I thought I would revisit this thread for some follow-on advice. In the time since starting this thread, I have learned a lot about python and have been able to greatly improve my methodology to the point where I am applying it to all products. I haven't done any optimizing and I am able to model any product with the exact same settings. Right now my code outputs to a variety of spreadsheets. I'm currently using it to trade my own stock account long/short in a semi-discretionary manner while I continue to learn python. My program ranks sectors and then within sectors I use separate criteria to ID stocks for positions. My goal for an upcoming deployment is to get rid of the spreadsheets and create a gui to interact with instead. Also to get closer and closer to automation. I decided to add a few years to my service for some personal reasons and because it just made sense. In the long run I am considering: start a fund(I have people trying to give me money already) license my eventual end-product software try to get hired on somewhere as an analyst So I guess my question is, what kind of account do I need to trade to be taken seriously? I understand any potential sophisticated investor/fund will want good risk adjusted returns, absolute returns, and liquid products traded, but is there an absolute account level I need to trade above for a certain period of time for anyone to care? I have a friend with low 7 figures that is interested in funding an account for me to manage with the end goal of us starting a fund together with him as a marketer and me as the trader(his idea not mine, I'm not seeking money at this time), so his money would be more for a track record than $ gains. Right now I'm trading a sub-50k account and targeting volatility that I am comfortable with (50% annual) assuming a .5 SR. I have no idea of my true SR, just used that to set risk level. Holding periods are generally a week or two. I'm only trading very liquid stocks. If I do this for a few years with a good SR, is this something I can take somewhere to get a job/ start a fund?
Hey dude, sounds great. IMO 50k$ is ok since you can scale very well at this point. Just your 50% volatility target is not too appealing. Just test your stuff and see where you have to make adjustments and trade for the stats. Liquidity will be the other issue you will be dealing with when you have to dump 50k shares into something that trades only 200K per day. But if you are focusing on liquid stuff, it should not be a problem considering your holding period is rather long.
Just to be realistic, it's pretty rare that you can do what you're proposing and get to scale. It's worthwhile to step back for a second and do the math on your revenue and costs to run a fund. Let's be generous and say you get 2/20. You're planning on supplementing your military retirement, so you target $100K a year in salary. Your partner will need at least $150. Your bare bones costs will be at least $50k. To clear $200k at 2% you need $10M under management. Now move to realistic numbers and you move to conventional wisdom that you need at least $50M for minimum viability. That's a daunting target for someone with your background, again being brutally honest from someone who shares much of your background. There are vanishingly few people who have no finance pedigree who have successfully started a viable fund based on a track record alone, we're talking "chance of becoming an NFL player given you're a decent high school player" probability. You're far better off getting a position working for a sle or former military person who is established in finance, learning the ropes, making contacts, and building a reputation. If you're young enough, getting a top 10 MBA will also give you a chance to break in via internship. Those move you into "chances of making O-5 given you are a high performing O-3" range, which is far more realistic.
Given the small capital pool, you'd unlikely see sufficient returns to get to the take home you want/need without extremely high sharpe. I know HFT desks in the $2mil range that can pull down $500k to $2mil a year. To do this, massive expenditure and intellectual capital is needed. the analyst path might be a lower variance option.
Thanks for the honest feedback. It sounds like the smart route is to keep trading my own account and maybe eventually sell a product if I can create the awesome software that I have in my mind right now.
I know you said you don't know your sharpe and that's fair, just wanted to give you a little perspective. Given a sharpe of .5 and a 50% vol the risk of ruin has to be 100%. A good exercise might be to calculate what the probabilities of a certain drawdown percentage would be at that vol level and see if you are comfortable with those results. The next step might be to see what sharpe you would need to be able to trade at 50% vol without risk of ruin and see if that's attainable.
Yeah my current target includes a fixed monthly contribution that is significant compared to the account size. Sorry I should have mentioned that.