How much is an ATS worth?
- Thread starter kut2k2
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My system has only ONE line around which i buy or sell.
The same question goes for anything really ... whether football or backet-ball or hockey players, objects like boats / cars / bikes / pens / computers / phones, books & software, food, art pieces, and of course companies.
It really takes an open market to "objectively" put a price tag on something, with competition & customers in large enough quantity for prices to find an "objective" equilibrium.
It doesn't seem to me that ATS have an open market. Sure, there are numerous ATS providers, but are there many customers? Which ATS & providers are the market leaders?
When it come to a particular individual & a particular object, the "value" of the object has 3 components:
- usage value: the value the object can (help) generate when using it
- exchange value: the value a similar object can be bought / sold on the open market
- sentimental value: the value the owner attributes to the particular object for personal reasons.
In the absence of an open market to determine the exchange value, an ATS value should be based on its usage value, a formula taking into consideration (per unit of trading, ie. per contract / 100 share / ... ):
1. ATS estimated expectancy
2. ATS estimated max.DD over its intended lifespan (capital at risk)
3. ATS estimated P&L over its intended lifespan
4. ATS estimated probability (distribution) of "success" over its intended lifespan
1. / 2. / 3. can be projected from past results (backtesting or live, best being live results matched by backtesting results for the same time period), as long as those past results are trusted. Conservative & nominal estimates should be made.
4. is where the most risk lies for the user. A careful analysis of the ATS internals might help mitigate that risk, but no matter what, any trading system's edge (fully automated to fully discretionary) can be voided overnight - or longer periods time - by regulatory, exchange, political, economical or technology changes.
It is complex,yet very simple,but cost me years and years of blood, toil, tears and sweat.I`m not a programmer,though and if could automate it,i`d forget about trading.So far it requires monitoring all day until that line is hit.
IMO the number of trades is not enough in itself ... there should also be a condition on the time period those trades cover. I find 10+ years a pretty good benchmark (where applicable), and I would now completely discard anything below 5 years.
For me, those figures apply for the backtesting part of the ATS. A one-year & 100+ trades live track-record, matching the backtest for that same period (95%+ of "identical" trades), would be enough for me to validate the entire backtest (assuming the performance characteristics for that one-year period are close enough to the prior part of the backtest).
Winrate is really meaningless by itself. The first "single metric" I would suggest to look at is the profit factor P/F.
But single metrics are quite deceptive, especially for large backtests, as they completely hide the variability of performance. Looking at the distribution of a particular metric on a year-by-year & month-by-month basis give a good idea of the performance variability.
Van and Ken talks about a SQN number:
System Quality Number: (Expectancy/Standard Deviation R) X square root number of trades.
If you can agree with that ranking for how good a system is, you can go to the next step and determine how much it is worth.
IMO: No automated system is worth money up front.
System Quality Number: (Expectancy/Standard Deviation R) X square root number of trades.
If you can agree with that ranking for how good a system is, you can go to the next step and determine how much it is worth.
IMO: No automated system is worth money up front.
Hello everybody,
Front my point of view the only serious way to buy an ATS is making it at success.
I try to explain me, I'm an investor looking for a good ATS and with $100k to invest so I reach an agreement with an ATS developer.
I'm going to run its ATS on my account under and I'll pay him a percentage over the profits, around 10%.
I think this is the only way to buy an ATS.
Of course the buyer has to be a good trader and follow all signals with discipline if not it's impossible to evaluate the ATS. And I fear than this is the clue, the important isn't only the ATS if not the psycology needed to run it.
Regards,
Front my point of view the only serious way to buy an ATS is making it at success.
I try to explain me, I'm an investor looking for a good ATS and with $100k to invest so I reach an agreement with an ATS developer.
I'm going to run its ATS on my account under and I'll pay him a percentage over the profits, around 10%.
I think this is the only way to buy an ATS.
Of course the buyer has to be a good trader and follow all signals with discipline if not it's impossible to evaluate the ATS. And I fear than this is the clue, the important isn't only the ATS if not the psycology needed to run it.
Regards,
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