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MarketBrief
The
Best Trading
Systems
On
Collective2
Issue No: 3
This update: Mar 31, 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 Mar 30, 2008, I ran a query on the new version of
"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 55 systems, which I
copied into Excel for further analysis, which included applying further
criteria
and calculating "The Muzza
Score".
- In the table below the six systems highlighted with a
green background at the top are the only ones that meet all criteria, out of
the 55 considered. The table shows the top 15.
- The three systems with their Age column entry
highlighted in bright yellow (Gold Swing Survivor Futures ptf $25000, EXCLENCE, and Dow Eagle) are the only "mature" systems that meet all
criteria.
- Have Fun and Gold Survivor Energy Portfolio are mature systems (over 180 days old) that only fail to be on the final list due to "Market Experience" (at 90% and 85%, respectively), and would be of particular interest to our fund manager or broker. Have Fun would also be of particular interest as it has the highest Muzza Score of all systems. Have Fun's creator only trades the best opportunities and is comfortable being out of the market until one comes along. This is a sign of a good trader, but means it takes time to demonstrate significant market experience within the C2 environment. Have Fun should qualify under the "Market Experience" criteria at the next update, but I already view it as being an "honorary member" of the "best list" - and in this update I have added it as one of just three Stars of Collective2.
Changes since the last update:
Method:
- I have adjusted two of the criteria to be a little
looser than they were:
- The Realism Score now has to be at
least 75% (previously 80%). This is because I have learnt that
this Collective2 score has some limitations, particularly for traders
who manually trade a system they have subcribed to (C2 scores systems
higher for Realism if they use market entries and exits, but such
systems can be difficult to follow manually).
- The Annual Return % to Max Drawdown
Ratio now has to be at least 4:1. The
minimum was previously 5:1, but on reflection this was a much
tougher hurdle than all other criteria. It is certainly a key
performance measure, but needs to be kept in context with other
measures as no one measure can reliably identify the best systems. As
it happens, all the systems on the "Best Systems" list in this update
comfortably exceed the previous higher minimum of 5:1 (they exceed 25%
for this ratio factor in the table below).
- The Realism Score now has to be at
least 75% (previously 80%). This is because I have learnt that
this Collective2 score has some limitations, particularly for traders
who manually trade a system they have subcribed to (C2 scores systems
higher for Realism if they use market entries and exits, but such
systems can be difficult to follow manually).
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 six in March.
Gold Swing Survivor Futures ptf $25000, and Have Fun are the only two systems to be selected in all three updates ("honorary selection" in the case of Have Fun).
- Of the eight qualifying systems in January, five have
dropped off the list: Team Aphid Bird (no longer supported by the
vendor), TrendSensor Golden Index, TrendSensor JUMBO, Jubilee, and
Lilac. Meanwhile three systems that didn't qualify in January are
now on the Best Systems list: The Dutch forex trader (entering at position 2),
Blue Lobster Fund (rising from rank 37 to rank 5), and Dow Eagle (moving from rank 21 to rank 6).
While I'm disappointed to see my own TrendSensor systems drop off the Best Systems list with this update, it is pleasing to see a system (Blue Lobster Fund) belonging to one of my previous mentoring clients arrive on the list. I have tremendous regard and respect for the trading abilities of Tom, the creator of this system. Maybe this is a classic case of the star student out-shining his teacher!
-
Gold Swing Survivor Futures ptf $25000, EXCLENCE, and Have Fun are now rated as Stars Of Collective2, and are the only systems in this new "best-of-the-best" category. Have Fun has rated a special mention, or honorary inclusion in the Best Systems List in each of the three issues, and is now effectively an "honorary member" of Stars Of Collective2. Have Fun only fails to qualify due to the Market Experience Factor. Even with this limitation, Have Fun now has the highest Muzza Score. Full details of why I think an exception for this factor should be made for Have Fun can be found at my Recommended Systems page (opens in a separate window).
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 |
And here are the newer systems I'd add to my "watchlist":
You can compare all eight 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 May 2008.
The Best Of Collective2 (Excludes Options systems): Based On Data Extracted Mar 30, 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 | +3 | 23 | Gold Swing Survivor Futures Ptf $25K | Yes |
8 mos |
107 | 3.400 | 364 | 300% | 51% |
147% |
154.40% | 10.10% |
95.54% |
3.372 |
88% |
253% |
4.62 | |
| 2 | New | 40 | The Dutch forex trader |
|
Yes |
4 mos |
30 | 16.800 | 504 | 300% | 47% |
187% |
70.10% | 10.10% |
43.38% |
1.716 |
100% |
377% |
4.53 |
| 3 | -1 | 1 | EXLENCE | Yes |
6 mos |
97 | 5.300 | 514 | 300% | 44% |
133% |
156.10% | 11.10% |
87.89% |
4.872 |
88% |
227% |
3.11 | |
| 4 | +2 | - | GoldenStocks Short Only |
|
Yes |
5 mos |
251 | 11.900 | 2987 | 300% | 67% |
127% |
41.80% | 7.10% |
36.80% |
2.487 |
86% |
182% |
1.40 |
| 5 | +32 | 30 | Blue Lobster Fund |
|
Yes |
5 mos |
56 | 1.700 | 95 | 136% | 57% |
133% |
44.60% | 5.80% |
48.06% |
2.605 |
100% |
175% |
1.08 |
| 6 | +15 | - | Dow Eagle |
|
Yes |
9 mos+ |
13 | 6.400 | 83 | 119% | 62% |
227% |
52.80% | 12.10% |
27.27% |
1.644 |
82% |
349% |
0.83 |
| 7 | +2 | 2 | Have Fun |
Yes |
Yes |
11 mos |
45 | 1.400 | 63 | 90% | 82% |
333% |
53.40% | 3.50% |
95.36% |
3.264 |
99% |
373% |
8.69 |
| 8 | New | - | Swing Big |
|
? ** |
2 mos+ |
35 | 7.000 | 245 | 300% | 69% |
147% |
29.10% | 6.80% |
26.75% |
1.675 |
99% |
155% |
1.19 |
| 9 | +4 | 9 | Gold Survivor Energy Portfolio |
- |
Yes |
1 yr 6 mos |
651 | 0.092 | 60 | 85% | 48% |
107% |
72.10% | 6.20% |
72.68% |
3.499 |
99% |
127% |
0.57 |
| 10 | New | - | Pipsociety |
|
Yes |
3 mos |
110 | 2.200 | 242 | 300% | 55% |
100% |
133.80% | 13.70% |
61.04% |
2.985 |
100% |
94% |
0.54 |
| 11 | -1 | 4 | MAIN QQQQ |
- |
No |
4 mos |
14 | 6.000 | 84 | 120% | 79% |
393% |
217.80% | 10.80% |
126.04% |
4.521 |
100% |
624% |
1.71 |
| 12 | New | - | stock explosion |
|
No |
2 mos+ |
19 | 16.100 | 306 | 300% | 74% |
233% |
92.40% | 14.70% |
39.29% |
2.501 |
76% |
265% |
0.15 |
| 13 | -2 | Zombie Breakout |
|
No |
8 mos+ |
148 | 7.700 | 1140 | 300% | 70% |
127% |
68.90% | 13.80% |
31.20% |
2.057 |
93% |
158% |
0.05 | |
| 14 | > +35 | - | System10X |
|
No |
5 mos+ |
72 | 3.800 | 274 | 300% | 65% |
107% |
144.00% | 18.70% |
48.13% |
2.152 |
90% |
91% |
0.01 |
| 15 | New | Corporate Investments |
|
No |
3 mos |
22 | 23.100 | 508 | 300% | 50% |
127% |
78.20% | 19.70% |
24.81% |
1.323 |
100% |
150% |
0.00 |
** No response received at the time of publishing from the vendor of Swing Big regarding use of stop-losses, but based on a review of trade results I have made the assumption stop-losses are being used.
- 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.
- 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 three 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 May 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:
