Limited is the strategy of the week for collective2.com. This strategy is likely not one I would personally be willing to copy with my own money. Per the screenshot below, the leverage curve shows huge spikes in leverage use, reaching as high as 22.10.
When strategies have huge spikes in leverage I typically don’t think they make good long-term strategies. This is because by taking such large amounts of risk it can easily cause a 100% or near 100% drop in the account value. By using 22.10 times leverage a sudden move of just 3% (Not uncommon in the investing world) could cause a drop of 66% in the account value. You could reduce some of that risk by using stop losses, but there is no free lunch. Say you set a stop of 5% of the account value. Using this much leverage means you will hit that 5% stop more often causing a series of 1,000 cuts rathe than one giant gash. Either way, more leverage means more risk. I am not opposed to leverage use, but to frequently use such high levels is a warning flag to me.
I expect that this strategy will likely experience a very large drop causing most to abandon it or to reduce the leverage use and use the early gains as good marketing. At this time the strategy is currently a part of the C2 start system which essentially means it hasn’t exceeded certain drawdown amounts. I find it hard to believe this could last with this level of leverage.
All that said I will be watching to see how the user fairs in making Limited succeed. Who knows? Anything could happen, but the odds are not good in my opinion.
Limited’s OnGoing Performance Chart
The chart below will provide live updates of the strategy going forward.
Other Strategies by Creator
After writing this post I then realized that one of the creators previous strategies followed a very similar pattern with leverage use and we can already see how well it worked out. I hate that they used the word “Patience” like some of my strategy names.
See my Brokerage Accounts
In addition to this blog you can follow my live brokerage accounts anytime. The three links below will take you to a third-party website called collective2 where I record and publish my personal trading decisions. If you have questions let me know!
Retirement Account #1:Patience is a Virtue
Retirement Account #2: My Roth IRA
Paper Trading Account #3: Leverage and Patience
Disclaimer
This is not investment advice. This website is designed to talk about investments but it is not designed to give you personalized investment advice. This site is generic and should not be used as the basis for any investment decisions. This is for entertainment and educational purposes only.
The owner of PatienceToInvest.com is also a trade leader on Collective2.com. We may receive compensation by promoting some collective2 strategies over others.
Investing is risky and can result in the loss of all your capital and even more than your original capital in some cases.
Patience to Invest 