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Starting an investment business

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

  1. nootje

    nootje Senior member

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    reasonably trending days.
     
  2. stevent

    stevent Senior member

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    How's it doing today? No way it could have predicted the drop we're at right now?
     
  3. NameBack

    NameBack Senior member

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    It went short, but it went short at open, so we're down right now. If it falls further today, we'll be in the money.

    Edit: we also just made a nice tweak that boosted returns from 244% over two years to 300%, so we'll be employing that in our simulations going forward, should see some improvement

    Edit2: 8:44 PST, aaaaaaaand we're in the green. Just barely though.
     
    Last edited: Nov 1, 2011
  4. NameBack

    NameBack Senior member

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    Welp, here is the correction. We ended up having to hold that short position and now we're getting our clock cleaned. Derp. Hopefully it's back up tomorrow after we cut our losses today.
     
  5. nootje

    nootje Senior member

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    Those positions still according to your algo? Just saying, as using words like "hold that short" and "cutting our losses" sounds like you're using your own judgement on positions.
     
  6. NameBack

    NameBack Senior member

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    No we have rules.

    We open a position at the open of a given day. Then, if we made money by the end of the day, we close it. If not, we hold it. If we hold it into the next day, we wait until the close to sell. Repeat once more, and then cut any losses on the third day, because we never hold a position longer than three days.
     
  7. NameBack

    NameBack Senior member

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    Well, today was better. That's something. We're back at 7.8% overall. Took a big hit on that last position though. That's for sure.
     
  8. HEARTLESS-531

    HEARTLESS-531 Senior member

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    Expect to pay a boatload in attorney's fees, SEC registration, new compliance regs, etc. But after that, it's smooth
    sailing. I actually think you're on to something.
     
  9. NameBack

    NameBack Senior member

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    Yeah the setting up will be a huge headache.

    Actually today I spoke with a guy who started his own trading strategy, and got financing for it from large investors who took a 50% cut of profits. He ended up managing millions straight out of the gate. Apparently there's a whole set of investors who specialize in financing new quant strategies.

    Anyway, he'll be checking out our model, and if he likes what he sees, then there's a chance we may get connected to a firm that does this, which would be pretty awesome. It'd be great to make real money on the test fund.
     
  10. NameBack

    NameBack Senior member

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    Update: Call went well, he'll be presenting our strategy to potential funders.
     
  11. Egert

    Egert Senior member

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    Hey, I've been following this and just like my bets against the market, I check constantly - updates please? :nodding:
     
  12. NameBack

    NameBack Senior member

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    Ah, yeah, I've been pretty busy with this so haven't been posting much.

    We raised money for a very small proof of concept fund which will be going live tomorrow. We also have some larger investors who are in on the test fund for small amounts, with larger (100k-1m) amounts on the way if the test fund works well.

    Overall I'm pretty happy with where we're at -- now it's just a matter of seeing if it works. Getting killed this week, but simulation has still been going pretty well overall.
     
    Last edited: Nov 22, 2011
  13. proximatecause

    proximatecause Member

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    See Roger Lowenstein's "When Genius Failed" - Merriweather and his All-Star's simply followed the alogrithm until...

    I'm sure your outfit is adequately quant-ed up but it is still hard for me to swallow as a value investor. How do you not go crazy checking your swings every 10 seconds or owning a company for less time than it takes to make a latte? I get it, you have confidence from a few dry runs but I would much rather find a five year track record of improving profits at a low P/E trading below book value with a competent leadership group who are passionate about what they do. Rare but as Puddin' Head Dave Wilson would say "Put all your eggs in one basket, and watch that basket."

    Although I strongly believe quants and the Chicago School are total bullshit, I wish you nothing but success.

    PS - As an attorney, please see an attorney immediately. I cannot tell from the thread but are you incorporated? Make sure you and your partner are not personally liable for any loses - it could get ugly in a hurry, ask JWM.
     
  14. NameBack

    NameBack Senior member

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    I'm curious as to why you would lump quants in with the Chicago School? I tend to think of them as mutually opposed -- Chicago School types tend to be more friendly to EMH, and quant trading pretty much flies in the face of EMH. Personally I'm a paleo-Keynesian/MMTer, so I'm no fan of freshwater economists (I too think the Chicago School is pretty much bullshit).

    To play devil's advocate to your point, I worry that with value investing, everyone has essentially the same tools and most of the methods are known and widely employed -- meaning that you're trying to exploit inefficiencies in the market that vast swaths of other investors are also trying to exploit, and who might be far better at it than you. Whereas a novel quant strategy that exploits novel inefficiencies is more likely to succeed by playing a totally different game than by trying to play the big guys' game better than they play it.

    Regardless, of course it could totally fail, and we plan on diversifying quite a bit once we prove the concept. We built models on some other ETFs that seem to work well also, and we've built a variety of models which vary slightly in their data mining parameters, all of which could be put together into a bundle of ETFs and algorithms that provides a more robust, if somewhat more modest rate of return.
     
    Last edited: Nov 22, 2011
  15. proximatecause

    proximatecause Member

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    You are correct on the Chicago EMH...I did not edit. Thank you for fleshing out the difference, I failed at making that point - I just finished Skildelsky's book on Keynes revisited, and I'm warming to him.

    I get why the whole algo thing is attractive, Simmons showed how well it can actually work.

    My taste is still for value investing - it doesn't matter how many people have those tools available to them, the principles are still applicable to almost any value situation. Value investors often do not see the world the same - see Berkowitz and Einhorn's war of words this summer about St. James. The goal of value investing is to find undervalued assets while mitigating risk by purchashing at a low price and that gives me piece of mind. The world will always have pockets of undervalued assets and overvalued tulips, easier said than done but value investing will never die because prices will never perfectly match values. Trading in and out of positions increases overhead, creates taxable events, and comes with too much risk for me.

    "If you don't borrow money, you can't go broke" - W. Buffet

    I'm a slow and steady type of guy, I guess value investing fits my personality.

    It sounds like you are in a fantastic place with all the possibilities imaginable before you, I wish you luck!
     
  16. 89826

    89826 Senior member

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    Two pieces of advice: leverage works both ways, and if you can't get a good backtest, you are an idiot.
     
  17. NameBack

    NameBack Senior member

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    First live trade today with real money! Woo! Went long! Sigh!

    Algo seems to be having a hard time getting ahold of what the market is doing right now. The fast cycling from rally to volatility to (what is starting to look like) crash is throwing it for a bit of a loop. Current market environment looks pretty damn close to our biggest dip in backtesting, which had about 17% losses over the course of six weeks.

    It's definitely going to be a roller coaster unless the market pulls into full-on crash mode pretty soon, at which point the algorithm should be able to pick up fairly easily on the large unidirectional downward swing. This first position is going to be brutal though, because we'll be holding for one or two more business days after today (assuming no late-day rally today), and I have a feeling we're going to get killed. Down about 0.5% right now.
     
  18. Sir Humphrey Appleby

    Sir Humphrey Appleby Senior member

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    Did you?
     
  19. GreenFrog

    GreenFrog Senior member

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    this.

    my portfolio took a beating and a half this week.

    :slayer::slayer::slayer::slayer::slayer::slayer::slayer::slayer::slayer:
     
  20. Sir Humphrey Appleby

    Sir Humphrey Appleby Senior member

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    I was going to start investing in late August, then the markets had a bad couple of days so I thought I'd ride that out, then they kept going down, then they only had a couple of days of going up before they went down again, had a lucky escape by about two days and that was more laziness than anything.
     

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