Thanks Pakelo,
Why would a person selling a trading system to the public not show broker statement if asked by a potential buyer?
Validation for Vendor Trading System
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Thanks Pakelo,
Why would a person selling a trading system to the public not show broker statement if asked by a potential buyer?
You keep looking for help but sadly, ET is not where you are going to find it. Second, buying a system isn't going to cut it either. There is a pretty good webinar about systems trading from futures.io.
What I found the most interesting was this. So first, we all know about drawdowns, but the way he presents this info and talks about it is interesting. You could have a very nice equity curve, but if you start at the wrong spot, your first few weeks could be downright ugly. Even more important though was how he talked about having multiple system running at the same time to smooth out the equity curve. This never occurred to me but it makes perfect sense.
As another poster mentioned, the systems vendor can easily just show you performance for one of his systems that is doing very good right now, but when you get on board, it might go through a drawdown. He might have multiple system, as was suggested, and only show which was looks the best currently.
Of all the system I saw on C2, none of them I thought were that good. Many which looked like they had a nice equity curve actually when through a very serious drawdown on individual trades before they were closed, but that manged to turn around. The trade might still show up as a profit of $50, but when you focused on the DD column, you saw that these trades were down 2% or more, which meant maybe $500 or $1000. Now tell me, if you were trading yourself, and your average win was $50, and if you traded without a stop, and kept hoping for a turnaround once you were over $500 in the hole, I'm sure you would have a good win rate as well (ie. small wins and very very large stop). But so many of these systems eventually blow up I'm sure. Hardly any of them seem to be older than 6 months.
Why don't you just post what systems you're looking at and the smart people here can rip them apart. I really don't think anyone out there is giving away free money. The guys on C2 I think make more in monthly fees than in trading profits, which of course is guaranteed income regardless of performance. If they blow up, they just start again.
That is a question for Al Brooks and other famous vendors. The truth is that most of these vendors either:
1. Don't have a long term profitable system, but they sell one nevertheless.
2. Don't trade with real money.
3. They might have a small account and they are not too proud of it. Why? Because their majority of their income comes from being a vendor and not from trading.
4. Any combination of the above 3...
Check out tradingschools.org out of a many systems reviewed, there are maybe 3 with a real money track record... When I was checking out systems and rooms, literally there was NONE that had a 3 years market beating record.
I disagree with the statement that nobody sells good systems. I sell them. In fact, I sometimes give them away! The devil is in the details. I have over 200 systems that have worked in various markets at various times in the past. Some of them are not currently profitable; some of them are. Markets change, and systems work or don't work, depending on the market.
For example, here's a working system that is working now - free. Buy Home Depot during the last 5 minutes of trading every day except Tuesday. Sell it the following trading day about 9:45 Eastern time. It makes about 20% ROI per year, and has been doing so more than 5 years. You're welcome.
Thanks Steve for commenting on this subject. And major thanks for the free working system.
It is good to have some diversity on this subject.
For me, currently, I am both side of the fence 50/50. I have no experience on rather or not a vendor system works or not, but I believe I do know the right questions to ask and information to prove the system worthy of buying. Well at least I'm learning.
For example, like Steve said, he sell systems and gave one away for free.
Also, a system developer may not have another capital to live trade a system he developed. He may have good results in back test and good results in sim live, but really don't have funds to trade the system. This could be my case, I am low capital right now, but I learning myself that I kind of like the systematic style trading and moving toward automation.
Just my 2 cents to not be so one sided.
Thanks Steve for commenting on this subject.
It is good to have some diversity on this subject.
For me, currently, I am both side of the fence 50/50. I have no experience on rather or not a vendor system works or not, but I believe I do know the right questions to ask and information to prove the system worthy. Well at least I learning.
For example, like Steve said, he sell systems and gave one away for free.
Also, a system developer may not have another capital to live trade a system he developed. He may have good results in back test and good results in sim live, but really don't have funds to trade the system. This could be my case, I am low capital right now, but I learning myself that I kind of like the systematic style trading and moving toward automation.
Are you joking?, you could of just bought and held Home Depot five years ago for about $40 and today it is $145. A higher rate of return than your long only trading system.
Also i suggest you look up 'curve fitting' with regards to developing a trading system. Your description stinks of curve fitting.
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Its easy to get money from friends and family if you have a good trading system.
In fact it is really easy, people will be eager to throw money at you.
Thanks for the comments southall,
A friend and I were debating this discussion "good trading system".
What is a good trade system?
For an income trader, is it a system that makes money every month, cause bills are due every month?
But what happens if you just start trading the system and experience drawdown?
How does a day trader define a good trading system?
Thanks
You have to bet smaller with initial capital incase you drawdown.
But bet bigger when you make money.
Say be prepared to risk drawing down 5 to 10% of starting capital but maybe 25% when you have healthy profit cushion.
In general i would describe a good system as one that has been tested to work over many years (at least 10) and over many different market conditions (bull/bear/sideways/very calm/ very volatile) and has a sharpe ratio of at least 2.0 over that time, obviously higher is even better but you must be careful of curve fitting bias.
It doesnt have to profitable every month, but the average winning month should be larger than the average losing month.