Not so excellent. The pricing of an ATS suffers from adverse selection. In fact, it's so bad that with pedigree, an ATS is worth effectively zero.
This I completely disagree with. What matters is the number of trades aka your sample size. Time span is meaningless.
Of course winrate is meaningless by itself. I'm not suggesting a pricetag based solely on winrate, I'm just trying to get a price factor based on winrate. You suggest PF but you don't suggest a way to evaluate it as a price factor. I don't know what all the "relevant" performance stats are and that should be part of this discussion, but the idea is to come up with a method of evaluation that includes all the relevant performance factors, which may or may not include winrate or PF. The beauty of looking at winrate is that it allows pricing all the way from worthlessness (winrate = 0) to the Holy Grail (winrate = 1).
Van Tharp & Ken Long. The SQN "formula" can be found in a few on Van's books. The formula suffers from using the number of trades, IMO.
Thanks. Here's a preliminary pricing factor. Feel free to dissect it. (Winrate/(1 - winrate))*(PF - 1)*SQN/sqrt[1000]
If you were talking about valuing a large cap business for sale, then valuation would proceed along any of the following lines: - Net Present Value of discounted future estimated net cash flow (after any and all costs, taxes, interest payments, etc where relevant). - Comparable transactions (i.e. looking at publicly available information about comparable corporate transactions or asset deals ⦠what was paid as a multiple to last yearâs cash flow or income, and/or of the year before that, and/or of next yearâs projected, and/or as a multiple of the number of strategies purchased, etc â¦) - Comparable trading multiples (i.e. what are publicly traded comparable companies valued at based on their stockprices, again as multiples of the above criteria, etc â¦) - If there are enough publically traded comparables, you may even be able to measure and estimate a cost of capital that you could use in Discounted Cash Flow calculation above ⦠⦠none of which is easy to do in this case. Are there any publicly traded companies that are essentially a bundle of strategies and folks who know about and operate those strategies? If so, and you can find out what they made last year, then you have a multiple of value to last twelve months income or cash flow or whatever ⦠and you can apply this to your own case (i.e. against what you made last 12 months)⦠At this point however you have to recognize that you are not a publically traded large cap business ⦠- The buyer's ability to turn around and sell on your strategy to someone else is not guaranteed ⦠big discount. - You are talking about a single strategy (not a large bundle ⦠so there is lack of diversification etc) ⦠big discount. - You are presumably planning on selling the strategy without the guy who knows and operates the strategy (i.e. you)⦠another big discount. - Is the track record a real one or a backtest? ⦠if the later, I suspect a buyer would generally apply the biggest discount of all ⦠to something pretty close to zero, I suspect. The best chance of a deal would be one where you address the above points (i.e. bundle the strategy with others, stay involved, and build a track record first)⦠so basically letting someone farm in to your strategy/strategies while you continue to trade it/them ⦠much like the prop deals that another poster mentioned above ... or starting a hedge fund ...