Subscribing to signal services

[Science Trader]

Hi,
This is a journal about a trading system I developed and am still improving, entirely based on signals received from 3rd party vendors and some hedging I added myself. In some way you can see it as a real-world experiment to prove that at least one person (n=1) can make a profit (or loss :cheesy: ) this way.

Of course that doesn’t guarantee anything, but I thought it might be helpful to others to share my experiences, and it might be helpful to me to receive feedback from people that have been there, done that etc.

My aim is not to sell anything, or promote the services of any vendors that sell trading signals. I also don’t discuss any open positions, only closed ones. Bottom line is: I just want to share my experiences and hope to get some good suggestions.

I keep a blog with a lot more detail and daily updates. I’m planning to use this journal to discuss my approach in a more general way, such that it might be helpful to others.

 

[Science Trader]

Approach

Let me explain my approach in some more detail. I don’t develop any trading systems myself. I like to leave that to others and instead focus on:
1. selecting systems
2. managing risk
3. execution

Selecting systems
For now, I limit myself to systems shown on Collective2, as it seems to be an objective source of information. In particular, because all system statistics are not based on backtests but on real-life (though still hypothetical) trades. If you happen to know of similar websites, I would be very interested as it would allow me to broaden the universe of available systems. In general, I do a lot of research before I decide to subscribe to a system and trade it.

Managing risk
Once subscribed to a new system, I scale in slowly, e.g. increasing my stake by a few percent every month. To spread my risk, I trade multiple systems at once, similar to the way one would hold multiple stocks in a portfolio.

Because the history for most systems is no longer than 2 years, in which the broader market has been fairly bullish, I don’t feel very comfortable trading these systems without a proper hedge against the possibility of a bear market. Also, part of my task is to make sure I am properly hedged (using index put options).

Execution
Finally, the proper execution of the signals is also an important activity. It is important to make sure that the fills in my own account closely match the hypothetical fills shown on Collective2. Sometimes this requires using so-called “auto trading” software and making sure that it keeps working properly.

 

[Science Trader]

One more task

I actually forgot to mention a fourth task, besides the three I mentioned in my previous post:
4. Modifying systems
Sometimes it can be attractive to modify the signals received from a vendor. For example, one of the systems to which I subscribe is called extreme-os. It typically has a maximum of 5 open positions and usually positions are kept open one or two days. There's quite a bit of slippage at the exits b/c all subscribers want to get out at once (as soon as the signal is issued) and in some cases the markets are not too liquid to absorb this without slippage. I am now testing different alternative exit rules, such that I might experience less slippage than other subscribers. Since it has a history of about 2 years and >1,000 trades I thought it might be worth the effort to run some tests. Initial results look interesting.

 

[Science Trader]

Results week1-week4

The results of the past 4 weeks have been quite encouraging:

profits:
week 1: +4.1%
week 2: +1.7%
week 3: -0.1%
week 4: +1.3%

max drawdown over the entire period so far has been less than 1%.

 

[bcp1]

Great Idea

Hi Science Trader

I have been looking at these systems myself, so will follow your progress with
great interest.

Very best of luck

bcp1

 

[nine]

ST,

Which systems did you choose?

 

[Science Trader]

Hi Kiwi,
Currently I'm trading extreme-os, Trend Plays #1 and Weekend Trader (all offered through Collective2).