Systems approaching zero capital

Trading and Markets
1

When a system getting close to being wiped out, shouldn’t C2 close it down to prevent it from going negative? Brokers usually do that and traders only go negative when the market moves either too fast or news gap happens and the broker isn’t able to catch it in time.

But when the adverse move is rather slow (takes all day), there should be plenty of time for C2 to close the system down before subscribers actually own money to the broker…

Case in point: Alpha and Omega started with 10K and right now it is 6K below zero.

2

Max dd of the A&O system is ~51k. For the subscriber with 500k it is only 10% dd. I don’t think that this subscriber will be really happy if C2 close this system now.

On the other side for the other subscriber started with 10k-20k at mid April peak the game was over around end of April. Maybe the system should be closed at that time?

3

We have to talk here %, not absolute numbers. If a subscriber trades the system with less money, he obviously has to down scale and trade less contracts. But a zero is zero, so once there is no capital left to trade, the system should be closed down, at least by C2…

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4

What about the case if subscriber trades the system with larger account?
If C2 closes the system, then subscriber will end up in the drawdown with no chance to get back since the system is closed. I don’t think that C2 wants to make it for subs.

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5

That’s a good point JITF.

There is still another possible scenario : what if a trader wants to join a system only when its equity curve is way below a certain limit?

6

No it is not. What is wrong with you people? 100% loss is wiping you out no matter if your account is 20K or 200K. If the subscriber has more money… screw it I wilI just give up… I guess this thread explains what type of people subscribe to a system with 100+% loss…

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7

Hi Pedro, I believe what they are saying is that if a subscriber subscribes at less that 100%, a 100% loss in the developer’s account may only equal a 20% loss (for example) in a subscriber’s account if the subscriber has scaling set to 20%.

HTH

8

Yeah, I got that after a couple of drinks. I just don’t understand the psychology here. The vendor is so bad that loses everything, but some subscriber is so HOPE-y, that they want him to trade back to at least zero??? So C2 gives the vendor unlimited credit?

That is exactly like real life… /s

C2 prides itself that it is as close to real life as it can be using simulator trading. Well, my broker doesn’t give me unlimited credit.

1 Like
9

Keep in mind that a 100% loss (on paper) could represent a mere 5% loss for some subscribers, due to their scaling down activities.

10

Let me drop in a question for those that are ok with a 100% System drawdown…
Does the system developer has to care one bit about money management if he can just continue after being wiped out?

If the answer is no then you know that this is a bad mechanic. It removes an essential element of what constitutes long term successfull trading.

Btw, the answer is no…

11

If a subscriber scale strategy so that a 100% DD is equal to his 5% DD, this subscriber is extremely risk adverse, to the extent that a 5% DD to him is the same effect as 100% DD to others.
So when he has a 5% DD, he would not stay with the strategy just as others would not stay with a strategy with 100% DD.

1 Like
12

Your comment implies that this particular trader scaled down right from the beginning (since inception), which is not necessarily the case.

13

That doesn’t make a difference.
If a strategy lost 100% and the ones who follow from the beginning also lost 100%( 5% if he scales to 5%),
and the one who joined when the strategy doubled its balance, if this strategy lost 100%,that represents more than 100% to the later and the later lost much more than 5% (if he scales to 5%).

14

Believe it or not but some traders prefer to wait for a very serious drawdown (on paper of course) before trading a system (their own system(s) or someone’s else).

This idea makes sense from a financial point of view (large drawdowns do not affect the trader that much) but it requires total confidence in the trading system, of course.

15

Check out IB commission plan with auto trading fees, you will see that this system is still +114% with dd around 71%. And if you check the raw equity values, you’ll see 54k of buying power.

I am not defending the A&O system, it was evident that it will die. But C2 doesn’t have the criteria to close the system.

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16

And yet according to C2 you subscribed to A&O on June 2.
Hunting for bargains, perhaps ?

17

I was really curios of what he is doing since May 19 (his last trade shown for non-subs). Decided to sign up for free trial and satisfy my curiosity. :slight_smile:

PS And I am already +800$ since June 2. But unfortunately on the simulated C2 account only. :frowning:

18

Oh I see, nothing wrong with that my friend. :slight_smile:

19

A system needs capital to trade. When the loss is 100% (or more) there is no margin and there should be no more trades.

This is as simple as that. Otherwise there is no meaning to buying power and developers can leverage to infinity.

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20

That’s another strange point. Under “Typical Broker Commissions” he is broke. Under any of the other 5 other options he still has some capital.
So, what’s so typical about the typical brokers commissions that make such a difference?

1 Like