How do I set up my own trading firm?

A

AndrewP

Hi, I'm a total trading noob. I have been playing around with second-level OHLC data for equities and may have fooled myself into thinking I have some profitable medium-frequency strategies, where I hold a position for a couple minutes before entering a new one. If I were to implement it, I would estimate total volume somewhere around 5k trades/month, totaling about a million shares/month.

What do I need to do to take my prototype research MATLAB code to a real trading program? I'd probably start with about ~$10k to test and gradually increasing to about $100k if successful. Is that too little capital to bother with?

Broadly speaking, I know I need to set up datafeeds, backtest on more historical data, open a brokerage account, and code up a real-time version of the strategy, but I don't know what I don't know. Here are some questions that come to mind, but I'm sure there's lots more detail I'm missing:
- What do I need to know about order routing? Right now I just occasionally trade in my Fidelity account, so I have no idea how my order gets filled...
- What recordkeeping for tax purposes do I need to perform?
- Should/how do I set up a corporation for trading purposes?

Any advice and pointers to books, articles, etc. that would be useful are appreciated.
 
don't think so much. just focus on trading your own account, and people will come begging to set up these stuffs for you.

the first part is to take your research to a broker platform that offers an API, run on a simulated environment with live market prices, and if it goes well, then fund a live account. broker reps will be calling you up to offer their assistance and answer all of your questions by then.
 
How does a noob suddenly do 5k trades a month?

Sounds like you want to drive Formula 1 after getting a learners permit.


Did Tom Cruise come out with an HFT movie or something?
 
xandman said:
How does a noob suddenly do 5k trades a month?

Sounds like you want to drive Formula 1 after getting a learners permit.


Did Tom Cruise come out with an HFT movie or something?
More...

Haha, fair enough, but I'm just playing to my strengths, programming and data analysis. How do I avoid slamming into a wall?
 
Take your strategy into live forward testing at IBKR or other retail broker. IBKR routing is as fair as they come. Make sure to have a software program similar to unlimited version of Tradelog. Makes record keeping a whole lot easier.

Talk to a prime broker. At this point, you will have a better understanding of your run-time workflow and know which services offer you value. If your strategy takes advantage of some order book/ dark pool exploit, then you probably don't have a choice but to talk to a broker for route access.

Talking to all parties is the key to implementation work and the prime broker will jump through hoops just to get your commissions. Ironically, this is just a fraction of the cost for most big boy games.
 
AndrewP said:
Hi, I'm a total trading noob. I have been playing around with second-level OHLC data for equities and may have fooled myself into thinking I have some profitable medium-frequency strategies, where I hold a position for a couple minutes before entering a new one. If I were to implement it, I would estimate total volume somewhere around 5k trades/month, totaling about a million shares/month.

What do I need to do to take my prototype research MATLAB code to a real trading program? I'd probably start with about ~$10k to test and gradually increasing to about $100k if successful. Is that too little capital to bother with?

Broadly speaking, I know I need to set up datafeeds, backtest on more historical data, open a brokerage account, and code up a real-time version of the strategy, but I don't know what I don't know. Here are some questions that come to mind, but I'm sure there's lots more detail I'm missing:
- What do I need to know about order routing? Right now I just occasionally trade in my Fidelity account, so I have no idea how my order gets filled...
- What recordkeeping for tax purposes do I need to perform?
- Should/how do I set up a corporation for trading purposes?

Any advice and pointers to books, articles, etc. that would be useful are appreciated.
More...
If you looking to margin your account there is this.
http://en.wikipedia.org/wiki/Pattern_day_trader

So 10k is like impossible to grow your account trading stocks for penny and less. If you going to do market orders will cost more in fees whereas if you use limits fees are less. Fees really eat up HFT, your broker will make more money than you. You have to use brokers that allow costs to be per share cause 10k doesn't buy much and I don't see you adding on too often. Test using tick data which you will have to buy cause using one minute bars is too long duration for HFT, could be huge bar with no prices in middle.

If you going to trade for yourself only, no need for a corp, cause thereafter fees on everything goes up.
 
Read Ernie Chan's book. He answers a lot of your questions (and a couple more) and he is a pretty good source not some random guy in an Internet forum like me and the other random guys in this Internet forum.
 
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