Starting an investment business

[Slopho]



I would suggest you talk with people before you are set on investing other people's money for a living. The reason I say this is disregarding anything about the algo if it fails or works miracles: People are assholes. You will get endless praise as long as you are making money for people. The moment you have negative returns people jump ship. Then they will try to call you at all hours send you death threats and all sorts of crazy.

I read a study once that said that people react 4X more negatively when they lose money as opposed to feeling positive when they make money.

 

[NameBack]



What kind of statistics are you using? Mostly based on linear modelling I'm assuming? You can probably share a few tidbits I imagine without giving anything useful up, eh?

Nope, not linear modeling. Machine-learning/data-mining stuff.

The basic concept (I may have explained this before) is that we have a suite of very simple algorithms. Each of these algorithms tells us whether to go long or short on a given day. We then choose which algorithm to use on a given day using a bunch of fairly cutting-edge data mining techniques that look at the performance of each algorithm, and decide which one is currently performing the best out of the total stable. That algorithm then tells us whether to go long or shot, and we do.

Today was good, so far we're on a 4-position streak, hopefully this keeps up.

 

[SkinnyGoomba]

What does the past performance of the algorithm tell you about the possible future performance?

 

[SkinnyGoomba]



I read a study once that said that people react 4X more negatively when they lose money as opposed to feeling positive when they make money.

I think you guys are going a little overboard, they do however need to make their investors aware of the risks that they're taking.

 

[Cognacad]



Nope, not linear modeling. Machine-learning/data-mining stuff.
The basic concept (I may have explained this before) is that we have a suite of very simple algorithms. Each of these algorithms tells us whether to go long or short on a given day. We then choose which algorithm to use on a given day using a bunch of fairly cutting-edge data mining techniques that look at the performance of each algorithm, and decide which one is currently performing the best out of the total stable. That algorithm then tells us whether to go long or shot, and we do.
Today was good, so far we're on a 4-position streak, hopefully this keeps up.

Interesting. Your not the statistician I take i t? haha. Just playing.

 

[gettoasty]

His partner is the statistician.

Question, something my firm manager brought up, but do you think your strategy will play more on the offensive or defense side?

It seems around "inner circles" that many funds similar (Black Rock comes to mind) are allocating their funds based on defense strategies so to fair best when the market turns sour. It isn't so much about the gains nowadays and it seems into the future, or at least going into 2012, but how respectable managed funds can make allocations that best defend against another downturn.

I think after 2008, investors who think toward the future are more aware of what can happen and prep for that possible drop rather than taking larger risks for a "meager" return.

So, is your strategy, based on emotionless algorithm--self-sustained management--more catered towards "smart" investors who acknowledge what happened in the past, or more on the aggressive side, looking to expose and take advantage of trends?

 

[effin genius]

let me know when you need a compliance officer!

 

[NameBack]



His partner is the statistician.
Question, something my firm manager brought up, but do you think your strategy will play more on the offensive or defense side?
It seems around "inner circles" that many funds similar (Black Rock comes to mind) are allocating their funds based on defense strategies so to fair best when the market turns sour. It isn't so much about the gains nowadays and it seems into the future, or at least going into 2012, but how respectable managed funds can make allocations that best defend against another downturn.
I think after 2008, investors who think toward the future are more aware of what can happen and prep for that possible drop rather than taking larger risks for a "meager" return.
So, is your strategy, based on emotionless algorithm--self-sustained management--more catered towards "smart" investors who acknowledge what happened in the past, or more on the aggressive side, looking to expose and take advantage of trends?

I'm not really sure how I would qualify it between those two options. I mean, it does very well in crashes, so in that sense it's "defensive." However, it's certainly capable of making money in good times too, and it's definitely all about aggressively exploiting trends. It's high risk, high reward, so in that sense it's aggressive. I feel like it's hard for me to say; our beta is 0.08, so the idea of our fund being a hedge, or a trend-follower kind of doesn't fit, I think. We do well or poorly based on things like volatility and the size of market oscillation, not bull or bear.

Also, for those who are interested, the fund is up about 6% since its inception roughly a month ago.

 

[Cognacad]

Very nice

 

[NameBack]

Up 9%. 7 of the last 7 positions have been winners.

We definitely went through a bit of a slump right when we started, which was totally nerve-racking, so it's nice to see it performing more in line with our expectations. Should be meeting next week to see about scaling up with the insurance company's financial advisory division. I'm hoping an eight-figure fund size isn't totally out of the question. That would make it feasible to live off the management fee until the end of the year when we take our cut of the alpha.

 

[v8 muscle]

former trader here. traded at a prop trading firm for a year before realizing it was a crappy career decision long term.

my very good friend who is 25 just started a quasi-fund and has over $1m in AUM. he technically has no backtest-able track record, but I helped him develop the system he's using and it def works. tons of examples, but its chart based and requires user input (grey box sort of)

 

[NameBack]



former trader here. traded at a prop trading firm for a year before realizing it was a crappy career decision long term.

my very good friend who is 25 just started a quasi-fund and has over $1m in AUM. he technically has no backtest-able track record, but I helped him develop the system he's using and it def works. tons of examples, but its chart based and requires user input (grey box sort of)

Woo grey boxes! Best of luck to you and your friend; we can compare our 2012 results and see who comes out on top.

 

[CYstyle]



Up 9%. 7 of the last 7 positions have been winners.
We definitely went through a bit of a slump right when we started, which was totally nerve-racking, so it's nice to see it performing more in line with our expectations. Should be meeting next week to see about scaling up with the insurance company's financial advisory division. I'm hoping an eight-figure fund size isn't totally out of the question. That would make it feasible to live off the management fee until the end of the year when we take our cut of the alpha.

They are going to give you 10mill+ dollars to manage after 1 week of trading? Sounds a bit too good to be true. Make sure you don't get shafted

 

[NameBack]



They are going to give you 10mill+ dollars to manage after 1 week of trading? Sounds a bit too good to be true. Make sure you don't get shafted

We've been trading for 5 weeks, simulating for 10, but I think most of it is on the strength of our backtesting. And we're vary wary of getting shafted, yeah.

 

[SVS]



Up 9%. 7 of the last 7 positions have been winners.

We definitely went through a bit of a slump right when we started, which was totally nerve-racking, so it's nice to see it performing more in line with our expectations. Should be meeting next week to see about scaling up with the insurance company's financial advisory division. I'm hoping an eight-figure fund size isn't totally out of the question. That would make it feasible to live off the management fee until the end of the year when we take our cut of the alpha.

Question number one for any startup is "how is am I going to get paid to do this?"