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Starting an investment business - Page 4

post #46 of 273
Thread Starter 
Quote:
Originally Posted by nootje View Post

Actually, it would be better for you if the first days/weeks were bad. Anyways, automated trades or trading signal+manual trade?

Signal + manual trade. And why do you say that it'd be better if the first weeks were bad?
post #47 of 273
Worst thing that can happen to a novice investor (not calling you one) is to make it big on their first pick, or first portfolio setup. The idea is that it leads to overconfidence which might lead one to believe they have beaten the system, can take podsitions in risky investments because they see something the market doesn't, etc.
Interesting project choice - are you going to be the business development guy while the other makes the money? But congratulations and best of luck. Lots of money to be made out there icon_gu_b_slayer[1].gif
post #48 of 273
Thread Starter 
Quote:
Originally Posted by chrisjr View Post

Worst thing that can happen to a novice investor (not calling you one) is to make it big on their first pick, or first portfolio setup. The idea is that it leads to overconfidence which might lead one to believe they have beaten the system, can take podsitions in risky investments because they see something the market doesn't, etc.
Interesting project choice - are you going to be the business development guy while the other makes the money? But congratulations and best of luck. Lots of money to be made out there icon_gu_b_slayer[1].gif

Ah, well, since we're just following what the algorithm says, emotion shouldn't play into it at all. We have very strict rules governing everything, so I'm not really making any decisions on my own judgment or emotions. So hopefully that will help us stay impartial.

I'm managing a lot of the actual modeling as well, and my partner is doing business dev too -- so at the moment at least we're splitting the burden a fair bit. Although I probably skew more on the fundraising side and he more on the analytics side.
post #49 of 273
Quote:
Originally Posted by NameBack View Post

Signal + manual trade. And why do you say that it'd be better if the first weeks were bad?

For one what the other poster said. Also, have you ever traded, and taken positions IRL? For now you can say you follow the algo, this will become more difficult once its real(your) money on the line. Untill youre working with real money you just havent experienced the emotions/problems involved. Given that, I hope you'll understand my other question about manual vs automated trades....
post #50 of 273
Thread Starter 
Quote:
Originally Posted by nootje View Post

For one what the other poster said. Also, have you ever traded, and taken positions IRL? For now you can say you follow the algo, this will become more difficult once its real(your) money on the line. Untill youre working with real money you just havent experienced the emotions/problems involved. Given that, I hope you'll understand my other question about manual vs automated trades....

Ah, yeah, I see what you're saying. It's definitely true, and I have put real money on trades before (on my own judgment, to much less success than the algo), and it is completely different. I agree. However I know that it won't be a real test of the algorithm unless I follow the rules. And if I can't really test it, then I can't make money off of it in the future.

But I completely agree it's different having real money on the line.
post #51 of 273
Just as a heads up, its going to be real tough to follow the algo when every fiber you have screams you should do otherwise, which will happen thrice a day. It takes a strange type to be able to follow that, which is why I would look into automated trades. FWIW, if you're going to use IB, there are software packages that will allow you to do that. I cant remember the names as it is too long ago for me.

Anyway, im perhaps a pessimist but I would seriously try to do this on your own dime before you start using other peoples money. If the algoritm works you should be able to increase your working capital form the (apparently meager) base you have now, and it will train you for the rigeur when the stakes increase. And if it goes south you will have some friends and relatives to fall back on, instead of them hiring hitmen....
post #52 of 273
Thread Starter 
Quote:
Originally Posted by nootje View Post

Just as a heads up, its going to be real tough to follow the algo when every fiber you have screams you should do otherwise, which will happen thrice a day. It takes a strange type to be able to follow that, which is why I would look into automated trades. FWIW, if you're going to use IB, there are software packages that will allow you to do that. I cant remember the names as it is too long ago for me.
Anyway, im perhaps a pessimist but I would seriously try to do this on your own dime before you start using other peoples money. If the algoritm works you should be able to increase your working capital form the (apparently meager) base you have now, and it will train you for the rigeur when the stakes increase. And if it goes south you will have some friends and relatives to fall back on, instead of them hiring hitmen....

Unfortunately we may get flagged as a pattern day trader, which comes with minimum balance requirements. Otherwise we would likely do this on our own dime, for the ease of it as much as anything else.
post #53 of 273
Quote:
Originally Posted by NameBack View Post


Ah, well, since we're just following what the algorithm says, emotion shouldn't play into it at all. We have very strict rules governing everything, so I'm not really making any decisions on my own judgment or emotions. So hopefully that will help us stay impartial.
I'm managing a lot of the actual modeling as well, and my partner is doing business dev too -- so at the moment at least we're splitting the burden a fair bit. Although I probably skew more on the fundraising side and he more on the analytics side.

 

"our algorithm says so" is not an going to be a convincing enough excuse if you are running actual money and having people on your ass when you are having a few down days/weeks.

 

if ur system tells u to jump off the cliff, what would you do?

post #54 of 273
Lol. Everyone's algo backtests well. How many stories have I heard of xxx% returns and backtested over the last 20 years!

So you and your friend in college created a strategy no quant on Jane Street or anywhere else in the trading world has thought of or tried?

Ok.
post #55 of 273
Quote:
Originally Posted by Dashaansafin View Post

Lol. Everyone's algo backtests well. How many stories have I heard of xxx% returns and backtested over the last 20 years!
So you and your friend in college created a strategy no quant on Jane Street or anywhere else in the trading world has thought of or tried?
Ok.

There are possibilites. I once had a reasonable succesfull strategy (reasonable due to fee "problems") that was based on a newly introduced euro style option series that were far from being optimised at the moment. The strategy worked, but I had to be on the lookout to find a cheaper broker, as trading several 100 contracts a day is costly..
post #56 of 273
Thread Starter 
Quote:
Originally Posted by Dashaansafin View Post

Lol. Everyone's algo backtests well. How many stories have I heard of xxx% returns and backtested over the last 20 years!
So you and your friend in college created a strategy no quant on Jane Street or anywhere else in the trading world has thought of or tried?
Ok.

A priori arguments aren't really persuasive to me. What can I say, I'm not a fan of Mises.
post #57 of 273
Ok. Implement your strategy and come back and tell us how it did. Be honest.
post #58 of 273
Quote:
Originally Posted by NameBack View Post

New backtesting results, with a more consistent yield curve, and the decision to look at 3x leveraged ETFs as a trading option has made us decide to move up our real-cash test fund. We're now trying to get it started within a month. Turns out IB lets you margin on 3x leveraged ETFs, so we're going to be switching over. Between the lower transaction costs, higher leverage, and better model, our returns are looking much stronger.

I would offer advice that you not use the 3X leveraged products. Even the 2X products can be hazardous to portfolio health. The danger is from some occurance that is "out of the blue" and un-modelable. Someday, somehow. lightening strikes when you are on the wrong side of the trade and the damage is immediate and multiplied. If you do decide to use the leveraged products, then you should certainly put some restrictions on the position size of the leveraged products.

The current economic environment is simply unstable. There must be and will be some very large adjustments. Those could develop very suddenly, and certainly the current trading environment is far different from just a few years ago, let alone ten or twenty years ago.
post #59 of 273
Thread Starter 
3/3 so far. It weirds me out every time this thing gets a call right. There's something unnerving about building something that makes better decisions than you can make yourself.

So it's only been one week, but we're up a little over 5% on SPY, and 15% on UPRO (makes sense, obvs). Both without margin, because I can't figure out how to turn off the damn diversification rules on these simulations, so I'm using like 1/8th my buying power and just comparing profits against that.
post #60 of 273
beginner's luck?
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