Starting an investment business - Page 7

Well, we're just testing right now. Pretty much nothing to report yet -- we won't really know if it works or not for at least six months, and frankly even that is a pretty small sample set. We're just glad it hasn't tanked.

I agree that 6 mos is a pretty small n, but it's large enough that investors are willing to bet on you. At least that seems to be the feedback so far.

Currently we're in talks with a large national insurance company to work as an RIA under their financial advisory division. They get 35% of the profits but they do all the sales to fill up the fund and all the compliance dirty work, so it might be a good opportunity. Most likely though the deal would hinge on our test fund's performance over the next 3-6 mos.

I think it's a big assumption that the events dictate the markets entirely -- how events are interpreted by investors is certainly a big part of the equation. And to the extent that how markets respond to events has to do with market trends, I think algorithmic trading can be successful even in macro-driven times. Macro events can also produce market trends that are easy to exploit -- for example crashes. I've mentioned before that our algorithm backtests quite well on crashes, because they're easy to pick up on, as they are large uni-directional swings. So if Europe produces a crash, that's a trend we can pick up on and exploit. The same goes for other trends as well. Often bad news out of Europe has produced downturns that last a week or more, and vice versa.

Yeah, I know what you mean, and we've definitely gotten fucked on some of these positions when Moody's or Draghi come out and say some bullshit. On the other hand, look at how much of what these politicians/bureaucrats/ratings agencies say that everyone already knows. Like when Draghi said that there was "substantial downside risk" and the market tanked 1%. No shit! Downside risk? In Europe? I had no fucking idea!

And while we all scratch our heads at why the market seems so stupid, it is an example of the markets interpreting the news as much, or perhaps more than, being dictated by the news.

We just went through a little slump though, so I'm not denying it's a rough market. We like big swings -- rallies, crashes, anything easy to pick up on -- or choppy up-one-day-down-the-next volatility. We can capitalize on either of those things. What we don't like is what the market has been doing recently where it'll climb for three or four days and then drop for three or four days. When the oscillation is the duration of one position in our model, we tend to lose a lot of positions. Ultimately though the dip is still shorter and shallower than the worst we've seen in backtesting, and we just won three positions in a row so we are hopeful that we've snapped back out of it.