Found It

Reserving the right to be wrong, I think the strategy Found It on collective2 is extremely risky and likely won’t end well. Its equity curve looks perfect with only an 11% drawdown and 14 consecutive months of gains.

So what makes this strategy so risky?

I have made warnings about multiple strategies like this. Take a look at this screenshot below of another example that worried me. Notice the strategy had 8 consecutive months of gains with almost zero drawdown until month 9 happened and there was a drop of 80% in a matter of days. The spikes of leverage you see in the screenshot are a symptom of the trading styles that led to results like this.

The strategy Found It has very similar leverage spikes.

No matter how long a strategy has survived if it has leverage spikes like this I see it as a huge risk. Even though this strategy has been around for 14 months I am not impressed. I have seen strategies last for over 4 years with methods like this only to crash and burn later. It is hard to see the leverage scale but the average leverage use is around 18. That is huge!

According to the data I see available on Collective2, zero strategies have survived 1,000 days or longer with an average leverage use of 8 and an annualized return of 10% or greater. This tells me it is very hard to survive with leverage in the range of 8 average. But the average doesn’t tell you everything. Found It doesn’t have 8 average leverage which is a good thing. But it has a really high max leverage of 25. There are three strategies that have survived with a similar metric but part of me feels it is only a matter of time if they don’t change their approach.

• 4QTiming FutNQ
• 4QTimin NDX3x
• OPN W8868

All that being said I would never subscribe to Found It unless I was willing to endure a drop in the ballpark of 80% within a month. I have simply seen too many similar strategies where something similar has happened. There have been thousands of strategies to come and go on Collective2, and in general strategies with really high leverage or leverage spikes eventually turn sour. So far I see no reason to think differently about Found It even though it is currently ranked #2 as shown below. If you disagree that is fine. We have a market now.

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