Track Record

J

joesan

Say one is planning to trade OPM or start a hedge fund, the first thing he has to do seems to establish a track record to show his competence at trading. My question is,

1--How do you create such a record ?
Is your broker's daily/monthly clearing report a natural track record ?

2--How long should your track record be?
one year ,two year, five year ? Daytrading, swing trading ,different length of record ?

3--What kind of track record looks attractive to the potential investors ?
(return, risk, etc. )

looking forward to be enlightened in this regard
 
Quote from joesan:

Say one is planning to trade OPM or start a hedge fund, the first thing he has to do seems to establish a track record to show his competence at trading. My question is,

1--How do you create such a record ?
Is your broker's daily/monthly clearing report a natural track record ?

2--How long should your track record be?
one year ,two year, five year ? Daytrading, swing trading ,different length of record ?

3--What kind of track record looks attractive to the potential investors ?
(return, risk, etc. )

looking forward to be enlightened in this regard
More...

I went through this same thing years ago...

1. Brokers' records are sufficient. The larger the account, the greater the credibility.... there is psychological pressure in trading big money that no one wants to lose.... having a track record with a $10,000 account won't gather much attention even if it's good. (Virtually nobody would give me a look until I showed good gains with a $500K account.)

2. The longer the better. No way to tell when potential investors will finally feel enough confidence. If you have a good one year record let it be known, but don't expect too much in return. Each year of success adds credibility.

3. Acceptable returns with LOW DRAWDOWNS. "Big returns with big drawdowns" suggest "accident waiting to happen" regardless of recent results.
 
Establish a 12-60 month trading record in several arenas using a business entity such as an LLC. Pay a reputable and long-standing CPA firm to do an outside audit. Anyone with a clue will ALWAYS assess your risk first(position sizing, margin, drawdown measures) and profit second so keep stringent professional criteria if you plan for others to take you seriously. I am in the process of the audit but have OPM because i allowed LLC partners to view my books and accounts. They are also people i know and trust and they trust me with their money. This is a good way to build a track record from scratch and will provide a foundation for raising institutional capital. Raising money is tough even with an outside audit.
 
Don't go the hedge fund route -- the costs (financially and legally) are too great, unless you like paying enormous accounting and legal "taxes". Plus, the investors are a lot meaner now -- they don't take their losses like big boys any more.
 
If you are scalper and
-Trading 10 times a day at least on average
-Every month have been profitable

Then you don't need more than six moth track record.

The point here is "the more you trade, the luck factor
reduce further" makes a more proven strategy.
 
Trading frequency is related to trading style. So apart from the audit issues, maybe I should ask accumulative results for how many trades makes it a credible proof that you have an edge. 100 trades, 1000 trades , 5000 trades , how large should be the sample ?


And if you finally have an satisfactory track record in hand, what will you do then ? Where will you go to attract funds ? Maybe this is a naive question sounded to veterans, but I'm sure many on this board are interested to know.
 
Quote from joesan:

Trading frequency is related to trading style. So apart from the audit issues, maybe I should ask accumulative results for how many trades makes it a credible proof that you have an edge. 100 trades, 1000 trades , 5000 trades , how large should be the sample ?


And if you finally have an satisfactory track record in hand, what will you do then ? Where will you go to attract funds ? Maybe this is a naive question sounded to veterans, but I'm sure many on this board are interested to know.
More...

Maybe you don't need to ask anything until you have a record. Don't beat around the bush what do you want to do with your life, where are you in life? Your credibility and character is the sell and the track record MUST be a given. If you are in college just hit the books and stop dreaming for now. You end up managing your money and you can go wherever your ability can take you. Having friends and associates that have known you for years and trust you helps to raise capital. It's all hard work when you manage OPM. You best think it over.
 
i have heard that in order to legally use your track record in your private placement memorandum (PPM) when you eventually want to raise money, you generally cannot use the track record of an entity other than the one that is raising the money. thus, you can't use your pers a/c, for example. this is what Green Company claims on their web site, and therefore they are offering a hedge fund incubation service, where they set up a pretty simple LLC for you to trade out of. they can do this for only ~$4,000 or so, if I remember correctly, but you cannot accept compensation from your investors. when you want to start charging people a fee/carry, you will need to pay for a law firm to prepare a PPM. however, if you are raising money for your existing LLC, you can legally use its track record in the PPM and other marketing materials. this is what it says on Green Co's web site about their incubation service:
http://www.greencompany.com/HedgeFunds/HedgeFundIncubatorFunds.shtml
I have considered this option, but I don't know if they are right about whether you can use a track record from your own account (or a different account). i'd like to hear about other people's experiences or inputs about this issue.
 
All the (conservative) legal advice I got was that the prior record was not usable. Once the LLC started and the entity traded as such, then the record would start. It didn't matter that it was the same strategy, segregated funds, etc.. etc...

That said, there are a lot of people in this business who do whatever the hell they want, and until the NFA comes calling they will continue to do so. I'm not saying you legally can or can't use personal track records. I just know that's what my attorney and accounting people advised. Robert Green has solid staff and knows the business pretty well.
 
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