Collective2

Objective method of issue selection: be greedy/fearful when others are fearful/greedy & vice-versa (reason); Pre-dominantly (greater than 95%) Always in the Market (true independence); Realism Factor (honesty) greater than or = 50%; 30,60,90 day return greater than 0; Open P/L greater than or = 0 (reliability or justice); Annualized Return, CAGR greater than or = 100% (productiveness); Sharpe Ratio: (integrity); Calmar Ratio (pride) greater than or = 2.0; Profit Factor (W:L ratio) greater than 1 (self-esteem) - highly co-related with Expectancy.

Principles are a form of conceptualization. Pitting principles against life is equivalent to pitting theory against practice. In both formulations, one is pitting concepts against life and practice, which means: one is accepting a breach between concepts and reality. This in turn presupposes a certain view of concepts.

I filter systems using Predominantly Always in the Market; Realism Factor; Annualized Return, CAGR; 30, 60, 90 day Return; Open P/L; Calmar Ratio, Profit Factor, # of Trades greater than or = 30, Age greater than or = 210 (30 weeks) and rank the resulting results by the Expectancy Score and the break a tie (less than 1% difference in Expectancy Score) if any, by the Sharpe Ratio. Use C2 methods only for direction and timing of the market, not for managing your money. You should manage your own money, or the market will manage it for you! else invest in a Mutual/Hedge fund managed by a Professional Risk Manager. Grandma: please stay away.

Productivity (returns) is not only a central element of a good methods life; it is the good methods central purpose. But it is logically interconnected, both in theory and in practice to other virtues (independence, honesty, reliability, integrity and pride) as these are all expressions of rationality, the primary virtue. None can be validated in isolation, apart from others; nor can a man practice any of them consistently while defaulting on the others. Individuals who trade their own creations are not parasites. The dependents among men in this issue are the non-creators. Some turn criminal and seize the unearned; these are the looters. Others peddle various forms of mysticism (e.g., astrology). Others - by far the largest subcategory - are the second-handers, who hold a legitimate job but drift through it out of focus, exercising no judgment, reaching no conclusions, merely imitating the motions of those around them.

The expertise of theRootofAllGoodisMoney.com principal establishes the foundation for an analytical discipline employing a macro, top-down, bottom-up perspective in a framework tailored to the asset allocation challenges facing investment professionals, professional & proprietary traders, brokers, accredited investors, hedge fund & asset managers whose main purpose is to maximize the returns. We are uniquely positioned to provide high value-added in the quest for superior returns with an approach geared to the investors need to choose from among competing asset classes on a low relative risk/high reward (prudent) basis taking into account the difficulty of picking winners, commission, slippage costs and tax consequences.

Please ignore the APD figures reported by C2 as these are stolen concepts and is also fraught with bad quote errors, rife with calculation errors, fallacies and prejudices, to base any concepts on it.

Our Model Positions are representative positions that put our best economic forecasts to work. These are not recommendations to buy or sell specific instruments, nor are they personalized investment advice.

Model Positions are created at a size representing a typical portfolio% risked adjusted by the dollar volatility of the instrument traded, assuming that the system has a positive Expectancy ((AW X PW - AL X PL) / AL) where AW=average win, PW=probability of win, AL=average loss, PL=probability of loss) & a Profit Factor (W:L ratio) greater than 1.0. Larger versions of similar positions may involve market impact costs or other costs that we do not take into account. Min. account size recommended: $10K - mini-fx, $100K - ETFs, Futures, $1M - Stocks, $10M - Bonds, $100M - T-Bills, $1B - fx.

The risk of a trade is defined as the dollar amount that the trade would lose per contract if it were a loss. Commonly, the trade risk is taken as the size of the money management stop applied, if any, to each trade. Reducing your positions is the same as raising your stop loss. If your system does not use protective (money management) stops, the risk can be taken as the largest historical loss. This is a modification of the approach Vince adopted in his book "Portfolio Management Formulas," John Wiley & Sons, New York, 1990. http://www.adaptrade.com/Articles/article-ffps.htm

In my mind, curve fitting means either using different systems for different markets, or using different parameters of the same system for different markets, & this is not valid technical analysis. Instead, one should trade the moves, rather than markets. Some traders hold on to a position, & keep changing their systems to fit it - other traders hold on to their systems & keep changing their portfolios to fit it. If a system works on Bonds & not on Beans, this system is curve fitted over a specific set of data (Bonds) & it loses all statistical validity. To believe it will work in the future as it has worked in the past is very dangerous. I therefore take exception to any system, that either only trades one specific market (stocks or fx) or group of markets (Energy or Grains), or trades different markets using different parameters or rules of the same system. All this proves is what has worked best in the past, & this will usually not continue to work in the future, as there is no correlation under this scenario as history wont ever repeat itself exactly.

Trader Mike says: "Expectancy, position-sizing & other aspects of money management are far more important than discovering the holy grail entry system or indicator(s)." http://tradermike.net/2004/05/trading_101_expectancy.html Alex Matulich says: "Expectancy score is a better, more objective measure than the Sharpe Ratio for evaluating the relative performance of different trading strategies." http://unicorn.us.com/trading/expectancy.html Harry M. Kat says "Overall portfolio volatility can be reduced further by combining both hedge funds & managed futures with stocks/bonds" http://www.capmgt.com/managed-futures-and-hedge-funds.html Dr. David Druz says, "The more robust a system, the more volatile it tends to be! This is because robust systems are not optimized to particular markets or market conditions. The converse is also true. You can design systems with excellent returns and low volatility on historical testing, but which work only for given periods in given markets. These systems tend to be curve-fit or market-fit & are not robust." This quote comes from: http://www.tacticalnet.com/cgi-bin/t2.exe/VolatiltiyPaper.htm

Day-trading systems specialize in one market, do very well for a while and then suddenly fall to pieces. Many day-trading systems are taking extremely large positions which, in the event of any large intra-day moves or breakdown in exchange trading functions or server outages or internet outages, hacking etc., which happen from time to time, expose the account to wipe-out, even negative equity. Please also note that as with many systems that go for medium terms moves(although not all trades do this), the combined equity plot favored at C2 sometimes provides a misleading, or we should say incomplete, picture. The most important negative points are those that involve actual (realized) account losses (drawdown), which are not the same as an open equity (unrealized) losses. There are going to be open losses. But in order to get the big moves, you have to be willing to give those profits a chance to run. Often it works, sometimes it doesn't. What is not shown on the C2 graph is the closed equity line. Usually, though not always, it shows a far smoother ride than looking at the open equity plot alone, which does tend to oscillate far more, & also with far larger moves than any day-trading system would permit. Also, options on fx & futures are not yet available at C2 and the leverage on fx (33:1) is way too low at C2, to serve as an effective hedge. http://www.dontloseyourass.com "All that glisters is not Gold" - Shakespeare