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shopster
Registered: Jul 2011
Posts: 1479 |
12-22-11 10:48 AM
...... really *prove* that you can do what you did the last 6 months for years and years to come...
H,
this is key.
without years of real time water under the bridge, just another wanna b delusional trader with the needle in his arm.
s
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tradewiz50
Registered: May 2004
Posts: 611 |
12-22-11 02:24 PM
Quote from sharpe:
I have been trading real time on updown.com for the past 6+ months with virtual money.
Here are my results:
Since Start DEC. NOV. OCT. SEP. AUG. JUL. JUN.
ME 28.5% -.9% .6% 6.8% -.2% 6.8% 7.6% 5.2%
S&P -7.6% -2.2% -.5% 10.8% -7.2% -5.7% -2.2% -1.8%
Position size of total equity= 20% for swing, up to 40% for intraday
Largest daily drawdown= -3% of total equity
Total trades = 150+
Duration= 1-3 days
For the original poster, I challenge you to a 3 month contest on updown.com.
For the experienced real traders I have a couple of questions:
1. What are my chances of soliciting funds based on this track record?
2. Can I solicit wealthy people in my city openly if I agree not to take a fee?
Get out your knee pads. You are going to be on them for a while.
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Epic
Registered: Apr 2011
Posts: 932 |
12-22-11 10:12 PM
Quote from heech:
Haha, good pitch.
Truth is, I know I don't need to improve my Sharpe; I'm already doing well enough that higher performance is *really* not an issue for future fund raising. It's just a question of longevity, scalability, etc... other stuff that just takes time to solve.
But I mean, really *prove* that you can do what you did the last 6 months for years and years to come... then people (including me) will throw money at you.
I'll throw in my 2 cents here because I truly respect Heech and his experience, but I followed the other route.
I worked hard and developed a couple strats over more than a decade, always trading with personal funds. During that time, people close to me began to seek investment advice which I gladly handed out for free. I was right most of the time, so I gained the respect of certain people. They started asking me to manage their accounts, but I always said I wasn't ready yet.
When I was certain that I had the refinements made to my best strat, I funded another account with personal $ for the sole purpose of trading that strat, and started trading it live. I did that for 18 months to get the track record together, and by that time I was trading the account at a $400K level. I finalized the formation of the CTA and let those prospective clients know that I was now setup to be able to manage accounts. It took about one month to raise a couple million, and I've been very careful to this point not to hold myself out to the public, but instead let people who know seek me out.
Now the problem isn't achieving better returns, but that the returns so far have been too high and foster too much skepticism, even with a 3.0+ sharpe. So my recommendation for anyone trying to get a start-up off the ground is to try to keep the returns below 40% annual, but above 15%. I realize that this is counter intuitive, but raising capital is similar to the Laffer Curve theory. There is a point where the level of returns draws the max interest from investors, and that point isn't at 100%+. But, with a normal fee structure, 20% returns aren't going to provide a good living unless you can raise at least $20MM to start.
Also, for business reasons, you'll want to make sure that your expected recovery period after a loss is less than one month. It's a huge disappointment if your recovery from a loss takes 4-5 months before you can charge fees again. Not to mention that you'll likely lose your clients.
Finally, Heech is correct, clients are looking for at least a 10 year relationship. The growth is in the compounding, and none of the good clients are looking for a 3-5 year home run investment.
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heech
Registered: Dec 2008
Posts: 1876 |
12-23-11 12:46 AM
Quote from Epic:
I'll throw in my 2 cents here because I truly respect Heech and his experience, but I followed the other route.
...
When I was certain that I had the refinements made to my best strat, I funded another account with personal $ for the sole purpose of trading that strat, and started trading it live. I did that for 18 months to get the track record together, and by that time I was trading the account at a $400K level. I finalized the formation of the CTA and let those prospective clients know that I was now setup to be able to manage accounts. It took about one month to raise a couple million, and I've been very careful to this point not to hold myself out to the public, but instead let people who know seek me out.
What the heck, someone else disagreeing with me.. unacceptable!
More seriously, nice of you to share. And it actually sounds a lot like Biog (on ET)'s story... he also traded his own account successfully for a long time, brought in a few family/friends, and slowly grew from there. I ended up putting $100k in his fund as well... so, you should send me your prospectus! (Do you have a CPO or only managed accounts?) I like people with a long (even if underground) track record, low draw-down, and lots of own capital + family/friend investors.
Now the problem isn't achieving better returns, but that the returns so far have been too high and foster too much skepticism, even with a 3.0+ sharpe. So my recommendation for anyone trying to get a start-up off the ground is to try to keep the returns below 40% annual, but above 15%.
Eh, I kinda disagree on this point.
I agree that those are the kind of comments you'll hear early on... (I ran with a 3.0+ Sharpe for about the first 6-12 months as well.) But I think it's just the sort of cold water people like to pour on new up and coming managers who they suspect are too performance-focused. You can *never* have returns that are too good in the long run (assuming you don't have correspondingly high draw-downs).
You just need seasoning + time, like I do. If you have a Sharpe of 3.0+ and 30%+ returns in 3-5 years, of course people are going to throw money at you.
Also, for business reasons, you'll want to make sure that your expected recovery period after a loss is less than one month. It's a huge disappointment if your recovery from a loss takes 4-5 months before you can charge fees again. Not to mention that you'll likely lose your clients.
That's good advice (focusing on the cash-flow point of view), but seems awfully difficult to manage...
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traderwann
Registered: Nov 2004
Posts: 221 |
12-23-11 01:24 AM
Quote from Swan Noir:
But that is the point. You are not a stakeholder in their business and they do not want to be a stakeholder in yours.
Not sure how to spell it but have you not realized that traders are not what one would call a Kumbaya group!
Technically there is separation, yes. What I meant was just like the relationship between two businesses, even though there are competitors to all options, you make a decision who you want to partner with. Once that is done it is best to consider your partner as a small stakeholder in your business and vice versa, trying to work together as much as it makes sense.
Does that sound different than what I originally posted? I was not implying a Kumbaya atmosphere if that is what you perceived. The point is you said each party is there to execute a plan. The whole point of partnering is because the plans coincide and compliment and match up.
So your statement is true only in the most technical sense, I tried to explain the point better here for you.
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traderwann
Registered: Nov 2004
Posts: 221 |
12-23-11 01:29 AM
Quote from Epic:
Now the problem isn't achieving better returns, but that the returns so far have been too high and foster too much skepticism, even with a 3.0+ sharpe. So my recommendation for anyone trying to get a start-up off the ground is to try to keep the returns below 40% annual, but above 15%. I realize that this is counter intuitive, but raising capital is similar to the Laffer Curve theory. There is a point where the level of returns draws the max interest from investors, and that point isn't at 100%+.
Thank you for adding to my point that stubborn belief systems influence a free market much more than 99.9% realize considering how little they know about them and psychology and their influence.
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