OAKLAND, California. April 30, 2018 – Collective2 (“C2”), the online trading strategy marketplace that connects investors with independent traders, announced today the public beta release of C2BROKER (“C2B”), the first-ever investment platform to offer hedge fund ideas with commission-free trading.
At C2BROKER, customers can automatically follow (“AutoTrade”) any equity or options trading strategies at C2 in their own C2B brokerage account without hidden fees, commissions, or complex pricing structures.
“Low-cost or no-cost trading is nothing new. For the past decade, it has been a race to zero for transaction fees in trading. But what good is saving money if you don’t know what or when to buy?” said Roderick Casilli, C2B Co-Founder and Head of Product at C2. Casilli added, “With C2BROKER, customers get the powerful trade-idea engine of C2 plus the benefit of paying literally nothing extra to place strategy trades.”
Thousands of trading strategies have been tracked by the Collective2 platform. Investors can examine these track records, and — if they see one they like — link it to a C2BROKER account so that trades are executed automatically. C2B accounts continue to be self-directed. Customers have the ability to turn on and off strategies, add new strategies, manage trades, and control trade sizes, all in real-time.
Founded in 2001, Collective2 is the world’s largest marketplace of trading strategies. Great traders from around the world ask Collective2 to track their trading results in real-time. Other investors can “subscribe” to these traders, and can automatically follow their trades in their own brokerage account. Over $75 million dollars of investor capital is linked to strategies on the Collective2 platform. For more information, please visit www.collective2.eu.
I’m presented with this question a lot.
Actually, “presented” isn’t quite the right word.
The question is not usually “presented” to me.
It is flung — the way dog feces are flung at the neighborhood crank’s house, the night before Halloween.
Sometimes even a friend will muster the courage to ask me the question. It happens usually while he’s drinking, and always with a knowing smirk — the smirk of the high-school debater about to deliver a coup de grâce.
I suppose in this age of Twitter wars and angry Facebook rants, I shouldn’t be surprised when someone comes up to me at a party and suggests that I’m a complete fraud, or that my life’s work is a scam.
But I’m not; and it’s not; and here’s why.
First, some background. Collective2 is the website I started 17 years ago. Think of it as a “poor man’s hedge fund.” (Actually, not so poor; many of the investors who use the site are wealthy and sophisticated by most people’s standards.)
The idea of the site is simple. If you are a good trader, you submit your trades in real time to Collective2 (or simply connect your broker account to us). Then other people can “follow” your trades in their brokerage accounts. Through the magic of software, the trades happen automatically. Followers pay you a flat monthly fee to follow your trades in their accounts.
Collective2 presents the performance, in real-time, of thousands of these trading strategies.*
In other words, Collective2 is a marketplace where trading talent can be bought or sold. Collective2 acts as a trusted third party which verifies the performance data of strategies on its platform.
That’s the question, then, isn’t it?
If you create a good trading strategy, why let other people use it for a modest amount of money (typically, strategy creators ask for between $100 and $200 per month), rather than keeping it all to yourself?
Actually, there are several reasons.
First, let me point out the obvious. If you’re going to be snarky and accusatory about Collective2, you might as well set your sights a bit higher.
The same question can be asked of virtually the entire financial industry. Why do top-tier hedge funds accept investor money? If the guys at Two Sigma are so smart (and they are), why don’t they just trade their own money from an unmarked building in Soho? Why go through the hassle of raising capital from investors?
Or more broadly, why have mutual funds? Why run a bond fund? If Bill Gross is such a genius (and he is), why does he bother accepting investor money, and suffering the indignity of annoying questions, or unfortunate P.R.? Why not trade his own private capital from his house in Laguna Beach, and when people ask him what he does for a living, he can just say, “I’m a beach bum. I don’t do anything.”
The answer is: leverage (people want more of it) and risk (people want less of it).
Even Masters of the Universe don’t have infinite cash sitting around. After all, many Hedge Fund Titans live in New York City: there are co-ops to buy, kids to private-school, restaurants to patronize. If you are a managing director at a top-tier hedge fund, and you have a million dollars in the bank, ready to invest, which would you prefer: to earn 20% on your money? Or 30%?
Letting other people invest alongside you, and making money on their money, is a form of leverage. (For those not fluent in finance: leverage means using borrowed money to make more money.) Leverage isn’t always a good thing, of course (you can lose more, too) — but if you have high confidence in your trading ability, using leverage can be a wise decision.
So too in the world of Collective2. No one offering a strategy on C2 is a Hedge Fund Titan — not yet, anyway — and so we’re not talking about the same order of magnitude. But listen, if you are a competent trader, and you have $100,000 sitting in your brokerage account, ready to trade, which would you prefer: to earn 20% on your money? Or 30%?
The mechanism through which leverage is achieved is different on Collective2: no one is allowed to collect “management fees” or “performance fees”; that is not permitted under U.S. regulations. Rather, your customers subscribe to your trading information, and pay a flat monthly fee to receive your buy/sell signals, win or lose.
But the effect is the same. Imagine you are a good trader, and you think that, without Collective2, you can earn 20% each year on your $200,000 trading nest egg. Now imagine that putting your strategy on Collective2 lets you earn an extra $5,000 each month in subscription fees from your followers. That’s the equivalent of another 30% on your capital. Sure, there’s no guarantee you will earn that, but if you build a good track record on Collective2, you can earn that much, and more. (As I write this, a popular strategy developer on C2 is earning more than $15,000 each month from subscriber fees.)
So, just like a Hedge Fund Titan — or just like a mutual fund manager — you can gain “leverage” on your own dollars by opening your strategy to the public.
Allowing outside investors to trade alongside you, and pay you a fee, also reduces your risk. Let’s be honest about that. A typical hedge fund charges “2-and-20” — which means they charge an investor a fee of 2% of the money invested with them, plus 20% of the investor’s profits. That 2% is charged no matter what — whether the fund wins or loses. It’s called a “management fee,” and in theory it’s meant to cover fixed expenses that happen every month at a hedge fund, no matter what: you know, rent, administrative assistants, legal and accounting, blow.
But money is fungible, and what you pay with one set of dollars is something you don’t have to pay with another set of dollars. One way to think of that 2% management fee is as a risk-reduction cushion. If trading doesn’t work so well in one month, you still get your 2%. When you’re managing a billion dollars, that’s a nice chunk of change.
Now, listen, if you stink up the place six months in a row, most investors will flee and take their 2% management fee with them. But you’ll get a bit of leeway — more so if you have a long and distinguished track record behind you. That leeway reduces your risk. That’s what you gain by offering your strategy to other people, instead of just trading it alone.
And again, the same incentives that exist in the hedge-fund world exist on Collective2. You sell your strategy for, say, $150 dollars each month. Get 20 subscribers, and that’s gross revenue of $3,000 each month, which comes in regardless of whether you win or lose in any given month. Just as in the hedge-fund world, your subscribers won’t stick around if you lose money, month after month. (And just as in the hedge fund world, you’ll be given a longer leash if your track record is more substantial.)
So, in addition to increasing leverage, putting your trading strategy on Collective2 reduces your personal risk by some small, but non-trivial, amount.
So far, I’ve discussed the financial reasons why a legitimate, talented trading-strategy creator would put his or her trading strategy on Collective2. But there’s another reason, which is not related to money, but, rather, to career development.
Finance is a hard industry to break into. We’ve all read about the glamorous life of hedge fund managers, but how exactly does one go about getting a job at a hedge fund? You don’t fill out an application online, and — truthfully — unless you go to a top-five American university, you won’t see the face of a recruiter at your annual career fair.
I’ve already written about how stupid hedge-fund hiring practices are. But indignation won’t change the world. The fact is, it’s ridiculously hard to get a job at a hedge fund, and in finance in general, and probably always will be.
But there’s one thing “finance people” respect, and that’s money. Prove you can make it for them, and it doesn’t matter one bit whether you went to Harvard or Pomona State. Money talks.
Collective2 lets you build a public, verifiable track record. It’s out there, for everyone to see. Remember: on Collective2, your can’t claim in March that you woulda, coulda, shoulda bought Apple stock back in January. You have to make your buy or sell calls at the time they occur. Collective2 will publish your results. No matter what. Your track record is your track record.
Running a public track record, with other people’s money at stake, is a different beast than sitting alone in your room, wanking your own tiny brokerage account. The pressure makes some people crack. I’ve seen it happen at Collective2: a strategy manager is trading well, starts acquiring his first few paying subscribers, and then… he loses his mind. He just can’t take the pressure of having to perform publicly.
So that’s the non-pecuniary reason that you can find good trading strategies on Collective2. Some people share their strategies with the public for reasons other than money: they are building their career, buffing their resume, trying to break into the business.
For all these reasons, there is always a possibility of finding a good trading strategy on Collective2. Nothing is guaranteed, of course. You can lose money as well as win. But if you’re looking for an alternative to the same old same old investing opportunities, come on over.
* We label Collective2 results as “hypothetical” because (among other reasons) there is no single broker account that looks exactly like the results posted on our site. Even if a trading strategy is followed by live investors in real-life broker accounts, or is driven by the strategy manager’s own live broker account, everyone following a strategy can have different results, based on factors such as individual broker used (we work with many), when investors start or stop trading, how large or small they make their trades, whether they use stop losses, etc. And, finally, in many cases, strategies on Collective2 are not followed by real life broker accounts at all — this is particularly true for newer strategies that have not yet gained subscribers — and so results presented in these cases are based purely on simulated real-time prices, and these simulations have many inherent limitations. So, you know, caveat emptor.
Alessandro Cocciola designs and develops quantitative, mechanical trading strategies that utilize proprietary measurements to determine the market regime along with a scoring system for S&P equities. His flagship strategy Carma Stocks is a mean reversion swing trading strategy that filters for oversold and overbought stocks. The strategy trades only highly liquid stocks, both long and short.
In Episode 6 of Top Trader Radio, Alessandro and host Charley Wright talk about the investment approach behind Carma Stocks, the importance of matching trading methods to your personality, lessons learned about liquidity from the perils of 2008, and the characteristics that have lead to Alessandro’s success as a portfolio manager.
Trading and portfolio management are my passions and my job. I find myself very fortunate that the two things coincide.
Principal Managing Partner, Carma Advisory
Alessandro has 11 years of experience in the financial markets. He is the Principal Managing Partner of Carma Advisory, a SEC Registered Investment Advisor firm. He specializes in mechanical trading and portfolio management with a focus on long/short equity strategies. Alessandro is graduate of Economics and Banking at the University of Macerata (Italy) and has gained significant experience in leading Italian asset management companies as a Portfolio Manager and as a Risk Manager.
Software Architect Daniel Tochner wanted a way to backtest, optimize, and execute multiple algorithmic trading strategies at a portfolio level. When he was unable to find a platform that was capable of the heavy lifting required to meet his needs, he set out to design and build it himself, and IQBroker was born.
In Episode 5 of Top Trader Radio, Daniel and host Charley Wright cover the features and benefits of the IQBroker software which was recently selected as Collective2’s first Preferred Trading Platform. Daniel explains how IQBroker allows multiple strategies, within a single portfolio, to trade multiple symbols, on multiple exchanges… and to use multiple bar-types, news feeds, RSS feeds, and fundamental data.
The result of over 11 years of R&D, IQBroker is one of the most powerful and feature-rich broker-neutral trading platforms for equities, futures and forex. IQBroker has received rave reviews from quantitative and algorithmic traders all over the world.
…a trader can have a strategy that looks at equities in New York, forex in Tel Aviv, and futures in London and they can simulate all of that as a single portfolio. That was impossible for traders to do [before IQBroker].
Founder & CEO, IQBroker
Daniel founded IQBroker with the purpose of developing the ultimate algorithmic trading platform. He is an experienced algorithmic trader and software architect with over 15 years of accumulated experience in professional software development, capital markets and business administration. Daniel handles both the vision and the day-to-day operations of the company to ensure that it stays on the cutting edge of technology.
Daniel holds a B.Sc. and M.Sc. in Computer Science from the Hebrew University of Jerusalem. He is a resident of the beautiful city of Las Vegas and is often in the San Francisco Bay Area and New York City.
After several failed attempts at discretionary trading, Paolo Geronazzo returned to his programming and IT roots and began developing rules-based, automated trading strategies. Many years of rigorous back-testing later, a mean-reversion strategy targeting the S&P 500 E-mini Futures emerged as “the star” and ANTARES SP500 was born.
In this episode, Charley and Paolo go into great detail about the workings of his strategy and the methods used to succeed with a contrarian model in what has seemed like a relentless bull market. Hint, ANTARES SP500 has more than one way to shine.
I opened an account and lost all the account trading discretionary. From that point I decided to trade only with mechanical trading systems.
Paolo has over 25 years of programming and IT experience in various industries. He was lured to the financial markets during the dot-com days of 2001 during which time he began to use his programming skills to develop automated trading systems. He is now a full time trader designing and managing proprietary trading strategies for his own use and a prominent Swiss financial institution.
Paolo lives in Varese (Italy), near the Swiss border.