Quote from skeptic123:
Yeah but selling a good reliable trading system making $7,500 per ES contract for $1,500 is completely idiotic. Unless of course it is not as reliable as $1,500 in one's bank account.
"Some Good/Valid Reasons Why Vendors Sell Systems
The system vendor may now have a better trading system which he/she is using in his/her own personal trading while selling the older (but still profitable) system to the public.
The second reason can also be while a system vendor may like developing systems, he/she may not necessarily like trading them. Everyone does not possess the discipline or the psychological makeup for trading. The logical solution is then to sell them. Even Jack Schwager of Market Wizards fame, says in his book that he likes doing research and creating new trading systems, but doesn't like the actual process of trading.
The third, and perhaps the most important reason is leverage and transference of market risk. Let's say you have $10,000 of trading capital and a great system that makes 60% per year. Starting with $10,000 you can make $6,000 profits in one year, if everything goes according to plan. Not bad, but don't forget the amount of work it'll take, with all the ups and downs and trading for a full 365 days.
Now lets say you use the same $10,000 as marketing capital to sell your system. You send out 1200 direct mail letters to a targeted mailing list of people who have bought trading systems in the past. Even with 1/2% response, you get 60 orders. Now if you charge $500 for your system, you generated $30,000 revenue or $20,000 profit, not in one year, but in a couple of months. Plus all the market risk has been transferred to the buyer.
Furthermore, if the system vendor wants, he/she can trade the system and sell it at the same time. In liquid markets, it will make no difference whether 1 or 1000 people are trading it. Another factor to take into account is that if 1000 people buy a system, less than 10% will actually stick with it for any length of time.
Half will never trade it, it'll just sit on their bookshelf gathering dust. The other forty percent will abandon it after 2 or 3 losing trades.
Selling trading systems is like any other business. People in other businesses sell products or services for profit. If it is possible to make a larger profit with less risk by selling a trading system rather than by using it, doesn't it make more sense to sell it instead?"
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This was in the link Richtrader gave
