FAQ 2

I see a trade in XYZ yesterday but it never actually touched the limit price. How does this happen?

If there are autotradres C2 acts as follows:
It looks at its data source if there is a (tick-) price below the limit price.
If so it converts the limit order to a market order and sends this market order to all auto-trading subscribers. They get filled at a bad price. And a bad trade is recorded in the systems track record.

C2 receives bad ticks/low prices all the time and triggers these "impossible" fills.
I complain about it all the time...

My suggestion to you: Do not try to keep in sync with these impossible trades, just leave your limit order unfilled. You'll most pobably miss a bad trade.

Yor exit limit price is below the last price of yesterday, how can this be?

Our exits are always the same: 2.5% above entry price.
(and sometimes there is a SellAtMarket after a timeout)

Furthermore these profit target exits are active one day after the entry to avoid day-trading and other complications.

Yesterday markets went above our profit targets for today, so we hope to make more than 2.5% profit on these positions.

Something doesn't look right for trade XXX - was that your system?

There are several possibilities:

The dataprovider of C2 delivered bad data (bad tick). There should be a button on the system page->open positions->details(arrow button)->"Submit to C2 Customer Service a trouble ticket for this trade"(icon on the left side).
With limit orders not everbody is able to buy at the same price. This is normal. Please see other FAQ entries about how to handle "out-of-sync" positions.
Sometimes there are margin calls. See other FAQ entries.
C2 cancels outstanding entry orders if buying power falls below a certain threshold.

I trade manually and placed the buy order as instructed. Some other traders got the same position for another price. How can that be?

You entered the correct order.

Probably one autotrader got a fill and C2 changed limit orders for auto-traders to market orders which were filled at a much higher price.
It's bad but we can't do anything about it, it's C2's policy. It is quite normal that some accounts get fills while others don't for the same limit orders.

I recommend to not change the limit order. You simply missed a trade, who knows if its a profit or a loss at the end of the day

Are you also trading in forex?

No. Topaz is a stocks-only and long-only trading system.

Forex?
Foreign Exchange -> currency trading

Tell me about yourself Dr. Koch

I am physicist, received a PhD form the University of Göttingen/Germany. I develop Trading Systems for private traders and hedge funds since 2001. I am DrKoch in the Wealth-Lab Forum and the RightEdge Forum. My systems for C2 run fully automatic in Wealth-Lab, signals are transported by BrokerBridge, a product of finantic, which is my consulting company. I make a living partly from profits from more sophisticated (intraday-) trading systems which are traded by hedge funds.

How can I test your system?

There is a 7 day free trial. On Collective2 and on global-Autotrading.com
InteractiveBrokers offer a "Paper Trading Account", which is fully functional but it does not trade (your) real money

How does your system do in bear markets?

Our systems use a special statistical anomaly which is much stronger than the overall market trend.
In fact the systems perform better in bear markets because there are more opportunities and thus more profitable trades.

Is any of your systems substantialy riskier than the others?

No. Pearl uses stop-on-loss but this is mainly for psychological purposes (to calm down the investors)

What is the maximum leverage your system may reach?

Topaz is designed to work with 2:1 margin. This means it shows its performance if it is allowed to open 19 or 20 positions, each with 10% of current account value.

If you use larger position sizes or an account with no margin there will be not enough positions to work correctly. On the other hand, if you use samller positions it is possible that more orders are filled and there are more open positions. While this is usually not too bad it will still produce results different from Topaz as run on C2.

In general it is better to limit Topaz to 20 positions

How does the system work when I trade manually.

All orders are set in the morning (it takes approximately 20min to enter them manually) before the market opens.
Make sure to work with a good broker (e.g. InteractiveBrokers) in order to get the best results (less fees). You will need 2:1 margin

Should I wait until XYZ before I start a new subscription?

It's advantageous to wait until Topaz in the middle of a severe drawdown(!) but who wants to do this? So I suggest to not wait for anything but start immediately. See other FAQ entries about starting a new subscription

I started with autotrading. How can I synchronize my open orders to the open orders of the system?

It will take a few days until all the positions are opened (and existing positions on C2 are closed). You don't have to do anything manually.

I received a mail from Collective2. What do all the symbols mean?

Please see: collective2.com/FAQ
and
www.collective2.com/emailSignalGuide.htm

I have a brilliant idea for you: Why don't you use the XYZ indicator to improve your system?

Topaz is the result of many years of research. We regularly check the system parameters. Because we were not able better parameter settings than the old ones, Topaz is unchanged since 2006.

Do I need multiple subscriptions when I want to trade your system on more than one brokerage account?

As a subscriber you receive trading signals and you should be able to trade as many accounts as you wish if your auto-trade software allows it.
If you want to use C2 autotrading you currently need serveral subscriptions for several accounts. In such cases we offer a special rebate. Please send a mail to info@finantic.de for further information.

Do I get a discount when I subsribe to several of your systems?

No, because we are bound to the C2 regulations. Trading several of our systems would not make sense anyway because they are too similar.

Can you customize your system to fit the TradeStation/NinjaTrader/Metatrader platform?

While Topaz currently runs as an automated script for RightEdge, we don't give away the source code. Please subscribe to Collective2 and/or global-autotrading.com to use the system.

Is it wise to allocate more than 10% for each order?

Even though Topaz is a very lucrative system and has a high probability of finding profitable trades this is not recommendable.
Losses tend to appear in a row and accumulate to visible drawdowns. The next big crash could "kill" you.

What portoflio sizes can your system handle?

We suggest to use Topaz for account sizes between $10k $100k
If your account is smaller, trading costs are probably too high.
If your account is larger, we suggest better finantic systems with lower risk. Please send a mail to info@finantic.de for further information.

Since I started with your system I lost money. Will this ever change?

It is indeed very frustrating to watch the markets or a trading system during market crashes and see the money melt away in your own account. My own account suffers the same.

There are a few things I learned the last years however: The basic mechanism our systems based on (human psychology) is very robust in the markets. There are some bad trades, even crashes, but in the somewhat longer term (six months, one year) things work quite well.
I've learnt to be patient.

Clearly Topaz and Pearl have trouble during big crashes (like nearly everybody else) but they work quite well in "normal" times. And especially shortly after a big crash they work very well.
So let me invite you to be a little bit more patient, I'll do the very same. This crisis will end some day and the sun will shine again.

I have an account smaller than $25,000. What about "Pattern Day Trading" (PDT)?

Background

If your account is below $25k you are not allowed to "Day-Trade". You are classiefied as a day trader "When there are more than three (3) day trades placed within five (5) rolling business days". A "day trade" is a position which is opened and closed at the same trading day.

Usually Topaz holds its positions at least one night so in theory this should never count as a day trade. But:

Margin Calls

Somtimes we have "unusual times" and these casue some heavy trading activity.

If Topaz is fully invested and markets go down then due to 2:1 leverage the investment can go above 200%.

A broker issues a margin call in such circumstances, C2 simulates such margin calls.
If not reacted upon C2 closes some positions (randomly) to bring the account back below 200% invested.
Usually Topaz does not "day-trade" i.e. open and close a position the same day. With these automated liquidations it may happen however, that a position is closed which was opened the same day.
This triggers the "pattern day trading" rule (PDT) for accounts smaller than $25k.

The rules allow you to request a "reset of PDT status" once in 180 days.

There are several possibilites to avoid this:

have more than $25k in your account

monitor C2 mails for simulated margin calls during the day and close positions which are old enough.

use global-autotrading.com for auto trading which can take care of these things

Why is Topaz not participating in this strong rally that is occurring?

Q: I am confused why after the recent losses and drop in the market, that we are not participating in this strong rally that is occurring? Is it simply mechanical? Is it that the algorithm doesn't find opportunities that meet the criteria? Are we expecting a near term market drop again?

A: after ten years of research in trading systems for the stock market I know one thing for sure: The good ideas are not intuitive, rather the opposite.
Topaz is a "contrarian" system which works in a 2-8 days timeframe. This is something that works quite well as historical results suggest. It does many things which seem plain wrong:

it buys when everybody else sells (prices drop)
it does not "let profits run" it collects rather small profits with a tight profit target instead.
It does not "cut losses short", it simply waits a few days if things turn into the green (what they often do)
there is no stop loss (everybody will tell you that this it is a very bad idea to have a position without stop loss order)

We designed it this way not out of the blue. We did many, many (virtually hundreds of) backtests over a long time. The strategy evolved as something that really works, statistically robust, proven, solid.

Then there are situatiuons like the current one. You can "fit" a trading system to make good use of such a situation. But guess what: This very same system loses money in the long term. I tried it. Often. Always the same. Its not intuitive...

Q: OK, but why do we sit here without any, or nearly any positions when the market is strong for several days in a row?

A: Of course it is disturbing to see the market going upwards while Topaz holds no positions. It seems very wrong - after the fact.

Let me put it this way: We approach the "question" of extracting profits from price movements from a very "scientific" angle: We search situations which have a certain "predictability" i.e. we look for market conditions where some prediction is possible with a high chance to be correct, this means somewhat higher probability than 50%.
We researched this "problem" for years and it turned out that there exist very few such situations. One of the "best" is the "mini cash" where prices go down by an "unusaual amount". In such a situation it is possible to make a prediction ("prices will go up") with a high probability (about 70%) to be correct.

The current situation a "mini rally" is quite obvious in the charts but (and this is the only interesting thing for me) it is very hard to predict, i.e. it is not possible to write a comuter program that finds such rallies before they occur.

When auto-trading Topaz, what are your recommendations?

It is simplest to use one of the "hands-free" solutions:

gen3-auto-trading with Collective2
global-autotrading.com

With these approaches everything is taken care of.

My general advice for gen1 auto-traders (TradeBullet, Trader68) are:

Do not convert limit orders to market orders
If an entry is not filled just ignore this position in the C2 model account
If an exit is not filled add a 2.5% profit target (STC at limit) for this out-of-sync position
If an out-of-sync position is older than 9 days exit with a market order

If you start with the same $100,000 but trade it without margin then what will be the total return by now?

This is a simple calculation:
We had 50 month and an overall profit of 512%
This means an average month made 6.12^(1/50) = 1.0369 --> 3.69%
With half the position sizes you get half the profits: 1.845%
50 months with 1.845% is 1.01845⁵⁰ == 2.495 --> 149%

So, without margin we had a return of $149k i.e. a total system equity of $249k after 50 months.

It is much less than half the overall profit with a margin account because of compounding effects.

When I add all the monthly return percentages I get a different, much lower annualized return. Why?

you should not add percentages, (12% + 15% != 27%)
instead multiply the factors (1.12 * 1.15 = 1.28 (28%))
or add the logarithmic returns 0.049 + 0.060.
Then you'll see the effects of compunding,
Theses effects are quite large with Topaz because of the high returns.

Does Topaz work with IRA accounts?

IRA accounts do not allow trading on margin.

Therefore you should scale down the system about 50%.

You should use position sizes (BTO order value) of 5% (instead of 10%).

This leaves you with half the profit and half the risk.

Collective2 does not work through global-autotrading. How does all this work?

with global-auottrading it works like this:

You open an InteractiveBrokers account which is connected with global-autotrading, they become the “Advisor” for your account, you can no longer trade in this account manually.

You are a subscriber at Collective2 and pay for the signals as available on C2.

We send our signals to C2 and to global-autotrading (directly)

They allow you to trade your account if you have a valid subscription at C2.

You have to pay C2 subscriber fees ($149 per month) plus global-autotrading fees ($70 per month).
Everything works fully automated. You need nothing more to do. You receive daily trading reports and enjoy the system’s performance.

Do you send your signals directly to global-autotrading?

Yes.

We send our signals to C2 and to global-autotrading (directly).

They allow you to trade your account if you have a valid subscription at C2.

You have to pay C2 subscriber fees ($149 per month)

plus

global-autotrading fees ($70 per month)

If I use global-autotrade can I trade another strategy?

If you connect your InteractiveBrokers account with global-autotrading you cannot trade this account yourself any longer.

You need a separate account for Topaz anyway, so it does not make much of a difference.

You could just open another InteractiveBrokers account with the funds you want to reserve for Topaz (or Pearl) and trade this new account automatically with global-autotrading.

Why do you report a fill at $X when prices were always below/above $Y?

C2 calculates reported fills from a live data stream. Such data streams contain errors: "bad ticks" which may trigger a "bad fill".

This happens from time to time and C2 has a mechanism in place to allow all customers to file a "trouble ticket". You find a button in the "Recently Closed Trades" section to the left of each reported trade.

Do you take into account after hours trading in generating your buy list for the following day?

No, we use prices from regular trading hours (RTH) only. We found that prices outside RTH tend to have a huge bid/ask spread and generally are not very reliable (in terms of predictability)

Whats your opinion of allowing orders to be filled in the pre market hours?

with pre-market trading there are a few pros and cons:

Pro: There is a high probability to get excellent fills (very low prices) as long as your volume is small.

Con: You no longer operate within the tested and proven conditions of the original system. It is not clear if these trades turn into winners with the same hit rate as the original entries.

Then you will be out of sync with the model account. If you have many fills, you probably have no more cash available for the good trades that happen in exactly such a situation.

Of course you would set up a 2.5% profit target (sell at limit) as you do with other out-of-sync positions.

Probably it is a good idea to "paper-trade" a dozen of this entries and see how it goes.

With only a few positions open it looks like Topaz makes bad use of available capital. Can I use larger position sizes to improve profits?

The number of open positions varies wildly, with an average exposure of 25%. When there are calm times (like february and March 2011) there are just a few open positions. If markets are volatile like in 2008 we have 19 or 20 positions open every now and then.

If you use larger position sizes and open fewer positions this will work in "quiet times" only. If Topaz wants to open more positions and you can't/don't, this will hurt your performance, probably you even produce large losses while the original system creates profits.

So the current allocation scheme may look like "bad usage of available capital", but in fact it is not. Topaz needs the "headroom" to handle smaller or larger "crashes" in the markets.

My advice: Just stick to the system, it is thoroughly crafted and stood the test of time. We check system parameters regularily and always find the existing parameters working quite good.

Any deviation from the system logic produces additional risks.

How can Topaz manage my portfolio when Topaz does not know my true position in IB?

We go to some length to ensure that your account is in sync with the Topaz model account. Here are some details:

For entries order sizes are specified through your user settings at global-AT. You should use 10% of account value here.

For exit orders global-AT looks at existing positions and adjusts order sizes accordingly.

If your account misses an entry-fill the exit orders are ignored.

If your account misses an exit-fill we use “cleanup orders” to synchronize your account .

Will Global AutoTrade automatically cancel unfilled orders to meet 1:2 leverage?

1. Yes, global-AT will cancel outstanding orders as soon as enough positions are open. And it does it very fast. This is important if prices fall quickly in many stocks at the same time.

If there are more orders than supported by my account, what will happen?

1. Our trading systems will often send more orders than the available capital would allow. InteractiveBrokers accepts these orders. As soon as enough positions are open, the remaining outstanding orders are cancelled by global-autotrading. Its all handled automatically.

How are order sizes adjusted?

You’ll have to adjust the size of a single order at global-AT from time to time to keep it 10% of available capital. You'll log into the user area at global-autotrading.com and enter the dollar amount for a single order. Make it 10% of available capital (or total account balance). You'll repeat this step whenever your account changed by more than about 5%.

Why have you modified the STC order for XYZ today?

We did not "modify" any orders. The exit price level (and sometimes the order type) is calculated anew every day. At most days the exit price is the same as the day before, sometimes the price changes. After a few days we change the exit limit order into a exit market order.

All these exit orders are DAY orders and in principle should be reentered every day as long as the respective position is open.

I received a list of cancelations and some orders are already filled. What should I do?

These cancellations come from a C2 Feature called „cancel entry orders if buying power falls below“

We activated this feature to help auto-traders to implement the limitation to 19 positions.

If markets move fast it is quite possible that such a cancellation arrives after you received a fill in your account.

As long as you are within the margin requirements of your account I suggest to keep the positions filled at the “planned limit price”. (Usually this will become a good trade.)

These are “out-of-sync” positions however and you should handle them accordingly. (For example: Apply a 2.5% Profit Target the next days.)

How much of the account to allocate for each trade?

In short:

You should allocate 10% of your capital for each order and enter all orders before the markets open.

In detail:

Position sizing is an integral part of the Topaz System. With 2:1 margin (as it runs on C2) it uses a "fixed ratio" position sizing of 10% which allows a maximum of 20 open positions. ( 20 * 10% = 200% of cash+open positions value) It is important to limit the system to these 20 positions however. This means, if you use 1:1 / no margin (with an IRA account, for example), you should size each position to 5%. If (on a very heavy day) there are more than 20 "fills" InteractiveBrokers will reject further fills which is quite ok.

The system analysis says:

On days with many fills the first/early fills will be losers, while the later fills will be winners (which usually win more than the losers lose)This works only, if you are able to enter the "later" positions.

Such a situation can occur several times in a year.

There are several out-of-sync positions. What should I do?

Here some general suggestions:

do not buy a stock if you missed the fill. Usually it is a good trade if you enter at the limit price. If prices moved away chances for a profit get smaller.
do not sell a position to mimic simulated margin calls on C2. These margin calls are executed in an automatic way and usually do not close the best position. It is favourable to close the position with the highest profit (or lowest loss) instead (if necessary).
if you have an out-of sync position then use a 2.5% profit target the next days. If the position is not closed after 10 days then close it with a market order.
if you need to close some positions (because of margin requirements) you should close the positions with the highest profits/lowest loss.

I got into positions on the 10th, when can I expect to get OUT of this position?

If there is an open position you should see a STC at limit for this position every day. If none of these profit targets is hit you should receive a STC at market at the tenth (trading) day after entry. So your position will be closed on the 24th at the latest.

There are a lot of limit orders. What do I do when the number of orders exceeds my allowed buying power?

there are two possibilities:

You have a broker who accepts more limit orders than available capital like Interactive Brokers. They "use" buying power when the order is filled, not when it is sent to the broker.
You use C2's auto-trading with the new "hold limit orders on server" feature.

In any case it is important:

To make every order 10% of available capital (for 2:1 margin accounts; for cash accounts it's 5%)
To use ALL orders. Don't try to pick some orders and leave others out, this will reduce your profits, to say the least.

We have a huge position in XYZ and you propose again to buy?

Yes, it is quite common that the system suggests another 10% position in XYZ.

This may be disturbing for experienced traders.

We developed Topaz as a 100% systematic/mechanical system.
We tried many strategies when a stock keeps falling. What Topaz does is one of the best possible strategies in this case:
It considers each day a new day. It does not take into account what happened yesterday.
If today is a good day to buy XYZ then we buy.
(We ignore the fact that there are already XYZ shares bought)

If we look at these cases historically it turns out:
The first/old XYZ positions are very probably losers, too late to change something here. The latter XYZ positions have a much higher probability to win than a "normal, single" position, so its wise to open such a position.

I can't predict the future. Probably this time we lose some money on XYZ, but the best bet in the current situation is: Buy one position more.
In the past it turned out that Topaz is more often right than wrong - even if its "decissions" go against our intuition.

I hope this helps a bit to stand the stress...

I added a Stop-Loss to Topaz, isn't it a great idea?

No.

Please don’t add a stop loss. It may help „psychologically“ but in fact it hurts performance.

We tested it again and again – for years.

It may sound counter-intuitive but its a fact: Topaz works better without a stop –loss.

What is the best and cheapest method to trade your systems?

When selecting a method for trading one of our systems you should not only count the money you have to pay month by month but also the risk of losses if something goes wrong.

Manual trading: No costs, high risk. On a “black day” you get too many fills and such a day can easily cost $1000.
Autotrading with your own PC: Cost $30 or $50 per month (Trader68, TradeBullet) plus dedicated PC plus reliable Internet connection. Risk that your hardware, power supply, internet connection goes down in the wrong moment and causes some bad/missing trade with unexpected losses.
gen3 auto-trading with C2: $100/Month, no additional work, no hardware and no software necessary.

You see, every option has its pros and cons. Unless you are really happy to run/check/supervise your own machinery every day I’d urgently suggest global-autotrading.

Do not forget the commission fees for the broker. On busy days with a lot of orders this can become quite expensive. You should find a broker with little commission fees like InteractiveBrokers.

Question asked by: Trader from Italy

I dont understand your trade signal. There are several positions with the same names but different prices. Which one should I sell?

With Topaz we have "overlapping positions" i.e. there are several buy orders on different days, each opening a 10% position.Accordingly there is a sell order for each of these 10% positions.
If you look on Topaz' detail page and open the "Open Positions" details (gray arrow right of section header) you see the individual positions. Part of this table is a "commentary" for each position, it contains a position identifier (PosID).

If you open the "Recent trade signals" details (gray arrow right of section header) you also find a PosID for each STC order.

For example one of them says "PT1, matches Limit Entry, PosID=2011-08-12", this is the one which matches your entry with PosID 2011-08-12.

Do you average down?

If you look at topaz' trade list you'll find positions with several entries and exits which consequently are larger than 10% of available capital. Some call this "averaging down".

We take another approach: Topaz opens many independent positions, each 10% of available capital. Some of these positions happen to be in the same symbol.

Here an example:

If a stock drops and generates a buy signal, we enter the trade. Sometimes a stock continues to drop below that day's buy level, and on the next day it falls even further and another buy signal is generated. In such a situation we add to the trade, we say it's warranted because, if you view the day independently, a buy signal was generated and it's justified to enter that same stock again like it's a brand new trade. It is our philosophy to "add" to the trade. Others would consider this as "averaging down" and omit the second entry.

Can you explain the overall formula behind the system

The system buys a stock when there is an “unusual“ low price. In this case there is a high probability that prices will rise.

The second part is an entryfilter, which filters out most “bad” trades.

This filter consists of a combination of several proprietary indicators developed by finantic.

Each day is viewed independently.

There are no classical TA indicators, no RSI, no ADX.

There are no Fibonacci Numbers, no Gann, no Elliot Waves.

I just started my subscription. Should I enter the currently open orders manually?

No, do not enter positions which are already open at C2.

It is important to get the original entry prices.

Please ignore all positions currently open on C2 and simply follow all new entry (BTO) orders. As soon as you have some open positions you should follow the exit orders (STC) for these (your) positions and ignore all exit (STC) orders for the old positions.

You may use the Position ID included in the "Signal Commentary" to tell new from old orders.

I didn't receive a signal mail today. What does this mean?

There are days where our systems don't generate any BTO orders. If at the same time there are no open positions you don't get no STC orders also.

With no orders for the following day, C2 does not send a signal mail.

This is quite normal and no reason to worry.

C2 shows positions different from my account, what should I do?

Because most entries and exits are limit orders, there is a chance that C2 gets fills, which arew not reflected in your account or you get fills which are not shown on C2's simulated account.

There are several methods to handle such a situation:

Close all positions in your account which are not shown on C2

While this brings your account back into sync with C2, we do not recommend to close such positions at an arbitrary time. Its better to apply the strategy mentioned below.

Keep positions, enter STC Limit orders for each

We suggest to keep these positions and enter a STC limit order for each at 2% above the entry price. After nine days you should exit the position at market.

Is it reasonable to believe this performance rate can continue?

Because I am more of a scientist than a marketing person I have to answer honestly: I don't know. Long term backtests show that there are "phases" in the markets where this kind of system works very good while there are other phases with just medium performance. Surprisingly this effect is visible for quite a broad class of trading systems i.e. does not depend on an exact set of parameter settings.

What's changed since X/Y/Z to produce these amazing results?

One possible explanation:

There seems to be an increase in volatility and "mass psychological effects" in the markets recently. This helps a system which makes use of both.

I reside in Asia and I sleep when the market is trading. Will your system work for me under these conditions without auto-trading?

Yes.Topaz is designed to be tradeable with a daily manual "one-time-effort" of about 20 Minutes before markets open. Please see other FAQ entries for further details.

Are you intending to keep the system going long term?

Yes. We are committed to run our C2 systems as reliably as possible.

How is it supposed that I know which one of the 30 limit order the system suggests is going to be executed?

You can't know this beforehand. It is part of the strategy to have more limit orders active than buying power would allow.

With a broker like IB it is possible to send 30 limit orders while there is money for 10 orders only. IB will simply reject some of the orders in the moment the limit price is hit.

Can one that works full time and therefore is not able to sit in front of a computer all day trade successfully using the Topaz system?

Yes, Topaz is designed to be tradeable with a one-time-efort per day. You will encounter some rejected orders and some margin calls, but this will not hurt the performance of this system.

According to your system it generates between 5 and 40 limit orders per day. If one were to allocate their trading capital for 5 trades and 40 orders were generated later that day the trader would be out of play for 35 orders?

All orders are generated at about the same time, during the night, before markets open. You need a broker who allows more limit orders than available capital (Like Interactive Brokers, for example)

On heavy days, there is a maximum of 19 or 20 open positions, all other orders are ignored (or should be cancelled after 20 positions are open).

You say it is a manual trading system. Do you mean that you don't recommend auto trading?

No, not at all. It is possible to trade it manually. Autotrading is always better. I do recomend to use autotrading.

Are there any rules to cancel BTO orders during trading hours?

The basic idea is to let your broker reject all orders which are above buying power. I.e. Set Positions to 10% (for 2:1 margin) buy all 19 positions (on very heavy days) and let the rest be cancelled by your brokers buying power restrictions.

This works nicely for a 2:1 margin account or an account without margin.

If your broker allows for higher margin, you should make sure that you never open more positions than specified.

We have the C2 feature "automatically cancel BTO orders when buying power falls below" activated to assist auto-traders in these cases.

With gen3 auto-trading this should work fine.

With gen1 auto-trading (TradeBullet, Trader68) the following applies:

The C2 feature „cancel all BTO orders if buying power falls below…“ has the effect that a cancel signal is sent to all auto-traders after 19 positions are open.

Things should work for gen-1 autotraders properly. Because this relies on C2 server action, possible network delays and so on, we cannot guarantee that the cancel arrives fast enough though.

I think it is a good idea to keep an eye on the machine on days with many BTO orders active.

In case of TradeBullet usage, would you recommend putting market orders in case if order executed in C2?

No. If a limit order is not filled, you should not enter this position.

Since I would trade without margin, how would the stats vary?

Basically you get half the profit AND half the risk.

What's the largest number of stocks owned in your portfolio at any one time?

Q: What's the largest number of stocks owned in your portfolio at any one time? (I need to know this because of the 3 day time limit on IRA Accounts in the U.S..)

A: Topaz holds a maximum of 19 or 20 open positions with potentially different stocks, some of these positions may overlap however, i.e. the same symbol is bought twice and its position size is not 10% but 20%.

Why are your limit orders are so far below the current market price

That's the way this system works. That's why it is so profitable. This is one of the magic secrets.

So 50% is what your system will comfortably generate?

Depending where you look on the C2 site, it says annual return is about 50% or about 100%.

In fact historical performance without fees is:

(500k - 100k) / 100k = 400% in 3 years and 8 months

This is an annual compounded profit of 46%

4 ^ (1/3.66)

Please note:

This is historical performance, no one knows what the future will bring
This is without fees. Depending on your broker your mileage will be worse

Conclusion: I calculate with an anual profit of 20%.

How do you control position size?

Position sizes are fixed 10% of equity. On days with more than 19 fills there are two possibilities:

1. you rely on your broker who rejects orders above buying power or

2. you cancel all remaining open orders.

Number 2 is possible only if you (or some software) monitors trading all day, of course.

Do you use autotrade at all from C2 for your own trading?

No, we do all our own trading directly, i.e. we send orders from RE to IB.

Should I use autotrade, or enter the limit orders manually with the broker?

Our systems are designed for manual trading. This means it is possible to enter all orders manually, because this can be done between market's close and market's open time. It can be quite a bit of work however. There are days with 50 limit orders. So it is much easier to use autotrading

This is what one subscriber wrote about autotrading:

I use TradeBullet and IB. Orders are transmitted completely. Some are transmitted when echanges open, sometimes. The scaling works seamlessly. After all: no problems.

(the German original: ich benutze Tradebullet und IB. Die orders werden lückenlos übertragen. Einige erst bei Börsenstart, manchmal. Das scaling funktioniert reibungslos. Alles in allem, kein Problem.)

I plan testing on my demo account first, will that cause any problems?

IB's demo account (edemo/demouser) does not send any usable historical data or realtime date, so the realtime data feed and historical data update do not work with it. We suggest to open a paper trading account with IB.

What would be the minimum account size required to trade Pearl?

The minimum account size required to trade Pearl depends on the leverage used and the assumed annualized profit and maximum drawdown.

For Pearl I'd suggest to assume an unleveraged annualized profit of 15% and a max drawdown of 10%.

Without leverage I'd suggest a minimum account size of $32k. This should produce an annual profit of $4800, well above annual C2 fees of $2400.

With a leverage of 2:1 as used on C2, I'd suggest an account size of $16k. This should produce an annual profit of $4800 with an expected drawdown of 20%.

What would be the minimum account size required to trade Topaz?

The minimum account size required to trade Topaz depends on the leverage used and the assumed annualized profit and maximum drawdown.

For Topaz I'd suggest to assume an unleveraged annualized profit of 30% and a max drawdown of 20%.

Without leverage I'd suggest a minimum account size of $10k. This should produce an annual profit of $3000, well above annual C2 fees of $1800.

With a leverage of 2:1 as used on C2, I'd suggest an account size of $5k. This should produce an annual profit of $3k with an expected drawdown of 40%.

It is possible to trade Topaz with CFDs and use a leverage as high as 1:20 (cmc markets offers leverages like this.) I strongly suggest to limit leverage to 1:3 however. Even this mild leverage produces an expected drawdow of 60% and "real" drawdowns are always deeper than the "expected".

To conclude: There is no minimum account size for trading Topaz, it all depends on the percentage you are willing to pay for fees relative to your profits.

Fees are fixed ($149/month for C2, $70/month for global-AT) trading costs are low with a broker like IB ($0.005/share) and profits are somewhere between 20% and 50% per year.

So yes, you can start with $10k, this will cost you no money but also will not make you rich. It will give you some feeling how things work. I guess with about $25k things begin to look nice.

How many positions on average are hold in the open positions?

I've seen everything between zero and 19 Positions. On average there are about 4-5 positions open.

Is your system doing day trades?

No. All orders are entered before markets open. All positions are held at least one night.

Our C2 systems are End-Of-Day systems.

There is an exception however:

There are days where markets open very low and many limit orders get filled right at the market's open. Some broker allow for an 4:1 intraday margin and allow these positions to open. These brokers switch to 2:1 margin before markets close and you are forced to close some of your positions before exchanges close.

We suggest to close the positions with the best profit / lowest loss. If such a position was opend the same day such a trade counts as "Day Trade" and may trigger the "Day Trading Pattern" restrictions.

Do you use margin?

The system as it works on C2 is designed for the 2:1 margin available there. If you don't want to use margin, just cut position sizes in half.

Expert: Dr. René Koch (http://www.finantic.de)

How to cope with margin calls?

It may happen that one of our C2 systems receives a (simulated) margin and C2 closes a randomly selected position as a result of it. You may see this in the comment field of these trades. (If the optional comment field is switched on)

We run the system according the "one effort per day" paradigm, so these broker initiated position exits are accepted and put up with.

Depending on the position size you use, you will receive similar margin calls. We suggest to close the most profitable position in such a case.

It is highly probable that C2's positions and subscriber's positions are out-of-sync after a margin call. We suggest to apply the rules for out-of sync positions in such cases.

Additional Information:

If you follow the manual "one time effort per day" the you'll receive margin calls once in a while.

It's because the necessary limitation to 19 or 20 position is done by the broker.

He will fill orders as long as there is some buying power. If all buying power is used up, no more orders got filled, they are rejected. If the markets go further down the broker will issue margin calls and close some of the open positions. Sounds dramatic but it does not hurt the overall performance.

If you want to avoid margin calls you have to switch to auto-trading.

Does the system work better in up or down markets?

It is not so much a question of up and down but of "nervosity". For example, we had some very nervous days in August 2007. Our Systems did very well in this situation. If markets are "quiet" it does make "normal" profits only.

How does that "one time effort per day" work in practice?

Q: Can you elaborate a little on the phrases "Topaz generates between 5 and 60 limit orders once a day" and "it is possible to trade it with a one time effort per day". How does that work in practice?

A:Of course, let me add a few details: > Topaz generates between 5 and 60 limit orders once a day Topaz is based on a RightEdge script which runs automatically at about 22:00 ET. This script generates usually 5 to 20 limit orders for entries and exits. There are days with no new entries. Then only exit limit orders for all open positions are generated. Occasionally there are up to 50 or 60 orders for a single day. This happens two or three times per year. > it is possible to trade it with a one time effort per day All limit orders are posted by 23:00 ET (unless there are major troubles with our servers or the Internet.) People usually send these orders to their brokers manually. Should take 10 to 20 Minutes every trading day. Usually there are more entry-limit orders active than available buying power so it may happen that the broker rejects some of these orders. A similar situation occurs in rare circumstances when the broker sends a margin call. It is the best to close positions with best profit in this case. C2 does this automatically. This means: As long as you don't mind rejected orders and automatic handling of margin calls (both very rare) you don't need to put more effort into trading Topaz than entering all orders once a day. (while NASDAQ is closed)

Is there a worst-case-stop in the market (stop-loss)?

Topaz applies the best stop loss strategy we could find after years of research: The best stop loss strategy for this kind of system is: No stop loss. It may sound counter-intuitive, but the overall performance gets worse as soon as any stop loss (other than the timeout currently used) is activated.

How do I find out my IP address?

From a DOS (Command) Prompt type "ipconfig" and press enter. The current IP address will be listed.

How do I avoid the "Accept incoming connection" dialog?

Add the IP of your host to the list of trusted hosts:
In TWS Open the Configure->API->Trusted IP Adresses Dialog. If this is a local connection (i.e TWS runs on the same machine) enter 127.0.0.1 (which stands for "localhost") to the list of trusted IP adresses.

How avoid "can't connect to TWS"

If you see this error: "can't connect to TWS No connection could be made because the target machine actively refused it code= 10061" TWS is not configured properly.

In TWS enable socket connections: select Configure->API->Enable ActiveX and Socket Clients (must be checked). You must repeat this for each demo account, real account and paper trading account.

Can someone explain why the limit order price and filled price are different?

Whenever this happens, C2 sends the following mail to the system vendor:

Mail from Collective2

Subject: Fill price change for Topaz NQ100 M
From: Collective2 AutoTrade Management

We are sending you this automated email to let you know about your system on Collective2 called Topaz NQ100 M. You now have at least one AutoTrader for this system. As you may know, U.S. regulations require that we display on the Collective2 Web site the actual fills received by real-life traders in their real-life brokerage accounts. We recently received electronic notifications from the brokers being used by your AutoTrader subscribers. Based on the real-life fill prices achieved in your subscribers' accounts, we have adjusted the fill price displayed on the Collective2 Web site. Specifically, we have changed the following fill:

Previous: BTO SHLD - Filled at 62.83

New: BTO SHLD - Filled at 62.845263

The new fill price will now appear on your Collective2 system page.

COMMON QUESTIONS

Q: Hey, that isn't fair. I submitted a limit order, and I can't fill a limit at a worse price than the limit I specify!

A: Often, system vendors at C2 will submit a limit order at a price that is not "market clearing." This means that the limit price just gets touched briefly, but does not trade through. Certain lucky people get filled at the price, but other people do not. Then the price moves away from the limit price.

In these cases, C2 will wait a few seconds for your order to fill at your specified limit price, but - if it doesn't fill in a customer's account - we will convert the order to a market order. In these cases, therefore, it is possible to be filled at a price that is less favorable than the limit you specified.

Welcome to the world of managing other people's money... and the world of trading large enough quantities that you can't count on an entire order being filled. If you were running a large hedge fund in a single trading account, and if you submitted a limit order to trade a large quantity, something very similar would happen. You might get filled for some portion of your order, but not the rest. Then you would have a decision to make. Move your limit? Wait and pray that the market moves back to your limit?

At C2, it's vital that we keep all your subscribers in sync with your system's intentions. When you are long, they should be long. When you're short, they should be short. That's what they are paying you for, after all.

This is the reason why we convert certain orders to market orders -- this only happens if you choose a limit price that is not "market clearing." And, when this does happen -- because we are regulated by U.S. regulatory authoritues -- we are required to post the actual fills received by your actual traders.

Q: Gosh, that really stinks.

A: Maybe. But it's worth keeping a few things in perspective. One: the ability to AutoTrade your system using the cool C2 AutoTrade technology makes your system more attractive to subscribers, and thus in the long run, is a good thing for you. Second, our insistence that we make C2 completely transparent and that we follow U.S. financial regulations make the site more attractive to subscribers (which benefits you). More important, this protects you from any regulatory concerns.

Does Topaz work with an IB/MB margin account?

No. Topaz does not work in an standard IB margin account without additional measures.

It is important for Topaz to work that the number of positions is limited by the margin requirements of the broker.

IB switches margin requirements from 4:1 during the day to 2:1 overnight. So you may easily end up with too many open positions during the day (Levarage bigger than 2:1) and IB will close some of these positions before markets close. Moreover you easily get out-of-sync with the C2 portfolio.

There are several possibilities to cope with this:

* Open an (additional) IRA account (no margin). This is the simplest.

* Use advanced features of TWS to get open orders canceled if leverage reaches 2:1. (Margin Alert, Order Action). This is a bit complicated and requires quite some additional work and is probably not 100% reliable.

* Use autotrading software like Tradebullet. This is more complicated, Requires a working internet connection throughout the day and leaves you with the risk that something goes wrong and you end up with too many positions during the day.

The same seems to be the case for MB.

Do you have more detailed background/backtest information?

Yes. There is more information on this site, see Products->Topaz.

What are the differences between your trading systems?

Our trading systems Topaz, Pearl and Diamond use the same statistical anomaly. They differ in the instruments traded and risk settings however.

Pearl trades the Nasdaq-100 components with 15% position size. It is considered an "slow" trading system in a highly liquid market.
It uses a "lazy stop loss" which should create smaller drawdowns.
Pearl does not use as many trades as Topaz which results in lower commission fees. Therefore Pearl is the better system

Topaz also trades the Nasdaq-100 components. It uses a 10% position size however and produces slightly more trades. It is considered a "busy" trading system when compared to Pearl and doesn't use any kind of stop-loss.

Diamond uses more advanced statistical methodology and trades the US Top 1000 Stocks, i.e. the most liquid US stocks.

I know a person that made... can you do the same?

Q: I know a person that made a system similar to yours but did XYZ to improve it. maybe you can do the same?

A: Our systems are designed for the special "character" of Naz-100 stocks (Ruby, Topaz) or the IXFN stocks (Turquoise). It does not work as well for other high-volume stock. In fact it works better for low volume titles, but usually there is too much slippage with these.