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Starting an investment business

Discussion in 'Business, Careers & Education' started by NameBack, Oct 19, 2011.

  1. ter1413

    ter1413 Well-Known Member

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    You're gonna need a BBerg.......:nodding:
     
    Last edited: Nov 26, 2011
  2. NameBack

    NameBack Well-Known Member

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    Yup! Down about 1.65% so far!

    We're thinking we may have started at the worst time possible, but hopefully we'll pull out of this dip soon. It's certainly a good test of our cojones though. I mean, we always knew there would be bad weeks, even bad months now and then -- no algorithm can be good enough to avoid that. So this is definitely going to test our mettle and see if we can keep our shit together while we ride it out.

    Or it might mean that the damn thing doesn't work and we're about to lose all our money. That's definitely a possibility too, but I still think that it will perform well.
     
  3. GQgeek

    GQgeek Well-Known Member

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    One of my best friends made 40k in his first 3 months of online poker. He thought he was awesome and then he lost everything. Some of these posts sound like newbs on 2+2 that think they're a winning players because they're up after 10k hands. Come back after 100k hands and then we'll see.

    How long is this test period supposed to run for? What Charley is referencing, to use the poker term, is the variance. Things could be going well for several months and then boom, it all turns to shit all of a sudden. You see it in poker all the time which is why you need such a huge hand sample to be able to say whether you're winning or not.

    Good luck though. If you make money I hope you donate it all to Green Peace, Code Pink and the NLRB. They're all counting on you! (and only a capitalist pig would use the money himself)
     
  4. stevent

    stevent Well-Known Member

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    Donate yes, Green Peace no.

    And honestly you don't know if you can win or not until you try. Just don't leverage up and lose more than you can handle. And don't make bets on stuff that the government can screw you over with (my oil derivatives this summer went so well until the release of oil reserves messed up my sweet / sour spreads)
     
    Last edited: Dec 5, 2011
  5. GQgeek

    GQgeek Well-Known Member

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    ^^ Ya, I'm not trying to rain on anyone's parade, but making any sort of assessment of success or failure of a strategy after a couple weeks of trading is pretty much worthless imo. That's really the only point I'm making.

    Obviously there are people out there making good returns on this kind of thing but the important thing is can you keep them going for a substantial period of time?

    Out of curiosity, how much data was this tested against and for how long (by whatever metric you're using)?
     
  6. NameBack

    NameBack Well-Known Member

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    Oh yeah, you're absolutely right. I can't help but monitor the damn thing, even though I know I should really just sort of sit back and passively manage it with some zen-style serenity until at least the 6mo mark. But, hey, easier said than done! Instead I spend my day flipping between bberg.com and ft.com and watching CNBC and freaking out as if I'm an active trader. It's stupid, but I'm sure I'll get over it after a while. At least the algo keeps me from trading emotionally.

    We backtested over the last decade, and we have a lock-in of one year for our funders. Even one year isn't necessarily great long-term proof, and we believe that this model's efficacy will decay with time. However, if it performs in line with our backtested annualized returns over that first year, then it probably means that the concept is strong, and we can build a lot of different models on a lot of different equities and "reboot" them periodically to ensure they remain fresh and effective. That's the long term plan. And we have some funders who are in for small amounts on the proof-of-concept fund who want to scale up quite a bit if things go well over the first 6-12 months.
     
  7. nootje

    nootje Well-Known Member

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    two things:

    1: you wont get over it, take it from someone who has been there and deals with several (former) traders.

    2: Should have used your own money.
     
  8. NameBack

    NameBack Well-Known Member

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    I did use my own money. Or do you mean I should have only used my own money?
     
  9. nootje

    nootje Well-Known Member

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    yes

    and fwiw, im not trying to be a pessimist or be too negative, but when larger amounts of money get involved it can get very ugly in all kinds of ways. I really do hope youre on to something, but just have my doubts..
     
  10. Cognacad

    Cognacad Well-Known Member

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    I am quite interested in investing and I am adept at statistics. I invest on my own without statistical aids and it works out fine, but I have always been interested in applying statistics to investments. Unfortunately I don't have time to do so and I don't think I ever will, but the interest is there. I would be interested in hearing more about this project!
     
  11. gettoasty

    gettoasty Well-Known Member

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  12. NameBack

    NameBack Well-Known Member

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    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.
     
  13. SkinnyGoomba

    SkinnyGoomba Well-Known Member

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    It takes longer than 6 mo, it is often a very similar market for months on end. Ask most investors if the environment they're trading in seems similar to a few months ago and a year ago and you'll get very different answers. Most trading systems seem to be terrible at adjusting to different market conditions over long periods of time.
     
    Last edited: Dec 19, 2011
  14. NameBack

    NameBack Well-Known Member

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    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.
     
  15. gettoasty

    gettoasty Well-Known Member

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    sounds like good news
     
  16. GreenFrog

    GreenFrog Well-Known Member

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    I'm just highly skeptical on an algorithm's ability to predict market movements that have been largely been dictated by the macroeconomic news in Europe, which, fundamentally, cannot be predicted by statistics, as they are purely qualitative events.
     
  17. NameBack

    NameBack Well-Known Member

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    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.
     
  18. GreenFrog

    GreenFrog Well-Known Member

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    It's a big assumption and I'm only saying it because the recent (past couple months) market movements by and large have been dictated by macro news in the U.S. and Europe. I agree with you that it's possible to exploit macro events after-the-fact, but I'm just saying it's pretty much impossible for your algorithm to predict that the market will go tanky tank or sky high tomorrow because that kind of movement is produced by such macro news.

    I can't count the number of times on my hands that the market has gone 2% one day, followed by an upswing of 3% the very day after because of some translucent shit that some politician in Europe said about the euro debt crisis while we were asleep. That kind of stuff, I'm saying, your algo cannot predict; nor can anyone else's.

    Don't take this as me shitting on your algo. I think it's awesome and great, brave, even, for you to tackle such a task in this kind of market. I sincerely hope it works out for you so I can invest in it too :p
     
    Last edited: Dec 21, 2011
  19. NameBack

    NameBack Well-Known Member

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    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.
     
  20. Master Milano

    Master Milano Well-Known Member

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    Wow, I know nothing about this, but good luck. It's nice to see an SF member in the middle of MAKING IT :slayer:
     

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