Best way to make money off a trading system?

Discussion in 'Trading' started by raintreeasset, Aug 31, 2011.

  1. Hey everyone, I'm new here but I've been trading since 1996. I've lost tons of money in that amount of time and have learned a ton! I developed a trading system about 8 months ago that is the culmination of all my research and experience. The system is actually quite boring. It trades off weekly charts, and it trades the major indexes. My backtesting through Metastock shows it to be profitable, it has more than doubled the return of the S&P 500 since 1992. It only trades a few times a year. It is quite boring really, not for daytraders at all. More for large positions and perhaps giving strategic signals for tactical traders.

    Now here's the deal. Just because I'm a market addict does not mean I'm rich. I work a steady job and live basically paycheck to paycheck. I am using my system successfully in my retirement plan, but that doesn't do me any good.

    What is the best way to make money off this system? I'm sharing it with a few coworkers, but other than that how could one make money off of it (without giving away the source code)? Thanks, and I've really enjoyed alot of the conversations on here. I've seen several questions and found other users answered them the exact same way I would have.
  2. kut2k2


    Maybe instead of sharing it, you should be charging a commission for providing a winning system to people who can't trade themselves. Not sure of all the legal details involved in that.

    Also what is the reason why you can't go EOD instead of weekly to increase your win rate? I don't daytrade myself, but weekly would bore me silly. EOD trading seems tailor-made for working guys.
  3. Marketing an investment/trading system is a tough gig to do.

    I applaud you for completing it and congratulations on its making money for you.

    But...I see/hear "backtest" and it immediately makes me lose interest.

    To monetize the system, your choices are:

    1. Buy an e-mail list from a list broker and direct market to retail investors. Assume a 0.1% conversion rate.

    2. Buy a booth at trading shows and market there. This is expensive.

    3. If you're short capital, go to a prop firm that isn't day-trading centric and leverage your capital with the firm's. Once you've got a live track record, your system will be much easier to monetize.

    Good luck.
  4. Do you trade for profit or entertainment?
  5. Hi, thanks for the reply. Well like most of you I imagine, I have file folders scattered all around my desk with backtesting of different indicators and trading systems. The system I created attempts to track big money moving into and out of the market as a whole, rather than individual equities. I tried my system on Daily data going back to about 1985 and it was profitable, but it created a lot of trades and commissions cut into the returns. I then tested it on Weekly data and it became more profitable. If you look at weekly charts a lot, you begin to realize that a lot of the daily movement in the market is just "noise". Often times what's difficult to see on daily charts becomes a more established trend on weekly data. I also tried the system on monthly data but that allows way too much of a movement before getting in on it.

    Most of my coworkers have no idea what the stock market even is. One that's about 5 years from retirement asked me what the difference was between a mutual fund and a money market. No use trying to talk to them about trading systems.

    I hope everyone makes money in this market,
  6. Handle123


    My longer term methods are all based on yearly, monthly and weekly bar charts, I do use daily and hourly if in the office, but all my testing going back over fifty years proves to me the really big money is in very long term trends based on weekly bars. Matter of fact, once I get to break even stops on weeklies, they never move till it time to get out, tests show trailing stops for myself cheat me out of long trends. So boring is good, matter of fact, if you are bored, you are making money. Day trading is fun and exciting for most, I not felt this way in like fifteen years, it all gets boring after awhile, it is like any other job, LOL cruel world we live in, traders who been doing this long while wish we could go do a different type of jobs and rest of the world want to become successful traders.

    Never ever share your method unless it is for seven figures. Contact whatever exchanges and inquire about the rules to become an Internet vendor seling signals, establish a track record and after a few years, others will notice. But I believe over the long haul, better to trade your own funds than go thru all the BS of dealing with others.
  7. Hi guys thanks for the discussion and replies. Yes I lost my ass trying to daytrade and even trying to trade on daily charts. I don't believe I can beat a HFT algorithm or some GS prop trader that has 8 screens in front of him and pumped full of Red Bull. I usually repeat my mistakes several times before I ultimately learn from them, so I'm a slow learner. Once I ran out of money for trading I decided I would spend all my time learning and trying to perfect a trading system. (I had already learned that just trading by the seat of my pants was very hazardous to my wallet). I think the only chance I have at beating the Big Boys is by sitting on my hands perfecting my slow and boring weekly system.

    I've backtested my system on daily, weekly, and monthly data going back to the mid 80's. It worked best on weekly, and as I looked at the charts it still got me out before 1987, 1998, 2001, and 2008. Of course I didn't discover it or begin investing with it until about 6 months ago as I stated.

    I'm 40 years old now, so boring is good.

  8. Yep, I feel the same.

    I am trying to figure out how to solve the problem with boredom.

    I can't make the market move faster. I have seen a bored trader read a book while trading. I don't think that's a good idea.
  9. Most systems are artifacts of data only and have no predictive power. The hardest thing in life is to make money of a trading system although some do it very well but it takes more than a system, much more.

    Maybe you could share the system backtesting parameters. What is the

    win rate
    profit factor
    avg. win to avg. loss
    Sharpe ratio
    max. drawdown

    Then, I can tell you what may lie ahead for you based on my experience with hundreds of systems.
  10. Ok, here is an image of the metastock backtest results.
    Not too many trades, drawdowns not too big...let me know what you guys think.
    #10     Sep 1, 2011