April 30, 2013 07:40 AM
(3.5 / 5)

Like several others, (ZuluTrade, eToro, Tradency etc), Collective 2 is a platform designed for the automated following of expert trading strategies and advisors. Founded nearly 11 years ago in NYC, Collective2 is one of the longest running pioneers of automatic trading. The Collective2 site contains a library of over 20,860 trading systems to choose from with each strategy being able to link directly through to an online brokerage account. The service is offered to US customers for a monthly cost of around $90 but is free to non-US customers owing to a fewer number of strategies available.

Collective2 trading systems

Getting started

Collective2 offers over 20,860 trading systems that can be linked directly to your brokerage account and since Collective2 requires no funds (everything is kept at your broker), getting set up is very easy.

To get going with Collective2, first open up the system finder and get started looking for a trading system that matches your risk tolerance and preferences. The system finder itself is a point-and-click interface which performs simple searches of the systems and then lays them out across the page. If you want more control over the search then skip the system finder and move to the advanced search using ‘The Grid’ layout. Here you can specify all sorts of criteria such as maximum drawdown, minimum ROI, profit factor and lots more. Collective2 also provides a column containing its own C2 score that measures a system’s robustness and another column showing the system’s popularity among users. As well as that, screenshots of the equity curve are included for every strategy. This is particularly handy, since equity curves give probably the best visual guide to the effectiveness of any system.

Collective2 performance charts

Once you have a system that interests you, the next thing is to click into that system so you can see all the finer details and see how it has performed over the recent past. This page will show a month by month performance table of the strategy and the equity chart can be zoomed in on for further analysis. You can also examine the system trade by trade and at the bottom of the page there will be some reviews from fellow traders who have already been using the system.

Now that you have a system you like, the next thing to do is to click subscribe. The cost to subscribe is set by the individual developer and will be charged to your account on a monthly basis. Prices vary but many of the systems are advertised for around $90 per month.

The next step is to tell Collective2 your broker details and turn auto-trading on. (Collective2 is partnered with a number of leading brokers so finding a compatible program is straightforward). A box will now pop up where you can tell Collective2 how much to allocate to each trade. You can specify risk as a percentage of the money in your account and make sure it never opens a trade larger than a specified size.

Collective2 is now set up to trade automatically on your brokerage account and you can follow the automatic trades as they are placed. Of course, if you don’t want to follow them you can simply turn off your machine and let Collective2 do its thing in the background. Otherwise, if you want to keep an eye on the system and interfere with it as you will, you can do so.

Extra Features and Support

Support for Collective2 is generally good with an active community of forum users that are an excellent way for a ‘newbie’ to ask questions and get to grips with the various systems on offer.

As well as this, Collective2 has a number of extra features for more advanced users and is capable of API functionality so that a trader can program his own trades with the help of compatible trading platforms such as MetaTrader, NinjaTrader, Interactive Brokers and Tradestaion. This allows bespoke, customized trading performance on a highly sophisticated level. The complete selection of API’s include an auto trading API, data services API, .NET wrapper and an API that even allows trades to be submitted by email.

Tips for using Collective2

The thing to remember when using Collective2 is that system selection as well as diversification is the most important ingredient for success and requires at least some knowledge of what makes a robust, profitable trading system. Indeed, for a strategy to be classed as good, it needs to have more going for it than just accumulating a large number of pips and smooth equity chart. In fact, an equity chart that is extremely smooth often indicates a system that is using some kind of technique that guarantees lots of small wins but will eventually blow out on one trade, (such as a martingale money management strategy).

In fact if you are new to analyzing trading systems, the best place to start is to learn how to analyze various equity curves and you will soon find it much easier to separate the good, robust systems from the ones that are doomed to failure. As an example, a good equity curve should have a smooth (but not too smooth) upward sloping curve (no more than 45 degrees) and a maximum drawdown that is small but not too small as to be unrealistic. Generally, drawdowns that are lower than 8%, indicate a system that will likely not be a good performer in the long term and has been simply curve fit to the recent data. Conversely, as drawdowns approach 35-45%, you are getting towards a system that is inherently volatile and may be prone to severe downturns.

As always, any system you choose must be tuned to your own trading personality and risk preferences. Since, if you are afraid of large losses, you may not be to stick to a system with a large drawdown. Similarly, if you are fairly impatient you may not be able to stick with a system that wins only 20-25% of its trades, (even though it still comes out ahead overall).

trading, MT4