Capital Available for Traders

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Quote from nonlinear5:

I thought about this for quite a while even before this discussion has started. It certainly makes sense to include the length of the trading history in the ranking equation. However, I think that the number of trades is equally (if not more) important than the length of the history.

Consider two trading strategies, A and B.
Strategy A has a history of 10 years, and made 10 trades.
Strategy B has a history of 1 year, and made 100 trades.

Everything else being equal (i.e, all the other performance metrics are the same), which one do you trade? According to your RAPA score, and assuming that you use the term sqrt(history length), strategy A will get the score which would be 3.16 times higher than that of strategy B. But is A really 3.16 times more attractive? I'd say "no". The sample size of 10 trades is too low, and thus the probability that strategy A accomplished its performance simply by chance is too high.

I'd say that if you take into consideration both the length of the trading history and the number of trades, it would be more fair:

Strategy A: sqrt(10) * sqrt(10) = 10
Strategy B: sqrt(1) * sqrt(100) = 10

What do you think?
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We are doing it differently: we do not have a sqrt(number of observation) multiplier but given different trading histories the distribution of Sharpe ratios is different. The typical situation is that A and B can have the same Sharpe ratio but since A has longer history it is being ranked based on a distribution with thinner tails. The classical paper that is dealing with this kind of situation is http://papers.ssrn.com/sol3/papers.cfmbstract_id=377260

Concerning the trades: there are alot of managers (and on our platform as well) who is using a buy and hold strategy - it does not have a lot of trades but in my opinion this strategy is the easiest to assess.
 
Quote from nonlinear5:
I'd say that if you take into consideration both the length of the trading history and the number of trades, it would be more fair. . .
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Gil Blake said something like that in his interview for New Market Wizards by Schwager: My answer to [diversification] is that you can diversify very well by just making enough trades per year. If the odds are 70% in your favor and you make enough trades, it's very difficult to have a down year. (p. 239)

Schwager considered Blake to be one of the most consistent traders he had met.
 
Quote from Jack_Larkin:

While it's great that you've made progress with supporting FX brokers, I'd be very cautious about going the 'report upload' method of tracking performance.

The report HTML files that MT4 generates can be doctored quite easily, and there's no way to verify if it's a real money account or demo.

--

Take a look at what MyFXBook is doing; they have a setup where they use the investor password for an account to directly pull the account's info from the broker's server, which makes doctoring the records much harder and the broker verifies the real money status of the account.
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Hi Jack,

I think MyFXBook has built a super website with great functionality, we have also developed a RAPA version for live reporting which definitely makes it harder to tamper with. As we mentioned the HTML file upload is our 1st version beta, we would like to test the live reporting version more before we offer it as an option on our site.

What makes me a little reluctant to push for the live reporting is that high quality traders may worry that we will be using their trade signals for free. Early in this thread a number of people felt they didnt want to upload their trade history for fear of reverse engineering. By only working with uploads at the traders discretion when to upload this may help.

I understand that there is a trade off for validating the authenticity of the trade history. My choice is to let this process evolve a little and we will then institute a more firm rule with this additional knowledge.

Thanks

Mike
 
Quote from mickson:

Hi Jack,

I think MyFXBook has built a super website with great functionality, we have also developed a RAPA version for live reporting which definitely makes it harder to tamper with. As we mentioned the HTML file upload is our 1st version beta, we would like to test the live reporting version more before we offer it as an option on our site.

What makes me a little reluctant to push for the live reporting is that high quality traders may worry that we will be using their trade signals for free. Early in this thread a number of people felt they didnt want to upload their trade history for fear of reverse engineering. By only working with uploads at the traders discretion when to upload this may help.

I understand that there is a trade off for validating the authenticity of the trade history. My choice is to let this process evolve a little and we will then institute a more firm rule with this additional knowledge.

Thanks

Mike
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Hey Mike,

Wasn't criticism, just concern, gotta protect the interests of your investors after all.

Thanks though.

We should chat.

Cheers,
Jack
 
The successful trader will earn a 1% management fee and a 10% performance fee.
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According to Collective2, the top system made $565,000 in subscriber revenue:
http://www.collective2.com/become-trading-system-developer

It doesn't say over which period of time, but let's assume that it's over 3 years. With that assumption, this means about $188,000 per year.

So what kind of account size would you need to manage with CAPA to realize the same revenue? Let's assume that you can turn over 20% annual return. My calculations show that the account size would have to be around $6.27 million:

6,270,000 * (0.01 + 0.1 * 0.2) = $188,100

Correct?
 
Quote from nonlinear5:

According to Collective2, the top system made $565,000 in subscriber revenue:
http://www.collective2.com/become-trading-system-developer

It doesn't say over which period of time, but let's assume that it's over 3 years. With that assumption, this means about $188,000 per year.

So what kind of account size would you need to manage with CAPA to realize the same revenue? Let's assume that you can turn over 20% annual return. My calculations show that the account size would have to be around $6.27 million:

6,270,000 * (0.01 + 0.1 * 0.2) = $188,100

Correct?
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Your calculations appear correct. I cannot comment on the C2 subscriber model I just don't have enough information but $565k is a pretty decent revenue stream off a hypothetical trade performance. I would be interested to hear how many successful fund managers have been incubated from this type of site.

Our goal with RAPA is to work with our traders and to try and incubate the ones we see as having potential to a fully regulated fund/managed futures program with compliance and other levels of support across the RAPA/Gleneagle family.
 
Quote from OddTrader:

Gross? or Net after C2 fees?
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It appears to be gross. Here is the exact quote from C2:
"The top-grossing system on C2 has earned over a half million dollars."
 
With regards to the RAPA score, I noticed something peculiar. When I uploaded my trading history via the Flex XML ending Dec 24, my RAPA score was calculated as 81. On Dec 26, I had two new trades, both winners, and both within the normal size. When I uploaded these additional winning trades, my RAPA score actually dropped by a point and it now stands at 80.

That doesn't seem right to me. I understand that if it were an outlier, it could have been flagged by your ranking algorithm as additional risk. But in this case, it was totally within the normal bounds, so I expected my score to go up (or at least stay the same).

Michael, if there is an explanation which requires the disclosure of my trades here, feel free to do it. I am listed as "nonlinear" in the leaderboard.
 
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