How to Raise Capital?

Quote from FXTRADER40:

Dear Tracy,

Thank you for your reply. I think you understand what my issues really are.
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The problem with you is, YOU don't understand what the issues are, and you aren't reading what folks here are telling you.

More specifically, your work is worthless without a verifiable real time trading record. There are many reasons for this.

- Forex data for backtesting is notoriously suspect. There is no central Forex marketplace, as there is, for example, with NYSE stocks. Your data source is not likely to conform exactly to that used by another trader. - Over the past 5 years - the period of your backtesting - there have been some major currency trends in place. There is a very good possibility that this impacted your results. What happens to your system when the trends change, which they will? The fact is, you don't know. And neither will an investor. This is where your experience will be critical, when you are faced with a trend change. But you don't have the experience.

- The fact that you personally have no direct trading experience is the largest issue. "You don't know what you don't know", because you have no real world experience. So you may want to discount what others have told you here about the importance of being in the saddle, but you can't. To use your experience of the flight simulator, would you take someone who only trained on a simulator and let them take fly your plane without you onboard? Of course you wouldn't.

For these, and a number of other reasons, your work is worthless until proven in real time.

I took the time to post this information not to disparage you or your work, but to help you avoid spending much time and money going in a direction which is likely to result only in your disappointment. If you have a good system, then trade it. Period.
 
http://www.hedgefund.net/spd_main/overview.cfm?category=8&list_id=0&Page_Name=SPD_Index

You can start there. (Disclaimer: I'm not affiliated with this site)

Investors these days are quite savvy and seek sophisticated managers, structured strategies and most importantly pedigree (ie if you worked at Soros, GS, Harvard MBA, etc).

Ask yourself, if you were a multimillionaire, would you throw money at someone with no background but 1 or 2 years of audited returns from some discount broker?

You can start by beginning the self marketing process, ie network, buy some suits, attend hedge fund conventions, etc. It's all about self-branding.

Quote from FXTRADER40:

Dear Tracy,

Thank you for your reply. I think you understand what my issues really are. So the question is:

--what marketers....how do I get on their radar screen?
--public speaking....to what audience?
--based on the lousy average returns of most money managers with verifiable track records, who appear to be getting money thrown at them regardless of lousy performance, where is this dumb money.....it clearly has to exist somewhere....
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Quote from lindq:

- The fact that you personally have no direct trading experience is the largest issue. "You don't know what you don't know", because you have no real world experience. So you may want to discount what others have told you here about the importance of being in the saddle, but you can't. To use your experience of the flight simulator, would you take someone who only trained on a simulator and let them take fly your plane without you onboard? Of course you wouldn't.

For these, and a number of other reasons, your work is worthless until proven in real time.
More...

The above sums it up.

To the OP,

What you're saying is somewhat laughable to some of us here because of the challenges we've faced over the years.

lindq knows the deal: even if you have a good system, the execution is not going to be anything close to automatic in so many ways... you have no idea what you're in for....

For example, I automated a system I personally developed AFTER trading it live for about 5 years (it's based on my "read" of the market). That's a huge edge that you don't have *I not talking about statistical backtesting edge here*, I'm talking about knowing the inherent market/system interaction day-in day-out and being able to consistently take the risk and profit. The psychological aspects of trading are not really removed when trading a system IMO. What happens when you enter a drawdown - will you have the discipline to stick to it?? At this point in your quest I'll give it a 97% chance you don't - I'm not saying this to be mean, I'm saying it to prepare you for a difficult lesson, you are no different than all the other people in this business. It doesn't matter if your system is good - its the trader that makes the difference.

Because you have not traded live - you know absolutely nothing about market risk: you don't know what it feels like, where it hides and how hard it can really bite... you can only find this out through trading for a couple years and seeing the various events unfold and play out live. Therefore you are not a trader ... yet. Which is why you shouldn't be asking for any money.. yet.

Look, I'm not trying to be negative, take what I say with some salt, but, I do manage opm. Its been a tough journey to say the least and I *refused* opm for a long time (friends and family, not institutional here). Only after about 7 years of trading my own money I started accepting opm, and even now the psychological hurdles are still as difficult as they ever were.

Regards,
Mike
 
It's a long tough road.

I developed a multifactor FX model over the years and was trading it on and off for some time, but without a verifiable track record.

So I tried showing the backtest around thinking people would be impressed, afterall it has a Sharpe Ratio of 1.70 and a Sterling Ratio of 2.00, with around 30% expected return per year.

I must've emailed the backtest to around 50 people in the industry, nobody was even remotely interested. I felt discouraged.

What I then decided to do was start small.

I got 3 of my friends to sign up to my managed account at OANDA. So far I have an independently audited track record since last July. And it's actual performance is in line with the backtest.

Now, the assets I manage are very small, and the clients are my friends, but I would think it carries more weight than just a backtest.

In July 2008, I will contact those same 50 people and resend them my *ACTUAL AUDITED* 12 month track record.

My advice is start small and build it up. If you can show an audited track record and have actual clients, you might have a chance.
 
Quote from lindq:

The problem with you is, YOU don't understand what the issues are, and you aren't reading what folks here are telling you.

More specifically, your work is worthless without a verifiable real time trading record. There are many reasons for this.

- Forex data for backtesting is notoriously suspect. There is no central Forex marketplace, as there is, for example, with NYSE stocks. Your data source is not likely to conform exactly to that used by another trader. - Over the past 5 years - the period of your backtesting - there have been some major currency trends in place. There is a very good possibility that this impacted your results. What happens to your system when the trends change, which they will? The fact is, you don't know. And neither will an investor. This is where your experience will be critical, when you are faced with a trend change. But you don't have the experience.

- The fact that you personally have no direct trading experience is the largest issue. "You don't know what you don't know", because you have no real world experience. So you may want to discount what others have told you here about the importance of being in the saddle, but you can't. To use your experience of the flight simulator, would you take someone who only trained on a simulator and let them take fly your plane without you onboard? Of course you wouldn't.

For these, and a number of other reasons, your work is worthless until proven in real time.

I took the time to post this information not to disparage you or your work, but to help you avoid spending much time and money going in a direction which is likely to result only in your disappointment. If you have a good system, then trade it. Period.
More...

Top post.
I was going to reply, but then I saw this and everything I was about to say is contained therein.

I especially agree with the conclusion (in bold).
 
how to raise capital?

here's a concept get a job save your money and trade it to billions before tax of course.

or show me that you have the Grail and i will fund you today. mb
 
$200k a year on costs? Man what is costing you $200k a year???? You said $100k of that is salary which is really taking profits.

$100k to run an office? Two words for you... LIVING ROOM!

And you are telling me that you have costs every year for your computer systems too?

If you are starting on your own with $500k, then you do not need other people's money if you can make 50% nor do you need to be spending $100k on overhead.
 
Quote from FXTRADER40:

I focus on tweaking the automated system until it yields a good reuslt.
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I'm surprised no one else has yet picked up on this line. So essentially you curve fit your indicators to give you the best possible backtest? That may not pass muster when it comes to live trading. The mortuaries of failed system traders are packed with curve fit backtest strategies...

As lindq mentioned, the backtest period encompasses nearly a one-way directional market against the dollar. If this trend changes (or we simply chop around for a year or more) how can you be sure your system will still perform as expected?
 
Quote from Trader KGB:

I'm surprised no one else has yet picked up on this line. So essentially you curve fit your indicators to give you the best possible backtest? That may not pass muster when it comes to live trading. The mortuaries of failed system traders are packed with curve fit backtest strategies...

As lindq mentioned, the backtest period encompasses nearly a one-way directional market against the dollar. If this trend changes (or we simply chop around for a year or more) how can you be sure your system will still perform as expected?
More...
You're right. If it's curve fitted on 6 months of data, it will probably fail going forward. Nevertheless, I want to speak to you FXTRADER40. I just PM'ed you.
 
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