Protecting your strategies

Quote from logic_man:

All of these scenarios stack hypothetical upon hypothetical and then draw a conclusion that has zero chance of happening in the real world, yet is logical given the premises.

How about 1 high-profile instance of this happening? Let's stipulate that it "could" happen in the same way my house "could" get struck by a giant meteor in the next 10 minutes, but now let's hear about at least 1 example involving someone who's been profitable at least 1 year in a liquid market who's had their strategy stolen and reverse engineered. If there isn't one, either this is the perfect crime and therefore must happen all the time without anyone ever getting caught, in which case it's one of the greatest conspiracies in market history, or it must just never happen and, hence, no examples to speak of.
More...

I have developed a very very similar strategy myself. Exceedingly good PF trades at a particular time on 60-70 days a year and highly profitable. So, there is nothing hypothetical here. I hope you trust me. So, now my question is how do I protect such a thing, because obviously such a thing is easy to reverse-engineer, but very hard to discover on your own :)
 
The good news is that the lower-tier "bucket shops" are all getting squeezed. In the short-term that makes them a little more desperate and possibly inclined to look at your trades - but it is also a double edged sword, once you get that reputation you have a hard time reversing it.

There is a clear hierarchy in the trading world and now that the banks are out of the prop business things have gotten much simpler.

First of all, based on the OP's statement that your strategy is only worth stealing if the P&L is in the multi-millions (lowest I saw was $3M-$5M and highest was $10M-$20M) you are a big fish and you have nothing to worry about. The single biggest reason why strategies like that don't get stolen is the sheer amount of capital that is required to back these types of strategies.

Lots of small-time strategies get poached all the time - in fact many of the entry level prop firms (or sub-division of legit prop firms) "interview" for automated "system or program traders" constantly. They do this because they find the naive guys who are willing to share their "track record" on paper or small time at a retail broker - and then they code it internally on their own.

If you are are big enough that you don't need a prop firm's leverage then you are also most likely big enough that your broker or clearing firm values you as a customer (and makes a decent amount of money from your trading execution & clearing).

This "everyone's out to get me" mentality is funny.


EDIT:

Quote from gmst:I have developed a very very similar strategy myself. Exceedingly good PF trades at a particular time on 60-70 days a year and highly profitable. So, there is nothing hypothetical here. I hope you trust me. So, now my question is how do I protect such a thing, because obviously such a thing is easy to reverse-engineer, but very hard to discover on your own :)
More...

Easy - the only person looking out for you is you. Remember that. Do your homework and execute & clear through reputable shops. If your strategy needs the leverage of a prop firm (because you are under-capitalized) I would STRONGLY suggest that you continue to run it on your own in a retail environment (assuming there is real money behind it) or else keep paper trading it and get a job/second job/part time job and use that income to fund your own strategy startup. If it "needs to happen now" then it will turn into a "too good to be true" situation and if it's too good to be true... it probably is...
 
Quote from gmst:

I have developed a very very similar strategy myself. Exceedingly good PF trades at a particular time on 60-70 days a year and highly profitable. So, there is nothing hypothetical here. I hope you trust me. So, now my question is how do I protect such a thing, because obviously such a thing is easy to reverse-engineer, but very hard to discover on your own :)
More...

Between 10:30 and 10:45 EST, the ES moves an average of 1 point per minute, obviously not all in the same direction nor all the time. But, that means that there is the potential to get an entry as much as 15 points away from the entry your strategy generates, if all you have to go on is the time of day. Let's say that depending on which way the trend is going, 10 of those minutes will be in 1 direction and the other 5 will be in the other. You still end up with an average entry of potentially 5 points difference. It makes no sense to try to copy someone's strategy if your entry is going to be off by that much on average.

Again, I'm only asking for 1 instance of this happening and the person getting caught. Every type of crime has at least one screw-up criminal try to perpetrate it, so if such a thing has ever happened, it's happened more than once and if it's happened more than once, someone's gotten caught doing it.
 
winston, I find a lot of merit in your reasoning. Thanks.

It will be great if more experienced systematic traders can speak up like lescor, EricP, spike500, nitro, TSGannGalt, AMT4SWA etc.

Thanks.
 
Quote from gmst:

Stan, Thanks for stepping up and making a comment.

1. However, it happened 2-3 days ago and when I clicked to show the file that MC is sending, along with 100 other things, I could find all the files in this directory also that multicharts was sending.

C:\ProgramData\TS Support\MultiCharts\StudyServer\Studies\SrcEl

As you know all these files can be opened up in a notepad and everything revealed. So, I am not sure if you are correct here. Or, if my understanding is flawed, I request you to kindly clarify what it means.

Once I discovered above, I didn't send the logs.

2. I think multicharts does sends the information from quotemanager, so it does send the symbols that I have opened on my platform. Doesn't it send the quotemanager information ?

Cheers,
GMST
More...

Hi GMST,

No problem. This question is interesting to me, since while it doesn't make sense to do it, I want to be sure about how the program works in this regard. I've confirmed with quality assurance department once, and they told me it's not sent. I'll confirm once again in detail, and revert most likely tomorrow.
 
Quote from jcl:

With all due respect, I doubt that you or anyone else can reverse engineer a serious, non-trivial strategy.

But you can prove me wrong. I'll send you a list of trades from a profitable system, and if you manage to reverse engineer the strategy and replicate the trades, I'll pay you $1000. Up to the challenge?
More...

No, I'm not up to the challenge, $1k is not worth my time to get involved here and there is the risk if you offered me more is you wouldn't pay up. :)
I won't enter into any further details, just saying, I've done it.
There is no such thing as 'Can't'. Thanks :)
 
In my world, entries & exits are just one side of the coin ... the other side of the coin is all the non-entries ... non-entries because either being filtered-out, or being simply "undetected" by the current implementation of the strategy.

Those non-entries are just as important to the strategy profitability, and probably much more difficult to reverse-engineer.

Coming-back to the idea of using multiple brokers/clearing houses, I think the right idea would be to spread the trades randomly through 3 or 4 of these ... in effect, that creates fake non-entries making the reverse engineering task even more difficult.
 
Like what rubber should you put on your Enzo if you ever win the lottery? Nobody is going to solve for the logic of any system user on this thread.

The only issue would be in an OTC setting in which you're phone dealing and you're known as a predominately long or short vol trader. It absolutely will impact the market you're offered.
 
Quote from gmst:

I have developed a very very similar strategy myself. Exceedingly good PF trades at a particular time on 60-70 days a year and highly profitable. So, there is nothing hypothetical here. I hope you trust me. So, now my question is how do I protect such a thing, because obviously such a thing is easy to reverse-engineer, but very hard to discover on your own :)
More...

60-70 day average duration?!
 
Quote from gmst:

Good question. We have come CTAs on this board. I hope they step up to give their point of view.
More...

Do we have to wait for some CTAs coming in for commenting the question? I am just wondering!
 
You must log in or register to reply here.
Back
Top