Too much of a good thing

I intend this post as a conversation starter, because I am curious what others think about the subject. So I will just give a quick analysis of the problem. And the topic is:



What is the effect of good vendors giving away their systems too cheap (for almost free) on C2?



Now first, you might think, what is the problem? Subscribing to profitable systems for a low price sounds like a good idea, and sure it is, if you are a subscriber. But let’s look at the other side of the coin.



On C2, there are 3 parties trying to make themselves and each other happy and rich. They are:



1. The owner of the website and his employees.

2. System vendors.

3. System subscribers.



First I will give you a few quick examples what systems I am talking about when I say too cheap, then I will explain the effect of them on these 3 groups.



Vortex Forex trading system (excellent, it doubled in the last 2 months) has a 90 days trial period which is way too long in my opinion and even after that it charges only $20 a year! That is basicly free for a system that has a potential to triple/quadriple your money in a year…

Another one is Midas short term, although it is a little inconsistent, still it has a 87% return and no subscription fee.



The effect of a cheap (but good) system on the 3 parties involved:



1. Matt: since he gets 30% of subscription fees, a close to free system’s 30% is even closer to zero, thus I assume Matt isn’t that happy.



2. System vendors: C2 is basicly a giant competition for them. When they have a good competitior against them with unbeatable prices, I assume they are losing subscribers and they are not that happy. If they decide to leave, that over the long run will make party #1 very unhappy.



3. Subscribers: They are the clear winner of the situation. Although I can see that it can be a problem for them too, if too many subscribers flock just to a few vendors and maybe altering their strategy, because most systems has a cut off rate at a limited number. The real danger for this group is, that if running the website is unprofitable over the long run, the too much of a good thing is going to end sooner or later, and there will be no C2 and cheap systems to subscribe to. So, just maybe, paying a little more now could mean profiting a lot more later.



I am not advocating anything at this moment, I am just curious what you guys think. Now some of you might notice that I am also guilty because I have the second cheapest system in the top 25, but its time is going to run out soon and that system has no subscriber anyway.



It is possible that I am just crying wolf too early and this above mentioned problem is not a problem at all. Still, I think this is something to keep an eye on.



All comments and opinions are welcomed…





Excellent points. I have 2 thoughts:



1. In the long run, you get what you pay for. If a system is worth it over the long haul (not just a few weeks), I (maybe naively) believe that subscribers will sign up, as long as the price is fair (not necessarily the cheapest). Mutual funds are a good case in point - people will pay a higher fee, load, etc if the manager’s performance is there.



2. Maybe eventually system developers can make a living just off of subcriber revenue, but I 'd be surprised if anyone is doing that now (and if they are, I offer my congratulations). That’s why I take the approach of "here my system is, sign up if you like it, but if you don’t, I’ll still make lots of money trading it myself!"



Of course, come system renewal time, if I have the same solid performance I currently have, and few or no subscribers, I might give up on C2, which I think is precisely part of your point.

I think the most important thing for both C2 itself and system vendors is to build C2’s subscriber base & increase its visibility. Offering cheap systems certainly makes it more tempting for borderline subscribers to take the plunge. Once C2 reaches critical mass and has an established reputation I think both C2 and system vendors will do much better (and then rates can be increased), right now I think the quantity of subscribers is more important then dollars per subscriber.

Agreed. C2 spends a fortune on advertising. This directly benefits system developers. We will continue to spend large amounts of money attracting subscribers for the forseeable future.

Peter,



> Now first, you might think, what is the problem? Subscribing to >profitable systems for a low price sounds like a good idea, and sure it

>is, if you are a subscriber.

It’s very false statement that invalided all your following conclusions. Price of a system doesn’t play any role, because subscriber’s risk is much, much more than price of subscription. E.g. I like futures systems on C2 it looks very cool and it’s a way to become zillionere in few days loll, only one but underlying price of the instrument. So when a system vendor recommends to buy/sell hmm… 10 e-minis (ES for example) it means that subscriber will take a responsibility for ~600K trade. Do you really think that on the kind of scale subscription fees mean anything? Of course if you at least understand what you’re trading and responsible for :wink:



I promised myself to not comment any system on C2, so you can try to become zillionere with systems from your list. Surely, you’ll safe few bucks on subscription fee.



Eu

Pete,



I agree that if we review C2 as not sandbox or contest of egos subscribers are a base. Vendors will come and gone, paper trading is easy you know lol There were two big steps on C2 in the area It’s RF and subscribers comments about a system.



Eu

Eu:

>Price of a system doesn’t play any role,



This is an incredibly naive statement on your behalf. Hell, people drive miles just to fill up their cars for 5 cents less, do you really think the same behavour doesn’t apply to system picking?



Sure price alone is not the most important factor (or shouldn’t be), but between 2 similar systems it makes HUGE differences. Here is an example for you:



Systems Koan 1 and Tradex have very similar returns, they have been trading almost for the same period of time and they are both

trading futures. BUT! Koan costs $1000 a month and Tradex costs $40 a month.



Now if you are telling me that a 25 times multiplier doesn’t make a difference, a will bow myself and go back to my cave! :slight_smile:



Sure, there are subscribers here with big money, for whom the cost is not that important. But I assume the majority of subscribers are small time investors (remember, big money doesn’t like risk, so they are not going to invest in big return but risky systems anyway) and if you only have 10K to play with, you are not going to subscribe to a system with a cost of $500-1000 a month…



Personally I think charging $1000 a month is too much, (because you can get the same stuff for much cheaper) but charging $10 is too little…



I don’t think you understood the problem that I described. The problem is with very good systems charging very little and by that undercutting other also very good systems who might go out of C2 as a result. As it was noted in an other post, when the 6 months runs out, vendors will take a second look if it is worthy for them to spend time and money here without getting any subscribers…

I see both points. With the intraday futures trading system I am subscribed to I can lose $1000 in a single trade so for me almost anything that would give one system a performance edge over another would be more important than the monthly cost or put another way the monthly cost is pretty low on how I would pick a system to go live with.



That being said, if one system was charging $1000 and another was charging $100 and I couldnt find any real differences I would of course go with the cheaper one.



Peter I think the only thing you have to worry about is that your system performs well. The only way the $20/month system will dominate all others is if its also the best performing system in whatever category it trades (timeframe/products). Otherwise I’m sure subscribers will be willing to pay $200 a month for a slightly better system than the $20/month system. A couple hundred dollars difference in the subscription cost over a month timeframe really is pretty insigificant if you are trading the system with real money.



Another point is that people trading real money might not take a “cheap” system seriously because they figure the system owner doesnt really care about the small amt of money it generates and would prefer a system where the owner is more concerned about the system performance because the subscription dollars are non-trivial.

Pete:

>people trading real money might not take a “cheap” system seriously because they figure the system owner doesnt really care about the small amt of money



This is an excellent point, and might be the solution to the problem. Or they might subscribe to it since it doesn’t really cost anything extra, but not exclusively, so they also subscribe to the more expensive system.



Now I am going to switch to a slightly different topic:



>I think the only thing you have to worry about is that your system performs well.



This is a myth among vendors, and some of them will find out to be untrue over the long run. After all, C2 works as hard capitalism at the turn of the century. When there were a few good systems on C2 (let’s say a year ago), it was a nobrainer that a good system would get subscribers. But when you have 40-60 good systems ( and there are at least that many) then quite a lot of vendors will realize just how hard is to get subscribers. Sellers competition is good only for buyers. If a town can support 3 bagel shops (with very tasty bagels) it doesn’t mean it can also support 6 (with also very fine products).

"When there were a few good systems on C2 (let’s say a year ago), it was a nobrainer that a good system would get subscribers. But when you have 40-60 good systems ( and there are at least that many) then quite a lot of vendors will realize just how hard is to get subscribers. "



As a subscriber I reviewed many systems and did not find many at all that meet my criteria. Maybe I’m unusual but I first filter out any systems that doesn’t trade the way I want, which I can breakdown into two components: timeframe and products. I wanted an intraday system (never ever holds overnight), it must only trade during normal market hours (9:30-4pm EST) and it only trades emini futures (ES,NQ,ER2 or YM).



In searching saw a lot of good systems that trade multiple products: stocks, options and futures. That’s great if there are customers that are interested in such a system but to me thats an immediate dealbreaker. Maybe there are 40-60 good systems overall but when you start breaking the systems into different categories (by timeframe and products traded) I think you will find very few in each category, at least that has been my experience.



Even if a system is a good fit based on those two filters, the style of trading may not be consistent with a subscriber (or comfortable for them). For instance, someone who always goes for lots of small gains but is willing to let a rare loser go against them in a big way can be a tought trading style to follow, especially if you are in the passenger seat, so to speak.



Also a lot of systems are very poorly documented leaving it up to the potential subscriber to figure out what their trading style is by looking at the past trades (which of course is no assurance that they suddenly wont trade differently). That sure doesnt give me a warm fuzzy feeling.



Thanks for the good discussion.

Seeing as someone chose to quote one of my systems (Koan 1 ES) I thought I’d chime in on this topic;



The question here is really one of quality and target market;



Let’s realise right now that C2 attracts a lot of “interest.” Let’s also realise that only a very small percentage of that interest gets translated into subscribers.



Now to the system designer/trader. A vendor is someone with a product to sell. All vendors of similar products generally compete on overall value, or upon their ability to “spin” their product’s value versus their competitor’s (aka marketing). When you view a system on C2, the first thing a subscriber does is look for a system that meets their subjective needs/desires. Given the breadth of system types and styles on C2, your average subscriber can usually eliminate 80% of the systems simply on the basis of a mismatch. Of the remaining 20% they will usually eliminate most due to poor or unattractive (subjectively) performance. That will leave them with only a few (<5 usually) systems that meet their criteria and are attractive. At that point price will come into play. I charge $1000 per month. Any guesses why? I don’t want a lot of subscribers. Those who do subscribe, I want them to be trading an account that makes my fee seem insignificant.



I do, however, get what I am looking for out of C2. I get a reasonable indication of my systems’ performance tracked in real time and published publicly. I continually receive proposals to manage funds for brokers and money managers. People that have tracked the performance on C2. THAT is where my target market is. C2 is the perfect venue for that.



I have priced my systems at all price levels, and to be honest - I have never had many subscribers. Most join for a trial period and then quit, and a couple joined, but never paid. That was one of the reasons I chose to change my subscription policy. So, If someone signs up and trades a 100k account, then over the last seven months, they would have made about 80k after paying me 7k. I consider that to be an equitable exchange.



Those vendors who price their systems cheaply are obviously looking for volume. Well, if they are getting it, then great! But it is my experience in this business that cheap and long term profitablility do no generally go together. And let’s not ignore tradability - thank you Matthew for the Realism Factor!



So, if someone else has a system that performs as well as, or better than mine, and costs 1/10th the price - they should get all the subscribers. That’s great! Subscriptions are not where the action is in this business - In my opinion subscriptions are simply a way to have C2 pay for itself. If your system is truly a solid performer - then you will attract interest from third parties prepared to throw serious capital at the system and pay you a percentage of the gains - THAT is a serious value proposition for a designer.

Yikes…$1000 a month .



Unless you have some small hedge funds following you…I dont see the point in charging so much.

I charge $200 with no free trial. Thats decent …Anything less and I am giving away my system…and I am only going to take 20 subscribers.



My only beef is that Mathew Klein takes 30%…thats alot since we already have to pay a fee to list such system. 20% is the norm.



Peter:



I sent you a couple of priviate messages in the last few days.



Did you get them ?