Excellent results. Hope to see continued met goals w/ improved market conditions.gA

Thanks for succinctly breaking down your stat's. Good organization and communication.

I offer the following with the utmost respect (and not criticism):

As a subscriber, I am curious about something - perhaps you can help me out... it appears from the Equity Curve that your system's performance has been almost exactly flat for the last 9 months - from late March until the present. The major market indices have not been screaming either, but this raises a question mark in my mind. Your system has not even kept up with the major indices for the majority of your reporting period.

Another way to consider this performance is to conclude that the system had an extraordinary jump in its first 1-2 months and then has not performed well since then. Was that jump due to a fluke? Did you modify the system's methodology in any way around March that unfortunately has caused its performance to be flat?

This is where simple system statistics can be misleading - do we have a truly robust system here that can systematically produce 100%+ per annum returns or do we have a system that had a couple of unusual (excellent) months early on followed by under-market performance for the majority of its tracked life thus far?

As a subscriber, prepared to spend significant capital on systems that I believe produce extraordinary returns, I am hesitant to do so with this system.

I don't mean to pick on you personally, but having a dialogue about this should be helpful to many of us - both subscribers and vendors.

Can you help me here and address these questions/issues?

Thanks and keep plugging...

Skip

Thank you Gilbert.

Hi Skip,

Thank you for taking the time to articulate your reply. You certainly have a valid question/concern; I appreciate the opportunity to respond.

I trade the Optimum Systems methodology outside of C2 where I track the YTD performance by my timing signal. While this is not verified by C2, perhaps it will provide some insight into the general performance of Optimum Systems. At the bottom of this post is the YTD gain breakdown by signal, for 2009. LT=Long Term, BF=Bottom Feeder, TF=Top Feeder.

Analyzing what happened this year, I see I hit a model portfolio high on the signal ending 4/16. At that point, the model portfolio was up 150%, my timer (buying and selling SPY) was up 10%, and S&P (Buy and hold SPY) was down 7%. Since that high, my model portfolio has lost 6%, my timer has lost 12% and the S&P was up 27%. Looking at these numbers, it is clear that my timer has performed very poorly since 4/16, especially when you compare to the S&P gains. While the stock picking part of my methodology has done relatively well throughout the year, it could not overcome the failure of the timer since 4/16 (The timing signals are the basis for the stock picking criteria).

Breaking it down by signal further, I get the following
BFUp: 3 signal, average gain=31%, average duration=9 days.
LTDn: 7 signal, average gain=1%, average duration=9 days.
LTUp: 9 signal, average gain=4%, average duration=23 days.
TFUp: 3 signal, average loss=5%, average duration=14 days.

Looking at the above calculations, it is evident that BF did well where TF did poorly. The problem is that there are too few observations to make a proper conclusion. There have been many times in my testing where TF did well for 6 months and then poorly in the next 6 months. It is the same thing for any of the signals.

My objective is to put the odds in my favor on each trade. I may have a streak of winners or a streak of losers. Over time I expect to meet or exceed my stated goals.

I hope that answers your questions. If, in the future, you would like to subscribe, please write me off-line. I would like to offer you a “thank you” discount for your contribution to my forum.

P.S. That goes for anyone else that has gotten this far and contributes to my forum. Thank you in advance.



------------ YTD Gain Breakdown -------------

Situation, Trigger Date, End Date,,G/L, YTD G/L
LTUp,01/02/09,01/13/09,,-2.16%,-2.16%
LTDn,01/13/09,01/20/09,,5.90%,3.61%
BFUp,01/20/09,01/28/09,,60.41%,66.20%
Neutral,01/28/09,01/29/09,,0.00%,66.20%
LTDn,01/29/09,02/06/09,,-1.62%,63.51%
LTUp,02/06/09,02/11/09,,-10.29%,46.69%
LTDn,02/11/09,02/19/09,,10.35%,61.87%
BFUp,02/19/09,03/03/09,,-3.55%,56.12%
LTDn,03/03/09,03/10/09,,-2.40%,52.38%
BFUp,03/10/09,03/18/09,,35.20%,106.01%
Neutral,03/18/09,03/23/09,,0.00%,106.01%
LTUp,03/23/09,04/16/09,,21.32%,149.93%
TFDn,04/16/09,05/01/09,,-9.66%,125.79%
LTUp,05/01/09,05/13/09,,-19.30%,82.21%
Neutral,05/13/09,05/18/09,,0.00%,82.21%
LTUp,05/18/09,06/16/09,,11.62%,103.39%
TFDn,06/16/09,06/25/09,,0.47%,104.34%
LTUp,06/25/09,07/07/09,,-7.21%,89.61%
LTDn,07/07/09,07/15/09,,-3.12%,83.69%
LTUp,07/15/09,07/23/09,,6.05%,94.81%
TFDn,07/23/09,08/03/09,,-6.68%,81.79%
LTUp,08/03/09,10/28/09,,37.43%,149.84%
LTDn,10/28/09,11/09/09,,-4.60%,138.35%
LTUp,11/09/09,12/03/09,,-1.24%,135.39%
LTDn,12/03/09,12/16/09,,-0.16%,135.02%
LTUp,12/16/09,Current,,-0.29%,134.34%

You're very welcome.

I'll think about the information you have provided. I appreciate the offer of a subscription discount - if I elect to subscribe at some point, that won't be necessary, however.

Best of luck to you and thanks for your contribution, too.

Happy Trading,

Skip

Skip,

Looking back at my reply, I'm not sure I fully answered your questions. It is difficult to give a concrete answer because sometimes the market simply doesn't play by "my" rules.

My TFUp signal was the worst offender since my April highs; I see that signal had a 15.87% loss in the 35 days it was occurring. TF is a counter trend signal and the 15.87% loss was doubly bad because it took away from any potential profit I may have had by staying in the LTUp (trending signal). The other counter trend signal (BFUp, Bottom feeder), made 92.06% in the 28 days it was occurring. I also notice that all the BFUP’s occurred 1/1/09-4/16/09 profitable period while all the TFDn’s occurred after 4/16/09.

While my counter trend signals make money over time, they can also be the most dangerous. They tend to have more volatility, less duration, and sharper gains/losses.

I hope that helps.

Thank you again for your interest and your practical questions.

I agree. it is sometimes difficult.

For me, when faced with conflicting stat's, I try and step back and just answer a couple of simpler questions... and let the answers be what they are.

Would I have made money with this system? A lot or a little? For instance, if I had subscribed to your system anytime after March, would I have made money? I know that drawdowns happen, and I could get caught up in one, but look at the long-term trend, what do I see? (Unfortunately, even a year track record is not long enough to often judge a system's long-term performance probabilities - but we have to live with this).

Would I have made more money in other, more widely used vehicles (like just buying SPY and letting it ride).

Would I have lost money?

It sometimes clears the air. After all - in the end - these issues are the most important. Capital preservation. Lost opportunity costs.

Skip

Skip,

OK, stepping back from all the details.

Bottom line...
"Would I have made money with this system?". "Would I have lost money?".

Based on C2 stats.

# months tracked: 10, Profitable months: (80%)
Annual return (compounded): 98.4%
Max peak-to-valley drawdown (historical) 21.17%

Yes, you would have made money in 8 of the months.
Yes, you would have lost money in 2 of the months.

A lot, a little? See above.

Yep. All look good.

Looks good at first blush. I'm with you there.

How much money would I have made? A lot? A little? Let me do some thinking out loud...

Well... If I had invested $50,000 in April, how much money would I have now? According to the Equity Curve - about $50,000.

So - I wouldn't have lost money (or at least not much - that's a good thing). But, here I think the CAGR is misleading - because all of the appreciation occurred in the first month. So -for 8/10 months, or 9/10 months - we really didn't make any money. So perhaps the CAGR is misleading. Is the system's performance the first month indicative of the system's performance, or are the last 9 months more indicative? I don't know. No one knows. But... it is some of the only limited data I have to use to make a determination.

This is just one example of stat's at face value and stat's in context.

But - here is the other thing - as a vendor you are unfortunately helpless to "steer" me if my interpretation is different than yours - in this case - I might have not even sought you out when I came across your system for the first time - I would have just made my own determination and moved on and you wouldn't have had an opportunity to make your case. Fair? Perhaps not. It is a marketplace.

So we both agree that the system has some impressive numbers, but my interpretation in context is that this system is flat and hasn't produced an extraordinary return in many months. Unfortunately, from what I can see, I don't believe that it will once again post the impressive numbers it did its first month. At least I'm not wiling to put my money on it. Lost opportunity cost.

And so I move on.

I hope this has given you some insight into how just 1 Customer views things. I am only 1 Customer - I know that there are probably as many opinions as there are Customers. Some of them will undoubtedly look at the same data differently. I'm sure you have subscribers (at least I hope you do) and their opinions are just as important as mine.

But it is an interesting dilemma - is it not? And - it can make the difference between you realizing substantial revenue from subscriptions or little. So - is there anything we can do to improve the "first perception" of the product?

Skip,

You and every potential subscriber have the right to use what ever criteria they wish to pick a system. I can not predict that Optimum Systems will have a flat period in the near term or that it will have an “extraordinary return” in the near term. What I can assure you is that Optimum Systems will be managed to achieve its stated goals over the long term. This has been accomplished in the first 10 months of Optimum Systems existence.

Good luck in your trading and in your system search.