C2 has been around for a while. Anyone have reliable information as to what happened to some of the older, successful systems? Were the developers poached by a company/investor? Did they become a fund? Etc.?
Thanks.
Hereās one that was hot in 2008/2009 that is still running:
2 Likes
Hereās a gold futures system that was hot for a while and got a write up from Collective2 at the end of 2012:
With gold going up again it might be doing well again if the developer was still supporting it.
And another one from the same write up in 2012:
1 Like
I see a typical pattern. Most of the successful/popular systems have very good 1-2 year period in the early lifetime and after that they slowly (or quickly) loose their edge.
2 Likes
Just spent an hour going through old emails from collective2 and visiting many systems from the past that were doing good at one timeā¦ they are all pretty much dead. Getting past 2 years is very rare, 3 years is rarer still. If you put a 1000+ days as a filter in The Grid you can find the few systems that have managed to stick around a while. If you sort by Annual Return youāll see none of the survivors are higher than 40% annual return. High return systems just donāt last.
The whole exercise has made me want to pull my system off C2 in the hopes of having it run a longer shelf lifeā¦
5 Likes
Hi David
Scary thoughts for the long run. But why do you think High return systems just donāt last? I have already had my experience with Genefish, first 2 years very good and now downhill
Iām not sure, itās just something I observe. But itās probably a combination of factors such as:
- To make so much they are too specific to a particular market period.
- Anything that makes so much is very risky/volatile and will soon run into the downside of the risks it takes.
- They create and attract a lot of money quickly that eventually dilutes the system edge.
- Logically they simply canāt last, because if they could they would very quickly BE the market. At 300% annual return you take $20,000 to over $1.5 million in 4 years. Then $14 million 2 years later.
7 Likes
Every high return system depends on one of the followings:
- liquidity restricted trades
- high leverage/risk
- restricted lifetime patterns, special situations, market regimes.
So they will run into:
- liquidity trap
- tail risk event, system bust
- or simply loosing edge and match index returns.
2 Likes
Interesting article [quoted above]. Interesting posts in this thread.
Regarding the parts I read of the article:
The article seems to assume that the high-gains trader is trading the whole market, and would therefore siphon all monies from the whole market.
Assuming that the article is correct otherwise, a high-gains trader that trades only one or two instruments would only siphon money from other traders of said instrumentāand not necessarily from the whole stock market. Returns would diminish as more and more āotherā traders stop trading (due to losing). Eventually, the well runs dry.
So, in this case, the high-gains trader could switch to a different instrument (While the first market replenishes itself.): rinse, and repeat!
The article also doesnāt seem to address the inflow of new money into the market. It seems to look at the time frame in a static sense.
1 Like
Reallyā¦the life of a strategy isnāt affected by C2. Are you saying if you pull your strategy from C2 it will somehow perform better for a longer period in the markets? Certainly you are not.
I was going to like your post until you said you were going to pull your system off C2 
1 Like
Of course C2 can effect a system. You think running a strategy at $50k is the same as running it with $10 million? You think having an audience of 200 traders watching how you trade every day (to say nothing of the thousands that now have access to your public trading record) will have no impact on your edge?
For a specific example, just look around. There are a dozen or more VIX systems today when a year ago there were 2 or so. But those systems were some of the highest rated systems and everyone got to see what was working. And now as a result there are a bunch of copy-cats. You donāt think that effects the strategy?
2 Likes
@DavidStephens Your observation seems to have a point. However, the rise of all those VIX systems may have (also) another reason. Volatility products ganied strong appreciation and attention from traders in the recent past. Highly increased volumes on instruments like XIV / VXX indicate that. And I frankly donĀ“t believe this increase in volume comes solely from c2 systems.
In fact IĀ“ve developed a robust XIV-only strategy which IĀ“ll bring online next week even without looking at other vola systems. IĀ“m kind of confused how easy it is to design a very profitable vola system compared to any other market. So that may also be a good reason for increased numbers of those systems.
Anyways, trading never was and never will be static so thereĀ“s something going to change at some point that prevents those vola systems from taking over the market.
1 Like
Itās so easy because they take a large tail risk, of getting wiped out in a 2008-like market. Until that happens, money can be made.
I developed my own volatility model long before discovering this site. Itās fairly easy to come up with a system that makes good money shorting volatility. But avoiding big drawdowns is difficult.
When the hard times come, and they will, there will be a big shakeup here, but IMO the strong returns to most volatility systems will return after some huge drawdowns. My guess is that, except for the few funds that manage the downdrafts well, most volatility funds will lose most of their subscribers when the DDs get large. But the vol. returns earned after the bear market ends will again be huge, and draw lots of new (and returning) subscribers and developers.
Soāoff and onāI expect vol. systems to be among the high-flyers on C2 for a long time to comeāunless the stock market creates more neutral ETfs for volatility than XIV, VXX, and the like.
2 Likes
A 2008-like market is actually no problem at all because it doesnĀ“t come out of thin air and is a long process. You can manage the strategy along the way pretty easy if you know what youĀ“re doing. For example my strategy is designed so that it will sit in cash after a certain point until the hardest time is over. That adds hugely to the robustness while the annual performance is still what I consider very good for a stable system. But IĀ“ll let my systemĀ“s performance do the talking albeit it will take months and months to prove anything. (Using broker transmit so 100% TOS as always)
@QuantitativeModels I also expect a major shakeup because IMHO most vola systems around are either overleveraged, overoptimized or based on pure luck (like risking the whole account in the first trade and win). IĀ“m actually expecting some difficult to handle event in the next say 3 months. Still IĀ“m setting up my strategy now because after that event people can compare apples with apples. Since July 2016 every chap and his dog could have set up a āsuccessfullā vola strategy and people would understand that if they looked only once at a XIV chartā¦
Anyways, trading volatility is a very interesting market with powerful instruments at our fingertips. IĀ“m keen on seeing the future development here.
āFor example my strategy is designed so that it will sit in cash after a certain point until the hardest time is overā
Ah ha. And how do you know the hardest time is overā¦? You donāt.
1 Like
Just a question - did you actually trade anything during 2008 and managed it with āno problem at allā or this confidence comes from looking at the chart after the factā¦? just asking, coz I donāt recall you being mentioned in āThe Big Shortā. Maybe you can appear in the sequel.
As I said IĀ“ll let my system speak for itself so no need to argue with you just for the sake of a discussion. I know what IĀ“m doing and if you think you know it better than itĀ“s fine for you.
re: vol strategies on this thread
-
a decent volatility strategy should take clear advantage of market downturns, not avoid them by staying out. VXX tends to move much more quickly than XIV once futures are backwardated, and even published quant vol strategies show +300% or better backtesting moves during the second half of 2008, when VIX shot through the roof and came back down. missing those opportunities with a half-vol (XIV only) strategy could be hard on subscriber healthā¦ but a subscriber who signs up for an XIV-only strategy should probably know that, so maybe theyāll be happy just sitting it out.
-
āunless the stock market creates more neutral ETfs for volatility than XIV, VXX, and the like.ā Many existing vol strategies work reasonably well with lower drawdowns (and lower returns) just by substituting in ZIV and VXZ longer term funds.
(disclaimer: Iām working on a strategy for C2 that is a hybrid short-term, long-term approach that loses some of the high-return punch of a straight XIV/VXX switching strategy, but improves the risk-adjusted returns. it looks good to me so far, but iām not happy enough with it to launch on C2 yet.)
1 Like
