Advice in quest for capital?

Quote from greaterreturn:

Of course, it will be fully tested for reliability in both a demo and live trading account using personal funds in the coming weeks before accepting any major amount of capital.

A more specific question: What measurements or statistics will help an individual or institution based on the back tested system to make a solid case for, say, $20,000 to run with after initial testing?
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Weeks? Trade it with your own/friends/family money for 5 years. Over the next couple of years there will likely be a couple of global panic situations like August 2007 (or Oct 1998, March 2008, Feb 2007, May 2006, Spring 2004 etc). This is how your system can prove what it's worth: audited, actual live forward trading performance that hopefully produces positive returns while other quant/mechnical/blackbox systems around the world blow up.

Nobody will give you even $5 to trade with if you come in with 10 years of simulated backtesting and 2 weeks of 'live trading'.
 
How much are you asking for?? you'd be surprised ....if people buy $500,000 worth of stock from a half as spoken english sales person who they'd never met.; imagine that....just a thought...good luck
 
Well, let me add the Sharpe and Sortino calculation to the platform. They're similar but I like Sortino better myself after studying about it.

You might be right about people hesitating to risk much on only a back tested system.

My plan was to run it for several months to a year before asking for additional capital.

However, that changed when I saw the results of how well this system works in back testing. It's not curve fitted at all.

So we'll see if you're right.

Probably wrong. Many institutions hire people to develop and try new strategies and give them a little capital in the $10K to $20K range to test them with.

So there are institutions and individuals who'll risk that if the idea behind and the results of a backtest seem very convincing IMHO.

Wayne
 
Tradelink,

Thanks for tips! I'll look at that.

I absolutely plan to invest my own money. Certainly. But I can only really justify $1,000 immediately after a failure in some real estate investing and other obligations.

My goal is to produce enough income through automated trading (I've been working towards this for 15 years) to focus on that full time (leave the software architecture job).

My own capital won't allow that for quite a long time.

However, if I can get someone to try it with a small amount ($20,000) long enough to prove that the trades match
the model then I hope to get it funded to a large enough amount that my 20% cut of profits makes enough to focus on this full time.

Why? There's tons of way to improve this system and multiply the results several times. But that all takes time and commitment that's difficult working nights and weekends around family stuff.

When I did real estate investing, there was no shortage of people who have money and want to make double digit returns. It's just you have to cross your t's and dot your i's legally and be responsible.

Anybody can just show up with money. I'd rather work with a firm or individual that has some knowledge and experience in trading so they have value add beyond just bringing money.

What's a prop firm? I'm going to research that. I know hedge, mutuals, and CTA funds very well. Prop I need to look into. One contacted my via PM.

My first step is to get the Sharpe and Sortino. That's seems important to people. I'll post it ASAP.

Sincerely,
Wayne


Quote from tradelink:

wayne,

your best bet is to hookup with a prop firm. there is a prop trading firm forum on elitetrader, you could post there.

honestly what I'd recommend is just trading it yourself, if you're feeling so strong about it it's the smartest way to go.

Besides anybody with any sense will require you to put some of your own money up to trade your idea, your best bet is just to take an exam, hookup with a prop firm, put up 3-5k or whatever and trade it 10:1 and keep 99% of the profits.

if you do some kind of a side deal with a prop firm where they putup most of the funds and you dont' want to be registered, eg you get 20% or something like that... I'd post this to the prop forum and see what response you get. Still though I'd recommend just going your own way, capital is in many ways the easiest hurdle.
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wayne,

in whatever you do you'll find some naysayers who tell you stuff is impossible or whatever.

I used to work for a CTA that managed $1bill and he wouldn't give somebody money without a year track record. I've heard 5 years in other places.

That said, I've been offered well in excess of the $20k you're looking for in situations where there was NEITHER of backtesting or live trading results.

As in dealing with people, often times it's more about the relationship than some hard number. Do your best and keep at it and capital won't be an issue. As I mentioned I don't think this is the best forum to continue your efforts.

good luck.
 
You situation is akin to a startup company asking for capital: The earlier you get foreign capital - the more you will be paying for it in terms of lost ownership, lost influence, time spent getting the capital etc.

How much time did you spend on building this?

Had you spend that time in a paying job i.e. as a programmer - what would you have made?

This is your cost so far.

20k usd should be a small amount relative to that.

So you should consider whether taking in that capital is worth it.

On the other hand: I think is quite possible to raise the capital.

I don't know about cold calling hedge funds.

But some random internet forum threads might just do it.

(I did not mean this as a joke).
 
I cold called a few funds by narrowing to only ones that already trade forex since that's what I do. I got some interest.

Most importantly, right now, I wanted to learn what criteria matters to those with funds.

It seems the Sharpe Ratio is the gold standard. I implemented it last night but I was tired so didn't finish running it on the entire model portfolio.

Last night, I only tested it on USD/JPY using the 2 raw models, the trend, and the channel.

The trend, understandably, scores low on Sharpe by itself. In contrast, the channel scores higher.

It was most interesting to see the Sharpe score when they were combined. It was slightly higher than the channel result alone.

There's several steps for me to test to get the final Sharpe score.

1. Add the rest of the models.

2. Turn on the model to scale into trend moves.

3. Add position sizing based on % of account.

4. Improve the efficiency of the exits from trend moves.

5. Add the rest of the forex pairs.

Of course, at each step it requires looking at how each item impacts the Sharpe Ratio.

That should all take at least another week or so.

Sincerely,
Wayne
 
I suggest you make a piece of paper describing the following:

1. Your investment universe - the currency pairs you trade, how you trade them, your target dollar amount exposure.
2. Your assumptions - what trading costs and interest rates you assume.
3. Your backtested performance year for year - for each year:

A. Earnings
B. Volatility
C. Maximum drawdown
D. Consider making an earnings distribution curve
E. Consider a p/l curve
F. Consider a graph showing total exposure in dollar amount / percentage of capital
G. For each instrument:

i. percentage long / percentage short / average position
ii. average holding period

You can post it here if you want to - shouldn't contain any trade secrets.
 
Thanks Chvid.

Your list is awesome. I can see how your list as a package can make a "solid case".

And reading your list gave me a vision for the platform to automatically generate a package with each of those graphs for each instrument separately and the combined graphs for all the time frames.

I'm implementing the Volatility formula now. It already has graphs, but they just need to somehow generate JPGs to disk.

That should all take a week or two to get it cleaned up and pretty.

Thanks everyone in the thread and those that PM'd. I have work to do. I'll post again in a week or maybe two with the finished reports.

Sincerely,
Wayne
 
You are welcome.

I am in a similar situation as you are - so I get a lot out of threads like this.

I too have a system / platform that I would like to see used in a professional setting (in a hedge fund) some time.

But I have taken the route of trading my own capital first.

BTW - I stumpled over this job posting:

http://nuclearphynance.com/Job Advertisments/Show Job Advertisment.aspx?JobAdvertismentIDKey=194

Maybe it is of interest to you - as they seem to be interested in people who built systems on their own.
 
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