SeanKelly11](https://forums.collective2.com/u/SeanKelly11)\ **Post date:** [October 4, 2024, 2:48am UTC](https://forums.collective2.com/t/sk-small-caps-q-a/16590/47 "2024-10-04T02:48:23Z")
The latest and (not) greatest! > **[The Simple Truth Behind Trading Success—If You Follow the Rules, You Will Profit](https://open.substack.com/pub/theseankellytradingedge/p/the-simple-truth-behind-trading-successif?r=2ubwr5&utm_campaign=post&utm_medium=web&showWelcomeOnShare=true)** > > Let me take you back to a time when the world moved a little slower, when values like discipline, patience, and hard work were rewarded, not just in life, but in the markets as well. ---
**Author:** ![JITF](https://yyz2.discourse-cdn.com/flex028/user_avatar/forums.collective2.com/jitf/32/24092_2.png) [@JITF](https://forums.collective2.com/u/JITF)\ **Post date:** [October 4, 2024, 3:53am UTC](https://forums.collective2.com/t/sk-small-caps-q-a/16590/48 "2024-10-04T03:53:52Z")
@SeanKelly11 how many strategies did you run on `collective2` before your current strategy? when did you start your `collective2` journey? ---
**Author:** ![SeanKelly11](https://yyz2.discourse-cdn.com/flex028/user_avatar/forums.collective2.com/seankelly11/32/19323_2.png) [@SeanKelly11](https://forums.collective2.com/u/SeanKelly11)\ **Post date:** [October 4, 2024, 2:55pm UTC](https://forums.collective2.com/t/sk-small-caps-q-a/16590/49 "2024-10-04T14:55:59Z")
Some time ago, I dabbled in some impulsive day trading strategies when I thought that was the path I wanted to take. I can’t recall which email or username I used, but I’m certain they’re stored here somewhere. There must be a way to search for them ---
**Author:** ![SeanKelly11](https://yyz2.discourse-cdn.com/flex028/user_avatar/forums.collective2.com/seankelly11/32/19323_2.png) [@SeanKelly11](https://forums.collective2.com/u/SeanKelly11)\ **Post date:** [October 4, 2024, 3:19pm UTC](https://forums.collective2.com/t/sk-small-caps-q-a/16590/50 "2024-10-04T15:19:10Z")
The reason I returned in April this year was to properly forward test this strategy on its own. After doing extensive backtesting and trading it alongside my other strategies, I felt that testing it independently would be more insightful, which led me to think of using C2. So far, it’s performed as expected, and I’m pleased with the results. However, time will be the true test. ---
**Author:** ![JITF](https://yyz2.discourse-cdn.com/flex028/user_avatar/forums.collective2.com/jitf/32/24092_2.png) [@JITF](https://forums.collective2.com/u/JITF)\ **Post date:** [October 4, 2024, 7:20pm UTC](https://forums.collective2.com/t/sk-small-caps-q-a/16590/51 "2024-10-04T19:20:04Z")
> [@SeanKelly11](#): > > properly forward test this strategy quite unfortunate that it is not mentioned in the official strategy description. that description is full of confidence and optimism. isn’t that a bit of misleading for potential subs? ![image](https://canada1.discourse-cdn.com/flex028/uploads/collective2/original/3X/8/e/8ef7e5e78d398daba8a6dfd015aad67b99fe5494.png) ---
**Author:** ![SeanKelly11](https://yyz2.discourse-cdn.com/flex028/user_avatar/forums.collective2.com/seankelly11/32/19323_2.png) [@SeanKelly11](https://forums.collective2.com/u/SeanKelly11)\ **Post date:** [October 4, 2024, 8:33pm UTC](https://forums.collective2.com/t/sk-small-caps-q-a/16590/52 "2024-10-04T20:33:41Z")
I’m not quite sure what you’re hinting at, but it sounds like you’re trying to stir the pot! As far as I’m concerned, the description does the job. But hey, I’ve got a brilliant idea—why don’t you whip up what you think the description _should_ say, and I’ll personally deliver it to the board of directors. How’s that for teamwork? ---
**Author:** ![JITF](https://yyz2.discourse-cdn.com/flex028/user_avatar/forums.collective2.com/jitf/32/24092_2.png) [@JITF](https://forums.collective2.com/u/JITF)\ **Post date:** [October 5, 2024, 12:35am UTC](https://forums.collective2.com/t/sk-small-caps-q-a/16590/53 "2024-10-05T00:35:08Z")
just at the start of the description add: ATTENTION! THE TRADING SYSTEM IS IN FORWARD TESTING MODE! ---
**Author:** ![SeanKelly11](https://yyz2.discourse-cdn.com/flex028/user_avatar/forums.collective2.com/seankelly11/32/19323_2.png) [@SeanKelly11](https://forums.collective2.com/u/SeanKelly11)\ **Post date:** [October 5, 2024, 4:25am UTC](https://forums.collective2.com/t/sk-small-caps-q-a/16590/54 "2024-10-05T04:25:43Z")
Let’s get a few things straight. Every system on C2 is in forward testing mode—that’s the nature of the platform. Now, unlike many systems floating around here, I didn’t just throw mine together for fun. I did extensive research, real legwork. Not only that, but I’ve been actively trading this system before I even brought it here. Now, help me understand your thinking: are you suggesting that I, specifically, need to highlight the obvious, while others get a pass? Should every system be required to spell out the fact that it’s in forward testing mode, or is it just me? And if you’re implying that _I_ should do it while others shouldn’t, I’d love to hear why. What’s the logic there? Because if this is about setting clear expectations, wouldn’t it make more sense for _all_ systems to be upfront, not just selectively targeting mine? I’ve got no issue being transparent, but let’s be consistent, shall we? ---
**Author:** ![SeanKelly11](https://yyz2.discourse-cdn.com/flex028/user_avatar/forums.collective2.com/seankelly11/32/19323_2.png) [@SeanKelly11](https://forums.collective2.com/u/SeanKelly11)\ **Post date:** [October 6, 2024, 10:11pm UTC](https://forums.collective2.com/t/sk-small-caps-q-a/16590/56 "2024-10-06T22:11:08Z")
My latest post on Substack has never been more relevant to this thread. LOL > **[Check Out the Sean Kelly Trading Edge in Action!](https://theseankellytradingedge.substack.com/p/check-out-the-sean-kelly-trading?r=2ubwr5&utm_campaign=post&utm_medium=web&showWelcomeOnShare=true&triedRedirect=true)** > > I’ve got some exciting news to share! ---
**Author:** ![SeanKelly11](https://yyz2.discourse-cdn.com/flex028/user_avatar/forums.collective2.com/seankelly11/32/19323_2.png) [@SeanKelly11](https://forums.collective2.com/u/SeanKelly11)\ **Post date:** [October 7, 2024, 4:22am UTC](https://forums.collective2.com/t/sk-small-caps-q-a/16590/58 "2024-10-07T04:22:02Z")
With all due respect, if you’d taken the time to read my previous posts, you’d already know that I put in extensive research and testing before even trading the system myself. I backtested it thoroughly, forward-tested it, and then decided to bring it to C2 in April to trade it as a standalone strategy. In every test and live trade, it’s performed exactly in line with the backtests. Now, I’m genuinely curious—what’s your motive for making such a condescending accusation? Are you actually interested in understanding the system, or is this just an exercise in skepticism for its own sake? Let me know, I’m all ears! ---
**Author:** ![Babbage\_9010](https://yyz2.discourse-cdn.com/flex028/user_avatar/forums.collective2.com/babbage_9010/32/23147_2.png) [@Babbage\_9010](https://forums.collective2.com/u/Babbage_9010)\ **Post date:** [October 7, 2024, 2:27pm UTC](https://forums.collective2.com/t/sk-small-caps-q-a/16590/59 "2024-10-07T14:27:40Z")
@SeriousTrading, it is clear that Sean places great faith in his backtesting methodology, and it has shown some success going forward. I wish him the best, and hope for all concerned that the strategy has great success here on C2. I personally am very skeptical of backtests, including my own, and have come to be this way through very humbling experiences. This does not stop me from backtesting; the process informs me and guides my expectations, my hopes and my assessment of certain risks. But I do not share my backtesting results or project hope based on their results, and similarly I am skeptical of the backtests of others. ---
**Author:** ![JITF](https://yyz2.discourse-cdn.com/flex028/user_avatar/forums.collective2.com/jitf/32/24092_2.png) [@JITF](https://forums.collective2.com/u/JITF)\ **Post date:** [October 7, 2024, 4:08pm UTC](https://forums.collective2.com/t/sk-small-caps-q-a/16590/60 "2024-10-07T16:08:04Z")
> [@SeanKelly11](#): > > Let’s get a few things straight. Every system on C2 is in forward testing mode—that’s the nature of the platform. It is not. Nature of the platform - virtual broker with the ability to sell trading signals. If you want to use it for forward test, it is your right. Other people sells signal for already tested systems. > [@SeanKelly11](#): > > Now, unlike many systems floating around here, I didn’t just throw mine together for fun. I did extensive research, real legwork. Not only that, but I’ve been actively trading this system before I even brought it here. Yeah, yeah. These are exactly the words traders are saying here on the forum (you can trust me, I am here since 2017). Only TOS can prove (to certain extent though) that you are trading your system. > [@SeanKelly11](#): > > Now, help me understand your thinking: My thinking is easy to understand: - if description says that `robust` trading system is offered and on the forum the same system promoted as forward testing, then description needs to be adjusted. Not all subs are coming to forum, i would say smallest part of them so they can be misinformed. - if system is promoted as `robust` trading system everywhere, then no changes are required. I call this consistency. ---
**Author:** ![SeanKelly11](https://yyz2.discourse-cdn.com/flex028/user_avatar/forums.collective2.com/seankelly11/32/19323_2.png) [@SeanKelly11](https://forums.collective2.com/u/SeanKelly11)\ **Post date:** [October 7, 2024, 4:28pm UTC](https://forums.collective2.com/t/sk-small-caps-q-a/16590/61 "2024-10-07T16:28:18Z")
Could it be that we’re seeing forward testing a bit differently? To me, forward testing seems to imply exactly that—moving forward. So, in a way, every system is technically in forward testing because we never really know what the future holds, right? The system is being traded into the future, isn’t that forward testing? Backtesting is behind us, it worked, and now we’re trading it to see if the results line up with the backtest. And so far, it’s been tracking well. Does that make sense? ---
**Author:** ![SeriousTrading](https://yyz2.discourse-cdn.com/flex028/user_avatar/forums.collective2.com/serioustrading/32/19626_2.png) [@SeriousTrading](https://forums.collective2.com/u/SeriousTrading)\ **Post date:** [October 7, 2024, 5:23pm UTC](https://forums.collective2.com/t/sk-small-caps-q-a/16590/62 "2024-10-07T17:23:53Z")
> [@SeanKelly11](#): > > To me, forward testing seems to imply exactly that—moving forward. But you said you already backtested your system with 20 years of historical data, so what is there to “forward test” then? A forward test is only necessary if your system is trading stocks (or assets) with low liquidity, and you want to see how the slippage/spread affects its performance. I will answer your other comments later, still looking for day-trading setups at the moment. ---
**Author:** ![SeanKelly11](https://yyz2.discourse-cdn.com/flex028/user_avatar/forums.collective2.com/seankelly11/32/19323_2.png) [@SeanKelly11](https://forums.collective2.com/u/SeanKelly11)\ **Post date:** [October 7, 2024, 5:37pm UTC](https://forums.collective2.com/t/sk-small-caps-q-a/16590/63 "2024-10-07T17:37:59Z")
I believe we’ve addressed this before, sir. I would kindly suggest you revisit our previous conversation. You mention that I place a great deal of faith in backtesting—where exactly did that notion come from? You express skepticism about backtests, even your own, but what leads you to think I’m not equally cautious? Naturally, I am. At times, I have to question the motives of some who join in on these discussions. [Previous page](https://forums.collective2.com/t/sk-small-caps-q-a/16590.md?page=2) [Next page](https://forums.collective2.com/t/sk-small-caps-q-a/16590.md?page=4)