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When possible subscribers are screening for systems to look at, what is the number one criteria they pick first?
Is it number of trades?
Is it winning %?
Is it how long they have been here?
Just curious if there is any way to find this out. It might help me in getting subscribers.
Anyone can respond, I’m just curious as to what is the most important factor to subscibers. I myself start looking by using the winning %.
I’d be happy to respond, as far as my personal criteria:
1) I look at per-contract draw-down as a percentage of margin requirement. For example, a completed ESZ6 trade would require roughly $3900/contract. Let’s assume the draw-down was $7800/contract. The draw-down is 200% of margin!
2) I look at the top losing trades for the past six months. If the top losing trade is outside the gaussian distribution, then I need to know why (maybe C2 had a problem). The vendor should have been smart enough to notate this on their trade.
3) I find it easiest to begin the above by sorting vendors by either sharpe ratio, percent annual gains or win ratio… excluding vendors who haven’t traded in 30 days and who don’t have 30 trades under their belt.
I sift through the slim-pickins and pull a detail page on vendors who have a high win percent (note: most of the 95+ percenters will fail in some other criteria) combined with decent returns, and then begin to do my homework. Part of that homework includes reading the description of their system, and then seeing if they violate their own criteria (eg, excessive number of open contracts, violation of risk management, etc). The reviews that people give, for the most part, are not part of my equation. I’ve found that people tend to blame the vendor for their own personal limitations. But that shouldn’t be a surprise to anyone.
Thankyou very much for the response. So far it looks like the Sharpe ratio, % Anual Gains, and Win Ratio are what people use the most to get started and that is what I am curious about.
I mostly second what L.P. and A.B. said. I have 2 points:
1) There is a much BIGGER problem. After all the statistical grilling, to me, that just means you have a small set of possibly good systems.
When you have 1000 systems being tracked, it is obvious that 50 of them are in the top 5%. If you took 1000 blind, random systems, then 50 of them are in the top 5%. Their equity curves look pretty good, compared to the others OR the S&P 500.
So you need one more step. When you have your small set of possibles, you must then start tracking them after your analysis for at least a few weeks or more (forward testing). If they were in the top few percent due to blind chance, then many of them will randomize during your observation period. If any continue to perform relatively well, THEN and ONLY THEN do I consider this as a system that MAY outperform.
2) The market tends to rise over time. A system (green line) that seems to outperform the S&P (red line) may also only be doing this due to leverage. We are in a multi-month market rise. Systems mostly long during this time that outperform, might just be leveraging the market, and looking good for it. A lot of goodlooking systems were savaged by the midMay market drop. I consider these as possible examples of leverage-based profits.
Why should you be paying for someone to tell you to "go long, but be leveraged??"
Truly good systems make money both with their longs AND their shorts over time. If not, then I attribute
Thanks for the answer.
Thanks for answer.
From my own expirience in system developing and real trading I found that No 1 is the average of netto P/L per unit (future contract) for hundreds of trades. If you see the P/L smaller than 4 x of min tick (for futures contracts) you will never have a result similar to demo trades. Especially it is right for lots over few contracts. If a system trades 30 ES mini contracts lot (on 100K !!!) and P/L per unit is about $15 ( the min tick $12.5) on demo execution----no way to get it in real trading. The % of winning, high return, nice equity chart …everething is a mirage!
Very interesting, Thanks for the input.
Where were you 4 months ago, when we were trying to get this point across? 
Too many new people think that the equity curve or total profit is the big deal.
As you said, small net profit/unit is nearly worthless, when you consider the various costs of trading - commissions, slippage, system cost, broker/user/vendor mistakes, and not to mention, the risk of holding leveraged investments…
What I would like to see in Forex on C2 is a pip statistic. I don’t really care how much money someone makes with fake money. And even that was real money who knows how big my lots are I am trading in my real account? Nobody. The only thing that really gives you some background you could compare to are pips!
P/L Pips per trade, average pips per trade, average trades per week, average pips per week, per month.
Everybody could transfer that into his or her own trading. 1 pip = 1 or 10 or 100 Dollars depends how deep your pockets are.
Is there a chance that we could get a statistic implemented?
Andrew
I will implement a pip statistic soon, but I disagree with your assessment that the way C2 measures P/L for forex systems (using dollars instead of pips) isn’t useful.
Keep in mind that C2 allows 33:1 margin for forex trading. So you can determine how much money you could make trading a forex system by using very simple math:
(1) Decide how many real dollars in your real-life forex account you will allocate to a system.
(2) Determine the % between your account dollars and and the C2 system equity.
(3) Adjust for additional leverage (above 33:1) you are allowed in your forex account.
Example: You have a $10,000 forex account which is allowed 100:1 leverage. You want to allocate only half of this account ($5,000) to trading a C2 system.
The C2 trading system has made $20,000 of profit on its $100,000 starting capital.
The implication is that you can make 20% on your $5,000, which is $1,000.
But since you are allowed 100:1 leverage, if you decide to take advantage of that leverage, you can actually make (or lose) three times the baseline amount (since C2 allows only 33:1 leverage. In other words, in real-life you’ll get three times the leverage that C2 allows its hypothetical systems).
Thus, in a best-case scenario, you could earn $3,000 on the $5,000 that you allocated to the trading system in question.
Of course, you could just as easily lose money. I give this example only to illustrate that you can judge the effectiveness (or ineffectiveness) of systems using dollar values instead of pip values.
Matthew
Hi Ross,
I was in front of my computer like it was in a course of all of 8 years of my trading. Such things as P/L and similar I tried to explain on different traders forums but nobody believe…and I clammed up. 99% of amator traders continue to believe that markets like a train runs on rails of technical analysis and by getting 1-2 ticks (pips) every day ( it looks easy…) they become millionars very soon…
You are correct, of course. But even the experience people continue to believe the magical system is right around the corner…
I have seen little from classical technical analysis that convinces me that it has much value. There are too many people that "believe in it" and not enough people who have tested it to see if it actually works (especially, in changing markets). I hear things like "well, it depends on how you combine them." How many unclothed emporers do people need to follow, before they realize that it may not work???
Sorry, but combining losing systems does not create a profitable one…
I think much really depends on your personality and what you are comfortable trading.
There are many single market daytrading and forex systems on C2. Yet, daytrading is much harder psychologically speaking. I personally think the longer your timeframe the easier it is on your psychology. Much more relaxing placing trades outside market hours and not having to watch the market all day. Moreover, the more trades your system takes the more risk you are subject to, especially in leveraged products like futures. Money management is also important. How is position sizing applied and what is the equity risk per position? A strategy that trades more markets should also tend to reduce risk more through diversification than a single market approach.
If I was deciding on a system these are the things I would think about:
(1) What type of trading do I want to do? Day or longer term?
(2) How many markets do I want to trade?
(3) You want high returns, but more important than high returns are consistent risk adjusted returns. The aim here is to try and make money every year, regardless of market conditions. But, also not to get killed during bad times.
(4) Will your personality allow you to trade the system you subscribe to? If you are a conservative person, for example, you may want to look for a system that has a high win ratio, low drawdowns and good consistent profits year in year out with very few losing years. These systems may not also provide triple digit annual returns.
(5) Cost. How are the vendors pricing their systems? I personally feel far more comfortable when there are profitable guarantees because then the vendor is putting his money where his mouth is and not paid regardless of performance. I would also be wary of any system that is priced too low. Why would a good system be sold for a low amount?
Just my thoughts, and something to think about.
Cheers.
>I personally feel far more comfortable when there are profitable guarantees because then the vendor is putting his money where his mouth is and not paid regardless of performance.
No serious vendor can guarantee that a trading system will make profits in the future, but professional development and thorough testing of a system increase your chances of making money dramatically.
The fact that the system results are the result of “hypothetical real-time trading” should not make one a bit skeptical. Does it mean that the system won’t work in “real real-time”?
Published results should always be marked as “hypothetical”, even if they have been achieved in real real-time trading. Heres why:
It is impossible to predict the slippage when using stop or market orders. Two traders, lets say YOU and John Doe, place an order at the same time, and John might experience 1 tick slippage, while you are filled right on your specified entry price.
You dont know whether a limit order will be filled or not. One is sure to get filled on all the losers as the price breaks support or resistance and trades through but miss a lot of winners (as the exchange queues the limit orders not only on a FIFO basis but also on the size (volume) of the order. Liquidity is there only at the Market On Open (MOO) and that too only on volatile days. Hence Market orders placed other than at Open may result in split & partial fills especially if it is a large order which presents a money management nightmare).
If your trading system requires the use of limit orders, you might experience the following situation: your order is filled, Johns isnt, and the market retraces. While you took some profits using a limit order, John is still in the trade and sees his profits shrinking, and in the worst case turning into a loss.
Another factor is the account size: If John is trading a rather small account, then his broker might liquidate his position because he experiences an intra-day drawdown that issues a margin call. Many electronic platforms are set up in such a way that they immediately liquidate a position, even if the market turns around and he would end the trade with a profit. John then experiences a loss, while you might realize profits on the same trade.
What about the ability to withstand losses and your discipline to follow the trading strategy no matter what? Lets say that after a couple of losses John decides not to follow the system any longer, and thats exactly when the system produces some winners. You strictly followed the system and realized these profits, while John is missing them.
Published results are always PAST results. If more traders would have been trading the system, the prices might have behaved differently. There could be a difference in price movement when 100 traders try to enter the market at a certain price point instead of only 1 trader. And what if 1000 traders placed a 2-lot order at a certain entry signal?
Palsun:
I agree with some of what you say, I disagree with other remarks.
On the pricing issue. I didn’t price it at a whim. I looked around to see what the high end systems were priced at and priced my system just below. In hindsight, I felt this was the wrong approach as the price should be linked to the performance as you state. So, I changed this trying to anticipate future profits based on past performance. I would much rather have this based on actual performance, but the site only gives me limited options. I am the first to admit I am a total novice at selling systems, but know a bit about trading.
I agree with the points you mention about the difference between actual performance and hypothetical performance. However, the fact you are on C2 it should be obvious to all that the performance is merely hypothetical.
I find that price seems to have little to do with longterm outperformance by systems, so all things being equal, you can guess where my money would go…
Hi Andrew,
I think the fact that the number of trades is relatively small (you wrote you closed 26 trades in 2006) makes it difficult to get subscribers quickly.
ooops, this was meant for another thread in your own forum
