For profitable traders only...how much is your strategy worth?

[Overnight]

...She noticed/discovered that at some particular time of day there was some momentary spike in buying of an ES or some other commodity. She started digging around and found out that some big firm (Goldman I think) had it programmed to buy predetermined quantity on a specific day of the week at specific time. She milked it until they changed the method. These kind of edges are very real (not statistical/hypothetical) but obviously very fragile.

But if all you have is your chart and gut feel (experience), yeah you can sell that all day long.

Hey man, I'll share my findings here! (All times Eastern) I have found some patterns on equity futures too! The 10:30 AM reversal, the 2PM rush, the 3PM rush, and the occasional spike in activity from 3:30 PM until close!

And on some days, there's that MAD-HATTER shit on the last 15 minutes of the RTH.

And then on some days, there's just that 5 minutes when everything goes haywire! 3:55 PM to 4PM.

It's science, bitch!

If anyone seriously thinks that their system gets out and it stops working in a market like the ES is deluded with grandeur. Seriously.

 

[Handle123]

First off there is one human being I trust and you are not him since he is not a member of this forum. All systems I have back tested, forward tested and manually traded from couple years to four decades showed profits are automated and self adjusting on weekends. All of this took much time and expense to be/have programmed, and continuation ongoing efforts. Second, I would never trust anyone to not share or keep their big mouth shut. Third, whatever you could pay me would not be worth my time but more importantly my ability to trust you, let alone at some point you be my enemy as both would be going after same prices with larger volumes eventually. Forth, I generally can't stand being in same room let alone to be on phone with other traders any more, feel like I need a shower afterwards.

People do not understand, the ones with the least amount of knowledge buy trading systems and when systems need adjustment, buyers lack ability to adjust or even stop trading them. Every system I have developed has had adjustments through the months/years, I try to do what HFTs do not do, some are chart related with "kicks", something most people don't seem to see cause it takes great deal of time back testing tidbits of patterns within patterns. The quant work been doing, these work for few months and slide into stop working and I have noticed the climate they work has much to why they work and lack of content reason they stop, so then design to resume when content is correct. But anyone buying something like this would be very unhappy as they would lack abilities.

When it comes down to it all, there is no way around it, best golfers, physicians, parents etc have plans and goals, dedicated to work and not dream, to gain knowledge when too many say it can't be done, and you become a lone wolf.

 

[maxinger]

It is priceless.
There is no reason why we should sell it even for a million dollars.
Because not everyone can be a successful trader.
Also there is absolutely no reason to earn extra money by selling our strategies.
And we don't want to be cursed and sweared by students.
And we don't enjoy coaching students.
We only enjoy trading.

Well. For those traders who can't make it, they will enjoy coaching students by selling their strategies.


I will only coach my close relatives.

___________

 

[d08]

The age old question comes up - if a strategy is that good why would anybody sell it?

I've designed stuff that is decent but not earth shattering - low teens annual returns with Sharpe of about 2.5. The thought of offering it for sale has crossed my mind but the problem is that I derive a large portion of my living income from trading my strategies. If I sold it and it went on to lose its edge, whatever I sold it for would have to cover my potential lost future income. This would be too high a price.

A rule of thumb is that any explicit "system" offered for sale is no good. However in the past I have paid for trading "frameworks" or "approaches" that got me thinking in new ways which were useful.

It depends on the return, your capital situation and the price offered. If someone offered me $500k I wouldn't take it seriously, $2m I would think about it, something like $25m I'd probably take it immediately as that's more than I'd expect to earn in the next few decades BUT the liquidity ceiling hasn't been reached so someone buying it who is very well capitalized could earn a decent return.

 

[themickey]

....Forth, I generally can't stand being in same room let alone to be on phone with other traders any more, feel like I need a shower afterwards........
....you become a lone wolf.

Weird isn't it! I wonder if there are other occupations or endevours where people behave like this?
Maybe religions, maybe trading is a type religion....?
Outside of trading are you ok with different viewpoints from others?
But I know what you mean, every trader has their own mindset and the longer in the game the more ingrained it becomes.
Maybe trading's not socially healthy.

 

[ajacobson]

So different firms will have a different marginal value - sometimes based on available capital in addition to the overall value.
So what does a great developer/quant make at a world-class firm?
Not an easy question, but take the going rate in this(Chicago) market.
Very dependent on a bunch of other factors, but I'll throw out some numbers to foster the discussion.
$250,000 base and the team's bonus could be as much as 10% of their book.
Again capital and the ability to deploy it. Can the IDEA be scaled and the issue becomes not only what the strategy will make by design, but also what it will lose by design and when do you scale up and when do you pull the plug.
Top shop with plenty of capital and a scaleable idea - $5 million a year on up.
Some firms isolate the book - so if the book has a good year and the firm doesn't you still get paid.
Some don't.
Another issue is how really proprietary the idea/strategy is.
If you were recruiting this talent from another shop you might PV a handful of years earnings as a structured incentive. Realize they/the team could quit when things go wrong.
Looking for @sle's input if he chooses.

For a number of years all of the geniuses were vol. arb and those folks are still pretty valuable.

Much of the innovation comes from people/team moving from the sell side to the buy side.

A lot of talent is moving from the HF community to the endowment and family office community.

Losing money by design isn't quite as bad as losing money by lack of design.

HF community isn't permanent capital - pension, endowment, and FO can be permanent capital.

 

[Wide Tailz]

I'll answer it another way. It took 10 years and a few tens of $k tuition to boil it down to a few strategies that worked for me (my own "holy grail"), even though I was profitable my first month and several years in between. It was mostly stuff I learned from a subscription service from my first year but seemed too boring to try. Even the "training course" dvds from this service only covered part of the real strategy. But it's not worth selling because your own "holy grail" will probably be something completely different!

 

[schweiz]

Therein lies the problem. If a discretionary system is profitable, how can one sell it? Because a discretionary system's profitability can change on a dime.

Profitability of ANY system can change on a dime. Whether it is because discretionary or not. Any edge can disappear suddenly.
Theoretically a discretionary system can be automated too. Discretionary systems also need decisions, logical rules and/or signals to trade. So it is theoretically possible to program it too, as long as the trader can explain his discretionary part. Many times discretionary is the result of the inability to program it yourself and not wanting to share it for someone to program it for you. That's my case
.

Regarding the concerns a couple of others here have spoken about, about how if their precious system gets out into the wild and everyone starts using it, that would cause the system to fail...Is that even a thing? Does that actually happen?

I know that John Henry changed his communication with his clients when he experienced that what he shared with this clients (telling them all the time his/their positions) was used against him. Some positions that he took were heavily countered by others once they knew his position, they tried to force him out with a loss. After he stopped sharing the actual positions, the problem disappeared.

 

[schweiz]

i too seriously contemplating about teaching my kids how to trade one day. but i'm not going to force it upon them. i will see how they will take it. trading is stressful and i will know if my kids can handle it once they get older.

Don't have too high expectations. I had already 2 failures (2 of my children failed in trading), still one to go...

 

[schweiz]

what is your track record? how much you made last year? and with what amount?

My answer would be: show me first hard proof that you have 4/5 billion to pay me. Then we can talk (maybe).