I would like to start a new forum called Traders Tips. Hopefully this forum will be used by all to help the community. If we have any vendors or traders here that would be interested in sharing their knowledge this is the place to do it. If you have a favorite trading style or philosophy you know can help others please do tell. Is there a great web site or trading tool that you like? How about something specific to Collective2? Do you have a favorite grid search you believe points out the best trading signal?
Along the line of using tools to compliment Collective2 I would like to show everybody this web site. http://www.hquotes.com/tradehard/simulator.html.
This web site is not a seceret. I found it here on the forum on Collective2. Go to your favorite Collective 2 signal. Fill out the win loss ratio by dividing the average winning trade by the average losing trade. The win probability is simply the % of winning trades. I like to put 100 in the lines QTY. Now just push generate. The important thing to look at there is the Kelly Value. It shows you the maximum % of your portfolio to put into this one trading signal without the signal blowing out your entire account. This calculation can help you find the right portfolio of signals to use.
I suspect by putting together a portfolio of the best Collective2 signals and trading them with a vigilant eye for failure a person could make a large return any money manager would be proud of.
Good Luck
Rick Haines
Richard,
Thanks for sharing the HQuotes webpage. Out of curiousity, I visited it and input the information from my system.
I entered the following:
Win/Loss: 1.02
Win Prob: .875
Lines Qty: 100
I then pressed “generate.” When I did, it produced a Kelly Value of .752 and a Math expect value of .767. Is this system suggesting that it is prudent to place 75.2% of an investor’s portfolio into one trade using this system? Am I misreading something or perhaps did I mis-enter something? If that is the case, that doesn’t sound very realistic…not trying to criticize, just trying to understand.
Thanks,
Daryl
[LINKSYSTEM_26717594]
Daryl there is a lot I don’t understand also. I don’t believe it suggest putting 76% into one trade. Maybe into one signal as a whole. I looked at your signal (it has fantastic statistics by the way) it holds more than one trade at a time.
I dont believe I have the ability to dissect this web sites results. So it is hard for me to justify why it would put 76% into one signal. I am just putting this out there in hopes of helping potential subscribers make money by thinking for themselves. Hopefully do some good for all of us.
Rick Haines
Is this system suggesting that it is prudent to place 75.2% of an investor’s portfolio into one trade using this system?
No. It shows allocation of trading capital per signal. You have to divide it on max possible number of positions in your portfolio to get final allocation.
To simulate portfolio of systems you have to put average numbers of all your systems in your systems portfolio.
Eu
Thanks, Richard. I suppose like any tool it is all about the application of its use. I am sure others will find it helpful.
Have a great weekend!
Sincerely,
Daryl
[LINKSYSTEM_26717594]
"Is this system suggesting that it is prudent to place 75.2% of and investors portfolio into one trade"
Yes, that is what it’s saying, but the Kelly criteria is more appropriate for gambling than trading. In gambling the Win/loss ratio is the same each deal, or roll of the dice, or whatever your doing. In trading, the ratio is found by averaging all your winning trades to form “Win” and all your losing trades to form “Loss”, but in trading the vaiance across wins and losses can be very big, from a few cents to thousands of dollars. Thus over any sequence of trades, you’ll sooner or later get blown out when you hit a string of larger losses.
A better money mangement scheme for trading is fixed risk. You allocate a certain percentage of your portfolio to each trade and when the trade is issued divide the risk of the trade (distance to initial stop, in dollars) into the percent of equity you are risking to determine the number of contracts, or shares you trade.
If you search the net for money managment, you will find all kinds of information on this, and other money managment schemes.
Great info. Thanks Keith!
Sincerely,
Daryl
[LINKSYSTEM_26717594]
Thanks Keith for your input.
I also tried to play around with the Kelly formula for money management of trading systems after reading Fortune’s Formula by William Poundstone and came to the conclusion that it is not applicable to most trading systems. Even professional gamblers use some modification, like half Kelly, because the whole Kelly would require you to give up huge profits in order to eventually - and that might be a long, long way in the future - achieve maximum gain.
…the vaiance across wins and losses can be very big, from a few cents to thousands of dollars….
Kelly criterion is a result of mathematical theory. This result has some premises. If a particular trading system does not satisfy premises, application of Kelly criterion will be hardly succesful. But if you have something, what fulfil premises, you can use Kelly criterion or some of it’s modification and depend on it quite well.
This is available in WL, too, and max risk % per trade in the simulator. The key is to have the proper stops in place for this, and this will depend on your sizing as well.
If you’re willing to risk 8% on a trade with a 4% stop, obviously you’re at 2:1. However, if you’re just risking 4% on the trade, the position size will decrease by half.
I second fixed risk. It is definitely superior to Kelly, optimal f, and Fixed Ratio. I based this on having seen the results of those who tested it, not on opinion.
One of the most misunderstood or over looked items on Collectiive2 is the advanced statistics area. If you go to your favorite signal and look at the dark grey area where it says advanced statistics. Click on advanced. You then are in an area that is very important and hard to understand.
One thing I always like to keep track of is the annualized return on a daily basis and for the last 6 months. When I see a signal that has a higher return for the last 6 months then it does for its entirety I know it is not yet failing. If the return for the last 6 months is considerably less than for its entirety then I need to be careful because lately it has not lived up to its past performance.
When you first enter advanced statistics there is a guide you can click on and everything is explained there. Even though there is this guide it is still difficult for me to understand exactly what some of these things mean. I am hoping some of you will post here how you use this area for a better understanding of the signal you are looking at.
Thank You
Rick Haines
Richard,
I never realized that there was this Advanced Statistics, thanks for pointing it out. I hope other people will contribute and shed more light on it.
I was going to write a long article on the White Label program here on C2. I thought it would be helpful to some of the new vendors if they had a brief explanation of what it can do for them.
As I was reading about the program to refresh my memory I found the administrator Mathew Klein used my old signal Wave Rider as an example of a bad signal. I guess in his words the signal was gnarly.
Wave Rider was a signal published here on C2 for 12 months. It had 13 different subscriber charges. So my fee to C2 was $98 * 2 = $196. For the year. My subscribers paid $25 * 13 = $625. C2 earned $625 * 30% = $187.50. $196 + $187.50 = $383.50. Also I did some advertizing on C2 for that signal but I dont remember how much.
In summary C2 earned $383.50 plus advertizing revenue. 2 of the subscribers of Wave Rider are still with me at Conservative Growth.
My vendor rating at C2 currently is 99.2 out of 100.
In my defense I would like to say I dont think my work is gnarly at all.
Thank You
Rick Haines
Rick:
Sometimes I need to create screenshots demonstrating features of C2. I usually just pick systems at random, and write random words or comments. In my fake "analysis" of Wave Rider (created solely for demonstration purposes), I used California surfing lingo ("gnarly") simply because the name "Wave Rider" conjured visions of surfing. I really did not mean to offer rigorous analysis of your system, and I meant no criticism.
Matthew
Favorite searchs on the grid.
I believe one of the very best tools we have here on Collective2 is the grid. It is the best tool to sort and find a trading program that fits your style. I like the fact that we can search so many criteria. In theory this is a financial dream come true. I find it so very interesting that we have such a powerful tool and yet I see such reckless abandon when it comes to building wealth. Because of this reckless abandon it is possible Collective2 is the source of much despair and loss of wealth.
When I go to the grid there are some criteria that cannot be ignored, it just has to be used. Here is a list of what I believe to be the most important search criteria.
A positive return in the annual, 90 day, 60 day, and 30 day column.
A profit factor of 2.0 or greater.
A Sharpe ratio of 2.0 or greater.
A APD of .40 or greater.
If you have left the order on its default setting the signals will be in order of popularity. You now have what I believe to be the top 10 signals on Collective2. This site changes so fast later even today you may have more or less in this search.
What I find most interesting is the top 5 signals. MVP-3, Main QQQQ , Conservative Growth, SMA and ETF Timer. Out of todays 652 signals narrowing it down to the best 10 you find the top 5 to be signals that trade ETFs exclusively.
Now that you have the top 10 signals you can sort them any way you want. If you want the best annual return just click on Annual Return on the top of the column and these 10 signals will then be sorted according to that criteria. You can do this with all of the columns. Hidden risk, max draw down, trade length.
If you would like to be careful put in a time criteria or sort them according to age. What you find when sorting these 10 by age is the oldest 5 are also the ETF stock traders. The bottom 5 are a various mix. If you put in a time criteria of over 365 days you find the signal or signals that have stood the test of time and are doing well at this point.
The above selected criteria is not engraved in concrete. You can play with this thing anyway you would like. I do believe most people that lose money trading signals on Collective2 are somewhat reckless. Collective2 is the perfect tool to grow your wealth if you have the wisdom and patience to use it properly.
Good Luck
Rick Haines
The only point I would make with that particular search criteria is that I think you are missing a system age element. There’s no doubt that the systems remaining by your search are all commendable but your Conservative Growth is the only one with a track record over a year. (Maybe modesty was preventing you having a time element?).
We know from previous discussions over the years a Sharpe over 2.0 is very very hard to achieve for a much older system. (I think Extreme-os is the only one over 2yrs old that manages it). For me a Sharpe over 1.5 is still very good for a system with over a year trading history.
Interestingly with your current search if you adjust Profit Factor and Sharpe to 1.5 for systems over a year old you are left with just three - 2 Futures, 1 Stocks - Turning Points, Interlink and Conservative Growth.
