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Brent wrote:
>
> This subject has been on my mind a lot recently. How does one become a
> vendor or consultant and not become the Villain of Wall Street. I'm not sure
> it is possible to remain a good guy in the business.
>
> You certainly can't guarantee everyone that they will get rich quick and
> that is what almost everyone wants. Money back promises are helpful but it
> can be little consolation to give a guy back a few hundred or thousand bucks
> when he just lost 20 grand or more.
>
>snip
> I'd like some input on the subject from those in the know. Thanks.
I'm in the know as a 3yr newbie who hopes to recover sometime from
crashing. In other words, I still remember (and sometimes make) the
mistakes a person starting out does.
If you are selling a system, present everything including it's
weaknesses. Show drawdowns. Explain clearly what you are quoting: is
it closed trades drawdowns, open equity, daily, monthly, etc. While
closed dd's seem ok to me, quoting end-of-month dd's as some vendors
seem to do, seems misleading since you might have been down much further
midmonth. Also strongly consider doing "rearranged trades" dd's - since
dd's depend on the *order* of the trades, I think they are much more
irreproducible than avg win/avg loss. I think there are methods (Monte
carlo?) that can give you a probablility like, theres a 90% prob. that
the dd in this commodity with randomly ordered trades, would have been
less than $x. I dont think I've seen that in *any* vendor's ad
literature, tho it might be in some system lit since I dont have many
systems
Why do a lot of systems users crash? Besides not following the system,
the most prevalent problem (I'd bet) is underfunding. So if you are a
system vendor I think you NEED to have a very clearly explained section
on money management. Some of your users won't know this at all! If you
are selling to all takers, then you need to bring the user up to speed
on how to survive with your system. It's not just enough to provide a
profitable system.
I think a key problem is the practice of presenting subset portfolios.
I guess that even vendors who do very objective testing on their systems
on each commodity may fall prey to picking the "best" subsets to show.
There are major problems here!! It's choosing commodities that *happen*
to have had (in the past) trades in the right order to give the smaller
dd's, and picking a set that *happens* (in the past) to have the
individual dd's (already cherry picked) at different times. Instead of
commodities that trade well together", maybe you need to show *all*
reasonable 5 commodity portfolios so people see the range of dd's that
might occur.
I believe most people who are still buying systems, won't have the
$100,000 to trade a full portfolio in a multi-commodity system. Most
are going to pick a subset. Thats where a lot of your testing and
disclosure should be directed.
If you have a one-commodity system for sale, then the lessons on mm, and
the need for trade-rearranged dd's would still apply, tho obviously not
the portfolio stuff.
Even if you think your users should know mm don't count on it. Some are
still in the beginning stages, they are the ones that are going to crash
and learn the hard way (and some blame you or the system) unless you
warn/teach them. It'll take some of them several wipeouts before they
figure out it's mm and not the systems, thats the problem. You can
either take the attitude that's these failures are inevitable and not
your responsibility or you can try to teach.
Similar considerations would apply to a newletter writer. Don't just
advertise how much profits you called last year. Indicate what acct.
size you think is needed and the dd the reader might expect, at least
based on previous performance if you've been publishing for awhile.
Conrad Bowers
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