unhappy with Collective2

[TradeBlazer]

No, the mid-Dec high was 92K and the mid-Feb low 98K, so like 8% in 2 months, what is pretty much sideways with such a high market volatility.

The problem is though that if someone had just bought for 10% of capital a weekly SPX call, they would have performed the same or most likely better, with 1 trade a week and no subscription prices.

Also you started a system without fully testing it? Probably restarting it in November would have been a better idea, the 42% DD wouldn't show up.

I don't know why you carefully selected those two dates to nitpick. Look a few days before or a few days after them. Better yet, look weeks before or weeks after, or a month before and a month after.

 

[TradeBlazer]

Your strategy is too risky for investors' appetite, that's my guess. Your strategy has a maximum 43.5% drawdown which means an investor can lose close to half of his/her money and your win ratio is less than 50% so your strategy is losing money more than half of the time. And the bulk of your winning is concentrated in this one month of December. This is a kinda of a swing-for-the-fences kind of strategy. For more than half of the time, you don't win but this one few times that you do win, you win a windfall. But during the time that you are losing, you could lose almost half of the invested capital. So after losing almost all of the invested capital, how does an investor still have money to invest to win the windfall?

This is what goes on in an investor's mind when he/she is looking at your strategy and this is probably what the algorithm takes into account when assessing a strategy's eligibility to be included on the leaderboard. So if I were you and I wanted to improve my C2 score, I would tweek the strategy a bit to lower the max drawdown and increase the chance of winning a bit. I mean think about it, if you were to invest your own money, would you invest in a strategy that only wins less than half of the time and can make you lose almost half of your money? If you would, then f the Collective2 and just trade your strategy with your own money. You would make 242% return on your invested capital, that's more than double the invested capital, who gives a s about subscription fees? You will be richer than Warren Buffett in no time.

When did that drawdown occur? Close to the onset of the strategy's origin. Then look at the performance of the strategy since then. See any more big dips in drawdown? And remember, win rate means nothing. It's about the bottom line and growing your capital. I do trade this strategy using my own money.

"I mean think about it, if you were to invest your own money, would you invest in a strategy that only wins less than half of the time and can make you lose almost half of your money?"
I look at the bottom line performance. If the capital is increasing and it looks like risk is managed fairly well, then yes I would invest in a strategy. The drawdawn from last September is no longer an issue but C2 likes to put up in the front page frong and center in size 32 font regardless of how things may have been corrected since then.

 

[TradeBlazer]

Just to provide an update, after lengthy correspondence with Collective2 they replied with the following assessment regarding my original question and my original post on this disucssion forum:

I spoke to an Engineer, and they told me a few things 1) your leverage is actually within range for an options strategy and really isn't having much of an effect 2)They use a formula based on notional value and the delta of the option. 3) Your biggest factor right now is age. Essentially beside rating for performance, C2 Score measures our best guess of which strategies will survive long term, so naturally longer term strategies will rate better. They say once your Strategy reaches around a year the C2 Score should improve markedly, and your drawdown will have less of an effect as well. 4) There is nothing they can do about Drawdown 5)All Strategies are treated equally and there is no bias towards any particular strategies.

so my strategy has not been showing up in the Leaderboard because their algorithm places a lot of emphasis on the tenure of the strategy. Can't say that I disagree with that from their perspective.

 

[TradeBlazer]

I believe in having both a good return rate AND a good win rate and I never look at win rates alone completely ignoring the return rate but I do have a basic win rate that I consider required when evaluating a strategy and I speculate many investors do as well. It's just natural. What's the point of having a good return when you are not going to be able to obtain it when the win rate is so low and it goes hand in hand with risk. How can you say a strategy is not risky when you lose more often than you win? Letting the profit run requires that you win first. And finally it IS possible to have both a good return rate and a good win rate. They are not mutually exclusive of each other.

Look at the size of the wins vs. the size of the losses. Win rate alone is truly meaningless. You could have a 25% win rate and still be profitable if each win was much larger than all of the small losses. Win rate means little; look at the bottom line and historical performance of the portfolio. I know you have your own rules and that's fine but they are not universal to a winning strategy. I'm sure you have heard of the old adage " let your winners run and cut your losses early." That does not equate to a high win/loss percentage.

 

[TheDawn]

When did that drawdown occur? Close to the onset of the strategy's origin. Then look at the performance of the strategy since then. See any more big dips in drawdown? And remember, win rate means nothing. It's about the bottom line and growing your capital. I do trade this strategy using my own money.

"I mean think about it, if you were to invest your own money, would you invest in a strategy that only wins less than half of the time and can make you lose almost half of your money?"
I look at the bottom line performance. If the capital is increasing and it looks like risk is managed fairly well, then yes I would invest in a strategy. The drawdawn from last September is no longer an issue but C2 likes to put up in the front page frong and center in size 32 font regardless of how things may have been corrected since then.

Well then like I told you,

f the Collective2 and just trade your strategy with your own money. You would make 242% return on your invested capital, that's more than double the invested capital, who gives a s about subscription fees? You will be richer than Warren Buffett in no time.

What are you still hung up about subscription fees from C2 for?

 

[TheDawn]

You could have a 25% win rate and still be profitable if each win was much larger than all of the small losses. Win rate means little; look at the bottom line and historical performance of the portfolio. I know you have your own rules and that's fine but they are not universal to a winning strategy. I'm sure you have heard of the old adage " let your winners run and cut your losses early." That does not equate to a high win/loss percentage.

Provided you would still have money left for you to hit the big home run. Lottery return is 1,000,000+% but its win rate is 0.00000000001%, is investing in lotteries a profitable strategy then if win rate doesn't matter and all it matters is returns %? This is what people don't understand about the probability of trading wins vs. losses. The probability of winning/losing for each trade is independent. In other words, the probabiltiy of you winning/losing the next trade is not dependent on whether and how many times you have already won/lost. If your win rate is only 25%, then you are losing 3 trades out of 4, what if you lose them all in a row before you hit that winning 4th trade and by the time when you do, you have lost all of your capital, how are you going to have enough investment capital to win back all of the losses and even end up profitable even if each of the winning trade wins more than the previous losing trade? This is why I feel win rate is also important because we don't get to choose when we win and when we lose so it helps if we can maximize the frequency of your winning trades.

Like I said the prerequisite to "let your winners run" is that it has to be a "winner" in the first place.

 

[TradeBlazer]

Well then like I told you,
What are you still hung up about subscription fees from C2 for?

I am not hung up on subscription fees. Re-read my op.

 

[TradeBlazer]

Provided you would still have money left for you to hit the big home run. Lottery return is 1,000,000+% but its win rate is 0.00000000001%, is investing in lotteries a profitable strategy then if win rate doesn't matter and all it matters is returns %?
This is what people don't understand about the probability of trading wins vs. losses. The probability of winning/losing for each trade is independent. In other words, the probabiltiy of you winning/losing the next trade is not dependent on whether and how many times you have already won/lost. If your win rate is only 25%, then you are losing 3 trades out of 4, what if you lose them all in a row before you hit that winning 4th trade and by the time when you do, you have lost all of your capital, how are you going to have enough investment capital to win back all of the losses and even end up profitable even if each of the winning trade wins more than the previous losing trade? This is why I feel win rate is also important because we don't get to choose when we win and when we lose so it helps if we can maximize the frequency of your winning trades.

Like I said the prerequisite to "let your winners run" is that it has to be a "winner" in the first place.

I don't know why you are talking about homeruns and lotteries. A trader could have tight stops which lowers their win%. Everyone trades differently. Losing 3 trades then winning one trade does not result in losing all capital since position sizing comes into play.

 

[TheDawn]

I don't know why you are talking about homeruns and lotteries. A trader could have tight stops which lowers their win%.

Well if you have tight stops, you are going to need "homeruns" aka relatively larger profit on winning trades to make up all the losses incurred by the stop-losses. That's what I mean.

Everyone trades differently. Losing 3 trades then winning one trade does not *necessarily* result in losing all capital since position sizing comes into play.

But it could especially if you can have a maximum drawdown close to 50% of the capital. I am not trying to put down your strategy. I am just trying to show you what potential investors see and what they think about when they look at your strategy. And this might be what C2 thinks about and/or factors in when they calculate their proprietary algorithm to determine the ranks.