From zero to supertrader :)

Discussion in 'Options' started by Aquarians, Jul 31, 2020 at 8:15 AM.

  1. Aquarians

    Aquarians

    Suppose you fall on some strategy with controlled risk and high Sharpe (>3 .. 5), which you devised based on a combination of fundamentals, market observation and experimentation.

    But it needs more money than you have .. say you would invest some $5k-$10k in it but to trade the required instruments it needs more.

    Would you split the risk by associating with other guys? The individual risk needs to be low enough so you can afford to lose some of those money (very probably only a fraction of them before you conclude it doesn't work no more). But also the reward needs to be high enough to be worth associating.

    Like if the strategy continues to work and is now market-proved live, well... you can look for real funding.

    There's of course the issue of confidentiality and although such an association would already involve a legal agreement, it's extremely important that information doesn't leak.

    I mean to beat the market you need to:
    1) Be better at HFT than the existing players (you can forget it).
    2) Have some sort of inside info ahead of the other players (can't rule out that it happens but I certainly don't)
    3) Notice some fundamentals that likely are not obvious otherwise everyone would trade them. Since we're in options, it's common knowledge today that stock returns are approximately normally distributed but 120 years ago when Louis Bachelier published Théorie de la spéculation, this was far from obvious.

    I think finding some edge can realistically only be based on #3 but it's obvious that should you fall upon such an edge, you need to keep it confidential if you're gonna profit.
     
  2. minor hurdle there .... ? :D
     
    jys78 likes this.
  3. wrbtrader

    wrbtrader

    Most Supertraders are well funded either on their own (its their money) or they word for an institutional trading firm. Yeah, there's a few exceptions that work for a prop firm and others that started with their own money and then combined it into some sort'uv family fund.

    wrbtrader
     
  4. jys78

    jys78

    Whenever I hear that term "Supertrader" I can only think of Karen.
     
    dealmaker, Lou Friedman and fan27 like this.
  5. Aquarians

    Aquarians

    Wish I could offer guarantees but no edge is guaranteed. Even in HFT there's risk: it usually involves two legs, sell one side and buy the other. Tests in live environment get calibrated to the expected delay between the legs and seem to work fine ... but you lunch to product and works for a while until it doesn't work any more. And you can't find immediately because even in the working case there are cases when you lose.

    Likewise if the edge has a statistical component. But as long as you make enough money exploiting the condition WHILE IT LASTS and your risk is limited so when you start losing you realize that and stop while ahead.. you can make a lot of money.

    Like the hedge fund I used to work for, with some $30MM of capital they were making 50% per year when I got hired, then some $10MM, then $5MM then $1MM and when they made $300K next year they closed the shop as it wasn't paying for itself anymore.

    But overall it was very profitable while it lasted. I don't think realistically you can do better than this: ride the wave while you can.
     
    Space Alchemist likes this.
  6. Aquarians

    Aquarians

    Well me too, actually it's in Karen's context that I first encountered the term. And gotta say I like how it sounds.
     
    jys78 likes this.
  7. AbbotAle

    AbbotAle

    You lot all see HFT as some sort of bogeyman when most of them are just market making which the majority of the time makes the market cheaper and more liquid to trade.

    Go back 20 years and you'd all be blaming Locals, who surprise surprise were generally market makers offering tight speads and liquidity (proper markets, not OJ or Bellies etc).

    Personally I'm a great fan of HFT (and Locals in the past) and they never seem to get in the way of my trading and I don't do anything exotic. All I do is try to work out if they are more buyers that sellers and if so join the party. It worked 20 years ago, works now, and will work in 20 years time.

    The workings of markets don't change overtime. Stock movements for example are no different today than they were in 1920. If you think the markets are different (apart from volume etc) then go to TradingView, put up a weekly chart of the Dow, scroll all the way back to 1915 and then contrast that sort of movement to today's. No different. Same sort of PEVERSITY as the price moves up and down doing its best to fox traders into doing the wrong thing and the wrong time...
     
    BlueWaterSailor and ZBZB like this.
  8. d08

    d08

    1 and 2 aren't worth discussing at the retail level.

    Fundamentals aren't the only "edge". Technicals are a thing.
    If you have discovered a viable strategy, you will find the funds unless you live in some dirt poor country. You can mortgage property, sell assets and if that isn't enough you can take out high interest credit. The main issue is finding an edge, not the funds.
     
  9. ajacobson

    ajacobson

    Most large pools of permanent capital would give you a ten-minute meeting. The challenge you have is how frequently you've posted a similar query here.
     
  10. Aquarians

    Aquarians

    Do they have to know I posted here? ;) Like I've my share of drunken posts that I'm not proud of. The problem with internet forums is that shit that normally flies and gets forgotten now gets archived and used against you.

    But I still think money trumps everything.
     
    comagnum likes this.