How do you go about raising capital?

Discussion in 'Automated Trading' started by sappjason, Apr 6, 2009.

  1. I am a software engineer (by trade) and over the course of several years, have finally taught myself how to trade profitably. Over the course of the last year and a half, I have managed to completely automate my trading methodology via IB's API (and currently working on integration of NxCore's market data feed).
    My strategy is a "day trading" strategy that trades equities only and averages 17 trades per day (ends flat every night) and has an expectancy of .24. My current risk size is .22% of account equity and my win rate is 41.77% with a p/l ratio of 1.97 : 1 (largest draw-down was approximately 11% and lasted for 3 weeks).
    I currently trade with a 170K account, but am looking to attract more capital. 60K of that is mine and the remaining 110K is borrowed at a 4% rate. So, how do I go about attracting more capital at somewhat decent rates?
    My bottom line is now that I am consistently profitable, I would like to focus on spending more time developing additional automated strategies, rather than continue working at my current job.
    My current game plan is that I'll continue working at my current job for the next 1 to 2 years and at that point, I should have enough equity that I'll be able to comfortably quit, while still being able to grow the account and live our current lifestyle.
    If you don't feel comfortable leaving your response publicly, please feel free to send me a personal message.

    Thanks for any input,

    Jason
     
  2. For someone risking only 0.22% of account equity a 11% drawdown is pretty large? Seems your trades must be highly correlated.

    To answer your question, you might consider asking Freinds and Family for funding. With say a 50-50 profit split. If your system is any good people will throw money at you (assuming they trust and believe you).
     
  3. Friends and family is the way to go unless you are a trader by profession and know a lot of other traders and ex-traders.


    Good luck.
     
  4. One of the worst suggestions in the trading world. Most systems blow up. Multi-billion dollar systems blow up (look at the last year - they thought they had it figured out).

    Asking money from people close to you, who somehow really don't understand what you are trying to do, but they trust you anyway is ludicrous.

    Do you really want to explain to your little sister why you lost her $10,000 that took her a few years to set aside, because something you never anticipated brought the Risk of Ruin home in a way you never imagined????

    Do you want to be embarrassed the rest of your life every time you see her?

    If you want to keep your family and friends, don't risk their money. Seriously
     
  5. I appreciate the suggestions, but I have to agree with TraderZones that asking friends and family for money is a bad idea.

    Is a 50/50 split normal in the industry? I mean, when people say 50/50 split to me, that sounds like I am paying them 50% interest per year on borrowed funds and that's just plain nuts. Can someone please explain this scenario in more detail? In other words, say someone gives me 300K and asks for 50/50 split, does that mean that I make no withdrawls for a year and at the end of the year, we split the net profit (after taxes) 50/50?

    Do these 50/50 split deals ever work from month to month? And if so, how does something like that work?

    If I borrow money from a bank at 4% (which I already have done), then I'm only on the hook to pay that 4% interest to the bank and if my system looses money for the year, the bank still gets their money. But with these 50/50 split deals (or 60/40 or 70/30), then what happens if a system looses money on the year? Is the borrower still on the hook to pay something? If so, what? This just doesn't make a lot of sense to me......


    Jason
     
  6. nobody is going to give you money without a very long track record.
    . especially now when so many hedge funds have blown up. sorry that just the facts.
     
  7. What is your average win and average loss and on how many data points was that calculated on?

    Is your p/l = 1.97 the profit factor?
     
  8. travis

    travis

    Try and do riskier things while you have the security of holding a job.

    Even reinvest your whole capital at all times and ignore money management. But before doing so, repay immediately your debt. Only depend on your own money.

    That's what I did. I reinvested everything for the past year. Ultimately it didn't go well, but I still had my job. If you gotta try crazy things, all sorts of tests, you have to do it while you have your job.

    At the start it went well. I turned 4500 into 23500, but then lost it all. Then tried it again, and turned 8000 into 26000, but then lost it all again.

    But it was no problem because I didn't have any debts and all the money I lost could be lost. In retrospect it was the best thing to do. I am free to do whatever I want, because I have my job. If I strike it exceedingly rich very quickly then I'll quit my job, otherwise I'll stay.

    If I play it safe, instead, I'll never be able to quit my job anyway, because my initial capital is always going to be 4000 dollars. Indeed I am not accepting any offers of money from relatives and friends, and I am glad I never did, because by now I would have lost hundreds of thousands of dollars.

    Except ten years ago, when I accepted a few thousand dollars from people at work (my boss and the computer guy). I had started trading options two months earlier and I was getting lucky. Two weeks after I accepted and invested their money (and mine), I lost everything.

    I would rather have just 4000 dollars, all mine, feel very light and carefree, and be able to reinvest it all in the riskiest ways, than be burdened by borrowed money that I cannot freely invest whichever way I want. I'd feel paralyzed with money from others. I wouldn't be able to think freely. Imagine playing the risk strategy game: would you play better if you knew it's just a game or if you thought your life depended on it?

    If you hold your job, and see trading as a game, and do whatever you want with maybe just 20 thousand dollars, everything will be better. If you instead depend on money from others, you'll have a lot of stress on yourself. How do you face a big drawdown when the largest part of your capital is not even yours? Think instead of a drawdown when you would be ok with losing everything? I went from 23500 to zero, all money made from the markets, and didn't even shed a tear. To trade properly you should be ok with losing your whole capital. Only trade the amount of capital you're willing to lose. That is what I am doing. (And I've been losing money for the past ten years, so feel free to ignore my advice).
     
  9. training yourself to have a gamblers mentality is the road to ruin. no real trader that has been around a while thinks like you do.
     
  10. sound advise...
     
    #10     Apr 7, 2009