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MarketBrief
The
Best Trading
Systems
On
Collective2
Issue No: 4
This update: Jul 23, 2008
Like beauty, "the best" of anything is very
much in the eye of the beholder. For this analysis I have tried to
approach the process from the perspective of a fund manager looking for a
specialist trader to trade a portion of the managers fund, or an
experienced, analytical broker looking for Collective2 systems to
recommend to clients.
So good, consistent results with excellent
risk management is the ideal, and while I might add systems under 6 months
old to my "watchlist", I'm mainly interested in the more mature, proven
systems and traders.
Summary Of Process And Results:
I'll get into the full details of criteria and scoring later (towards the bottom of this page). At this stage let me just summarize the process and results:
- On Jul 16, 2008, I ran a query using "The Grid" at
Collective2, applying filters where I could for the criteria I have. I excluded options
systems since I don't feel adequately qualified or experienced in this
area to assess them. So if you're interested in trading options,
this analysis won't help.
- This generated a list of 65 systems, which I
copied into Excel for further analysis, which included applying further
criteria
and calculating "The Muzza
Score".
- In the table below the 10 systems highlighted with
a green background at the top are the only ones that meet all criteria, out of
the 65 considered. The table shows the top 17.
- The 6 systems with their Age column entry
highlighted in yellow (Have Fun, Gold Survivor Energy Portfolio, EXCLENCE, Trending Futures, Turning Points, and Corporate Investments) are the "mature" systems (over
180 days old) that meet all criteria.
- FX.WAVE is a mature system that only fails to be on the final list due to "Market Experience" (at 76%), and would also be of interest to our fund manager or broker.
Changes since the last update:
Method:
- No changes with this
update. But for the next update I'm planning to alter the
Market Experience calculation to better reflect the number of decisions,
and the quality of those decisions, during a systems tenure on
Collective2. I'm also planning to extend the minimum age to 120
days (from 60 days). I will also further reduce the
Annual Return:Max Drawdown Ratio to 3:1 (from 4:1), as this is more consistent with the APD requirement of 0.30. Finally, because the Annual Return:Max Drawdown Ratio takes care of the key consideration of performance vs drawdown, I am increasing the maximum drawdown allowable to 30%. This will allow systems that have a large drawdown early on in their life on Collective2, but then perform extremely well over a long term (eg: mvp-3, which had an early 25% drawdown on Collective2) to be included in the analysis.
Results:
- Since November 2007, the number of systems meeting all
the criteria for being on the Best Systems list has tracked from five to
eight in January, to seven in March, to ten in July. Have Fun is the only system to be selected in all
three updates.
- Of the seven qualifying systems in March, five have
dropped off the list: Gold Swing Survivor Futures Ptf $25K, The Dutch
forex trader, GoldenStocks Short Only, Blue Lobster Fund, and Dow
Eagle. Meanwhile eight systems that didn't qualify in March are
now on the Best Systems list: PIPPROFIT.COM (entering at position 1),
TRENDSETTER (entering at position 2), Trending Futures (not previously in the top 55, now at position 4), Swing (entering at position 5), ST TREND (entering at position 6), Turning Points (entering at position 7), Gold Survivor Energy Portfolio (moving from rank 9 to rank 8 - note: Gold Survivor Energy Portfolio was an honorary member of the list at the last update), and Corporate Investments (moving from rank 15 to rank 10).
The large churn in list members probably reflects the challenging market conditions of the last few months. I also hope the changes planned for the next update (see above) will reduce the churn somewhat.
-
Perhaps appropriately, Gold Survivor Energy Portfolio replaces Gold Swing Survivor Futures ptf $25000 as a member of Stars Of Collective2. EXCLENCE, and Have Fun continue to be rated as Stars Of Collective2, and these three are the only systems in this "best-of-the-best" category. It's good to see there is more stability in this list.
Summary: As a broker or fund manager, here are the "mature" systems (at least 180 days on C2) I would be interested in:
|
System: |
Rated a Star Of Collective2? |
|
No | |
|
No | |
|
No | |
|
No |
And here are the newer systems I'd add to my "watchlist":
You can compare all eleven systems on one page, at my Analyst Page at Collective2.
Or, just view the three trading systems I personally recommend ....
Updates: I aim to update this analysis on a regular basis and include a comment here on new additions to the list of best systems, and deletions from the list. The next update is planned for late September 2008.
The Best Of Collective2 (Excludes Options systems): Based On Data Extracted Jul 16, 2008.
| The Muzza Rank | Rank Change | C2 Rank | System | Stars Of C2? | Uses Stop-loss? | Age (Tgt>= 2mths) Mature= >=6mths |
No. of Trades | Avg Trade (Days) | Market Experience (Days) | Mkt Exp Weight
(Tgt>= 100) |
Win% | Profit Factor Weight
(Tgt>= 100) |
Ann. Return% | Max Draw Down | Ann Ret % : Max DD Weight (Tgt>=20%) | Sharpe Ratio | Realism Factor (Tgt>=75) | APD Factor (Tgt >= 100%) |
The Muzza Score |
| 1 | New | 17 | PIPPROFIT.COM | Yes** | 2 mos | 93 | 3.100 | 288 | 300% | 93% | 493% | 159% | 12.1% | 82.18% |
3.78 |
100% |
265% |
12.74 | |
| 2 | New | 5 | TRENDSETTER | Yes | 4 mos+ | 120 | 2.000 | 240 | 300% | 89% | 473% | 146% | 11.2% | 81.38% |
3.031 |
100% |
214% |
10.86 | |
| 3 | +4 | 3 | Have Fun | Yes | 1 yr 2 mos+ | 59 | 1.200 | 71 | 101% | 76% | 233% | 42% | 3.5% | 74.11% |
2.724 |
99% |
305% |
4.36 | |
| 4 | >+55 | 4 | Trending Futures | Yes | 6 mos | 79 | 2.700 | 213 | 300% | 47% | 160% | 209% | 15.4% | 84.62% |
3.66 |
94% |
331% |
2.91 | |
| 5 | New | - | Swing | Yes | 2 mos+ | 56 | 3.200 | 179 | 256% | 61% | 127% | 74% | 7.0% | 65.71% |
3.182 |
100% |
198% |
2.75 | |
| 6 | New | 43 | ST TREND | Yes | 4 mos | 12 | 9.100 | 109 | 156% | 67% | 253% | 54% | 7.8% | 43.43% |
1.946 |
99% |
262% |
2.72 | |
| 7 | >+55 | 14 | Turning Points | Yes | 1 yr 8 mos | 194 | 4.200 | 815 | 300% | 56% | 107% | 100% | 16.7% | 37.24% |
1.935 |
100% |
344% |
0.68 | |
| 8 | +1 | 8 | Gold Survivor Energy Portfolio | Yes | 1 yr 10 mos | 777 | 0.092 | 71 | 102% | 47% | 107% | 74% | 6.2% | 74.50% |
3.389 |
99% |
114% |
0.63 | |
| 9 | -6 | 20 | EXLENCE | Yes | 9 mos+ | 164 | 5.000 | 820 | 300% | 46% | 107% | 109% | 18.8% | 36.34% |
2.915 |
90% |
146% |
0.09 | |
| 10 | +5 | 34 | Corporate Investments | Yes** | 6 mos+ | 42 | 25.200 | 1058 | 300% | 62% | 173% | 141% | 19.7% | 44.57% |
2.026 |
100% |
132% |
0.05 | |
| 11 | >+55 | 21 | seat of pants 1 | No | 5 mos | 75 | 4.400 | 330 | 300% | 77% | 500% | 91% | 11.4% | 50.00% |
1.973 |
100% |
273% |
0.88 | |
| 12 | New | 11 | TMG II Futures | No | 2 mos+ | 29 | 2.400 | 70 | 99% | 66% | 240% | 75% | 4.7% | 100.27% |
4.452 |
100% |
297% |
0.54 | |
| 13 | New | 12 | FX Signals | No | 2 mos | 84 | 1.200 | 101 | 144% | 74% | 193% | 567% | 14.6% | 242.72% |
6.089 |
100% |
261% |
0.47 | |
| 14 | New | 36 | Indefatigable Management | No | 3 mos | 55 | 4.200 | 231 | 300% | 84% | 280% | 179% | 16.6% | 67.51% |
2.76 |
92% |
301% |
0.27 | |
| 15 | New | - | FX.WAVE | Yes | 1 yr 2 mos | 237 | 0.225 | 53 | 76% | 53% | 100% | 92% | 12.9% | 44.43% |
2.232 |
100% |
102% |
0.12 | |
| 16 | New | 34 | EasyRider | No | 4 mos | 71 | 18.900 | 1342 | 300% | 48% | 140% | 60% | 11.8% | 31.57% |
1.774 |
79% |
115% |
0.05 | |
| 17 | New | 40 | FX-Razor | No | 4 mos | 90 | 1.500 | 135 | 193% | 58% | 180% | 174% | 17.7% | 61.26% |
2.351 |
100% |
197% |
0.05 |
** NOTE: While these two systems use stop-losses, they have had a few large intra-trade drawdowns (due in part to a high use of leverage), so may not suit more conservative, risk-averse traders.
- Max Drawdown not more than 20%
- Realism Factor of 75% or higher
- Age on C2 of 60 days or higher (180 days or higher to qualify as a "mature" system)
- APD (average profit per dollar of drawdown, after adjustment) of 0.30 or higher
- Profit Factor (total dollars gained to total dollars lost to-date) of 1.5 or higher
- Market Experience of 70 days or more (number of trades x average trade duration, expressed in days)
- Annual Return (%) : Max Drawdown ratio of 4:1 or higher
- Percent of winning trades of 40% or higher
- Uses automated stop-losses that are set at trade entry (this is checked with the system vendors of systems that meet all the above criteria).
Calculating The Muzza Score:
The Muzza Score = [Mkt Exp Weight] x [APD Factor] x [Profit Factor] x [Ann Ret : Max DD Weight] x [Max DD Factor] x [Realism Factor]
NOTES:
- Some systems earn the "Stars
Of Collective2" logo:
N
To qualify for this logo, a system must have been on at least two consecutive "best lists" (the actual number of times is shown by the number "N", to the right of the logo). It must also be a mature system on Collective2 (at least 180 days old).
To retain the logo a Star system can only fail to meet a criteria for a maximum of one update. If the failed criteria is "maximum drawdown under 20%", then it ceases to be a Star immediately as the system creator cannot subsequently reduce the maximum drawdown experienced.
- All factors have maximum scores set for them to prevent undue
influence from "outlier" results. These range from 100% to 500% -
see below for more details for each factor.
- The C2 rankings I include for comparison purposes are based on the
following page: "System Finder" (in left side navigation)/"Very
Conservative" (in Step 1). Also, exclude options systems in Step 2
(uncheck the box) and check all boxes in Step 3. This appears to
give the closest match between Collective2 rankings and my own
analysis. NOTE: You may need to refresh the page after making the
above selections if you use the Firefox internet browser.
- Mkt Exp Weight: Market Experience data doesn't exist at
Collective2, but I have calculated it using other C2 data, specifically:
average trade duration (in days) and number of trades on C2 for this
system. Market Experience is a very important concept as it gives
the total "days in the market" for a trading system (number of trades x
average trade duration, expressed in days). Let's consider an
example to clarify this: a system that has traded for a year but
has only completed three trades may seem impossible to assess. But
if those trades have averaged 30 days each, then the trader has had 90
days in the market, during which he/she can botch things up, or
excel.
On each of those 90 days the trader is reviewing their trades and answering these questions:- Do I close the trade?
- Do I top-up the trade?
- Do I close some of the trade to reduce its size?
- Do I leave the trade as it is?
So, although there are only 3 trades, there are 90 days of market experience, which meets the minimum criteria of 70 days. The weighting process sets 70 days at 100% and sets an upper cap at 300% (or 210 days). At this point there is ample data to be confident in the performance analysis, and additional market experience adds little in terms of additional certainty.
- APD Factor: APD is included as a statistic in C2, and is a key
performance measure. I make an important adjustment I'll get to in
a minute. Here's how I think of APD (Average profit per dollar of
drawdown): It's like an ROI figure for venture capitalists
investing in businesses. They will look for returns of 35 to 50%
or more to justify their high risk in investing in relatively unproven
businesses. Trading is also a risky business and we should aim to
achieve 0.35 to 0.50 or more, with 0.30 as a minimum.
As a venture capitalist I might accept a lower return (say 30-40%) from a proven management team that makes 80-90% great decisions, than from a company with an average, or unproven, management team. This leads to the simple adjustment I make to APD: systems with a % of winning trades over 50% get their APDs adjusted up proportionately, while those with less than 50% winning trades get adjusted down. Why? Because a system with 90% winning trades can afford to make less gain per dollar of risk (and most likely will) and still achieve a great outcome.
An APD of 0.3 converts to 100% after applying the % of winning trades adjustment. I view the APD Factor as the key measure of performance in the Muzza Score calculation. The cap is set at 400% (equating to an adjusted APD of 1.2 or higher).
- Profit Factor = total dollars gained / total dollars lost. A
score of 1.5:1 is set at 100% and a cap is set at 500% (equates to a
score of 7.5:1).
- Ann Ret % : Max DD Weight: A ratio of 20:1 is set at 100% and
the minimum of 4:1 equates to a 20% score or higher. The cap is 500%
(equating to a ratio of 100:1). This is also a key measure as a
good score means high Annual Return with a low maximum drawdown, which
is a very attractive mix.
- Max DD Factor: A maximum drawdown of 20% or higher is set at a 0%
factor score. A maximum drawdown of 0% would achieve a 100% factor
score. Other points are scaled between these two - eg: a max DD of 10%
would get a 50% factor score as 10% is midway between 20% and 0%. The
cap is 100%.
- Realism Factor: this ranges from 0% to 100% and is taken as-is
from Collective2 and used in the Muzza Score calculation. A figure
of 75% or higher is required to meet the criteria for realism.
- Maximum possible Muzza Score = 3 x 4 x 5 x 5 x 1 x 1 = 300, but in reality no system is likely to get close to a perfect score.
For Collective2 System Vendors:
For those who have their systems highlighted with a link - CONGRATULATIONS! With my "fund managers hat" on I can honestly say I believe you're doing an awesome job! Keep up the great work. You're the vendors who give Collective2 its real value.For Investors: In my view, the highlighted systems have traded extremely well. But what they have done, and what they will do in the future can be two very different things. I cannot give any guarantees and nor could the vendors themselves. You need to make your own decisions based on your own research and professional advice received. And always feel free to ask vendors at Collective2 your most difficult or important questions - just use the Private Message facility at Collective2. Please also read the full disclaimer at the bottom of this page, and the one at Collective2.
You can view the systems highlighted on this page, altogether for ease of comparison, at my Analyst Page at Collective2.
Or, just view the three trading systems I personally recommend ....
TrendSensor.com is a client of Collective2, but does not represent Collective2. Specifically, the analysis on this page is the work of Murray Nickel of TrendSensor.com and does not represent the views of Collective2 or its representatives.
Disclosure: I am the vendor and trader for the two TrendSensor systems at Collective2.
To contact Murray just click on the Contact link under the Information tab at the top of each page.
Next update planned for: Late September 2008.
Archive: | |
|
View previous versions of the Best Systems pages by clicking the appropriate links: | |
| Nov 2007 | |
Collective2 Growth:
Collective2 continues to become a more popular destination for folk searching for the best trading systems to trade:
