(Preface: I pretty much know nothing about stock markets and trading.)

Isn't there a whole industry that revolves around paying people to provide you with their trading strategies? How is that considerably different than what's happening on Collective2?

Having a good strategy doesn't mean you have the money to actually trade on it. Or that you can slowly build up your trading bankroll using the same strategy.

Then there's strategies that only yield modest returns. Why not make some money on top of that by renting it out? If you let a dozen people use your strategy, does acting on that information give you much of an advantage? I would guess that depends on how much money those people are trading on your strategy.

I would also guess there aren't many big players renting strategies on Collective2. It's an interesting concept and I think the fact that they've been active since 2003, somewhat validates the idea.

The best thing about it seems to be the ease of using an automated trading agent. I don't know how easy it is to do that elsewhere, but one reason to put your strategy on Collective2 (I'm guessing you can keep it private) would be to use their automation facilities.

There are several whole industries revolving around paying people for help with trading strategies. Most have very specialized economics.

A hedge fund requires capital to operate, and the owners can't necessarily cover fixed costs (salaries, etc) with their own personal capital. I'd be surprised if many of the strategies on collective2 fit this model

Investment advisers often fine tune a strategy to match your personal risks - i.e., help Southwest Airlines hedge their exposure to gas prices, or Apple to hedge their exposure to the RMB. Since Southwest is already short oil due to being an airline, the trading strategy of going long evens them out. It wouldn't make sense for me to trade this strategy, since I don't have an intrinsic short position in oil (plus the alpha in Southwest's strategy comes from selling flights, not oil).

If you let a dozen people use your strategy, does acting on that information give you much of an advantage?

Buy $10k of some low volume stock. Have a few other people pile on and buy the same stock (after you). The price will go up a few cents. Then you sell, probably to the same people buying from you. This is called frontrunning. If you didn't frontrun, you bear the risk that one of your renters would buy the shares before you do, thereby driving up the price before you purchase it. Less of an issue with GOOG, admittedly.

While I agree with your points, I think it is possible there are trading strategies that are defined by needing a certain amount of upfront capital (say $1 million). So, you might know it is a winning strategy after a couple of renters use it successfully, but need to rent it out until you have enough money to use it yourself.

That's the premise of a hedge fund. A strategy generating 9% alpha, but which requires $1 million in fixed costs to manage (office space, salary, market data), might require $30-100 million in operating capital.

It's hard to see how those economics would apply to collective2.com.