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Archive for May 2010

Review: Tradency System Trading Service

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Tradency is a web based service to compile and verify forex trade signals from traders and route such signals for autotrading in live accounts.

Investors access trading system ranking and selection tools only through their broker web pages, but not directly from Tradency website.

There are more than 1800 single currency-pair systems available, as well as a pre-selected system packages. The customers may subscribe to any number of single currency systems by doing research themselves. Or, they may choose one of 19 Top Portfolio Packages. Each such package contains 2-5 single-currency systems bundled as a strategy (pls click the thumbnail for an illustration).

My first impression of Tradency service is as rather average in terms of user interface and content. However, integration of the service in brokers´ web pages is a major competitive advantage. Packages suit perfectly to customers who are happy with shortcuts and have no interest or qualification to select trading systems by themselves.

Written by A.S.

May 27, 2010 at 1:16 am

FXCM and Alpari Use Tradency Service For System Trading

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Somewhat disappointed to find out that FXCM and Alpari both use a trird-party solution for trading systems. My expectation was a compilation and ranking of trading systems from their own customer account information. Instead, they use Tradency.

However, Alpari has a separate managed account service called ¨PAMM-account¨. The service allows investors to follow trades from live accounts. The fees paid by investors to traders are structured as performance fee.

Written by A.S.

May 26, 2010 at 8:09 pm

Looking for more trading system sources

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I´m looking for more trading system sources, apart from collective2.com, covestor.com and zulutrade.com.

So far I´ve spotted and marked for further research the following ones:

1. FXCM and Alpari
Both are forex brokers. Brokers, generally, are well-placed to identify the best traders and trading systems. They keep customer funds and have all the trade information recorded on their servers.  At at the time of writing, FXCM  has 2077 systems listed, Alpari – 499.

2. AlphaClone allows investing in ¨the stock ideas of top managers at the time their stock ideas become public¨. There is time delay involved, of course, as funds disclose top holdings quarterly. Basically, information from 200+ funds ¨cloned¨ into 15´000+ investment portfolios.

Covestor’s Most Popular Down 21% in May

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The most popular model manager on Covestor is down almost 21% month to date.


However, the model is up annualized 162% since inception on 10th April, 2010. 20+ percent drawdown is historic maximum drawdown for the system.

Drawdown of this magnitude, after months of good performance, is nothing extraordinary in the system trading world. Happens all the time.

What do you do, if you have a system like this in your portfolio? Quite simple – you pull it from your portofio. You may re-evaluate it later and probably put it back in the porftfolio, but at the moment it’s no-brainer – ditch the system from your portfolio just because it moves out of its historic performance parameters.

Have you lost money? Not at all, if you traded the system correctly. What does it mean to “play it correctly”? You watched the system for about three months in early Y2009, then gauged it’s risk/return profile and put it in your porftfolio. You still made about 100% annualised return on your money while the system was in your portfolio from July – August 2009 till May 2010.

Written by A.S.

May 23, 2010 at 11:17 pm

Perfect System Trading Pitch by Covestor

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Want to see a perfect pitch of system trading? Read this on covestor.com web site.

Of course, it’s perfectly crafted PR message by PR people. They don’t call it system trading either. But the concept is the same: pool trading talent globally, evaluate it and make it available to every investor.

A few qoutes:

Covestor CEO Perry Blacher said, “Our vision has always been to use the power of the Internet to discover hidden investment talent. We believe we will have more managers on the service than work for any professional firm by the end of 2010.”

“Unlike Fidelity or Merrill Lynch, we are not constrained by the managers we hire. The power of the Internet is in being open,” Blacher continues. “Rather than imposing a selection process, we believe that the future is about transparency and giving clients tools to put them back in control.”

“Covestor Investment Management (CVIM), an SEC registered investment advisor, provides the world’s largest web based money management platform. It offers clients a managed account service, previously only available to those with millions of dollars invested with a wealth management firm, where one can mimic the moves of any brilliant self-directed individual or professional investor.”

Enough said. Related link to Covestor Investment Management is here.

It just seems that Covestor gets everything right. From concept, to marketing, to tackling legal issues related to investment management.

Regarding regulation, just check the wording:
Unregulated individuals do not manage third party funds, but sell their trading data to CVIM. CVIM may use that data at its sole discretion to manage its clients’ funds based on their suitability.

Brilliant, isn’t it? 🙂

There are still shortcomings. First of all, only 63 trading systems (Covestor calls them “models”) as at the time of writing. Then, it’s limited only to stocks. System (i.e. model) analysis tools are non-existent beyond simple groups by investment style (macro, event-driven etc.). Lack of analysis tools is nothing of importance while there are only 63 systems, but the issue will become critical as the number of systems grows as I’m sure it will.

I look at Covestor as an excellent example of well-managed web-based company (possibly with synergy from venture capital investors at work in the background) in a business niche which is going to expand exponentially.

Written by A.S.

May 21, 2010 at 9:16 pm

Performance [Misre]Presentation on Zulutrade

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Looks like total geeks or rogue marketers run Zulutrade. I tend to believe that they’re geeks since the site has some whistles and blows and a very good business concept.
When it comes to presentation of the content (i.e. trading systems), it does a good job to display junk prominently and gives no other tools but to dig trough the list manuallly.

This is the recent e-mail from Zulutrade (click thumbnail on the lef). The yellow markings are mine. The system is ranked #7. The average profit per trade are 2.8 pips. 2.8 pips, modelled on 2 pip spread?! Empirically, the spread is about 10. 487 trades. Adjust for fees and slippage and you’re likely to get a deep-loss system. This is a typical representation.

Very likely another system (click the thumbnail for a snapshot) with 35 average profit per trade is profitable, but somehow it’s digged in as #343 after all the “a couple of pips systems”.

As well, the “advanced filter” is of little help as it doesn’t let you filter any basic parameter like return, drawdown, average profit.

Currently Zulutrade lacks pedigree. Something you can’t say about Collective2.com and, particularly, covestor.com. But then, Zulutrade seems to be successful in building customer base and, hopefully, one day they’ll fix the shortcomings.

Written by A.S.

May 20, 2010 at 7:10 pm

Trading Migrates from Stock Exchanges to Alternative Trading Platforms

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There is an insightful report on cnnfn.com about what high-speed computerised trading. The link to video is here.

Basically, the message is that stock exchanges have lost at least 20-30% of their business in selected stocks to non-exchange trading platforms.

Chi-X is the most visible of such non-exchange operators with 30% of trading volume in FTSE 100 stocks. Cost-efficiency is an obvious advantage of using trading facility like Chi-X — transaction costs are lower, much lower … Trading on Chi-X is more than 5 times cheaper than on London Stock Exchange and 10 cheaper than on Deutsche Boerse.

Written by A.S.

May 7, 2010 at 2:13 pm