Now you can use the same powerful algorithmic-trading techniques that drive the world's best hedge funds.
If you've ever sat down at your computer, logged into your brokerage account, and said... "What should I buy?" Or "What should I sell?" then you should consider algorithmic trading. Algorithmic Trading, very simply, uses mathematical rules to make buy and sell decisions. It's typically used with stocks, but is also popular with funds that trade futures. The media often confuse High Frequency Trading (HFT) with algorithmic trading, but they are not the same. In HFT, trades happen in milliseconds, and traders try to benefit from tiny price discrepancies or arbitrage opportunities that appear and disappear quickly. Most regular humans can't trade using HFT. But there are all sorts of algorithmic trading techniques. Some trade very infrequently - maybe once or twice each month - and do not require ultra-expensive data centers or fiber-optic cables into the exchanges.
Collective2 is a "marketplace" for algorithmic trading strategies. Once you sign up for a free account, you can "shop" for strategies that meet your criteria. Then with the click of a button, or two, you'll be able to "turn on" those strategies in a regular brokerage account. Trades will be performed automatically. You'll have complete visibility into what's being traded, and when -- and you'll be able to "pull the plug" at any time if you don't like what you see.
The algorithmic trading strategies available on Collective2 are designed by traders, software programmers, and finance professionals around the world. Rather than working for a hedge fund or quant shop, these developers sell their strategies independently on Collective2. (Or they moonlight at Collective2.)
Some of the results on Collective2 seem surprisingly good. (To be fair, some are surprisingly bad, too!) While all the "Model Account" track records on Collective2 are hypothetical, they share one important characteristic: they are "forward out-of-sample" results. This means that trades you see on the web site were "called" by the strategy manager as they happened. In other words, strategy managers do not say to us, "We would have bought Apple Computer back in 2001. Trust us." No. We don't trust anyone. (Neither should you.) Instead, we record when a strategy manager actually decides to buy or sell. We also record the any trades that are placed in customer brokerage accounts as a result of following a strategy.
Unlike hedge funds and CTAs, we do not charge a percentage of any profits. Each strategy charges a flat monthly fee. The price is set by the individual strategy manager, and ranges from between $25 and $300 per month. You can snap together multiple strategies to trade in one brokerage account.
If you ask this, Collective2 is probably not right for you. Remember that trading is risky. You may lose money, as well as make it. We do not guarantee that the strategies you choose will perform well. If you use Collective2, you should only trade with "risk capital" -- that is, capital you can afford to lose. Sound fair?