Haircut is basically the spread, the difference in price that you can buy and then sell the security for. It is used for calculating margin requirements and risk on positions. The haircut will usually devalue the collateral by a small percentage.
Funky, Sounds like u have a good plan going. Don't sweat making more or less whether it be to kickin some of the profits upstairs to a VC or prop house or slippage on odd lots. You need to give your system/trading edge a trial by fire/battle test and find out if u have any chinks in the armor. Get your fingernails dirty & just trade the thing. Then move from there. J-law
Instead of trading 160 stocks requiring 200k for round lots, why not trade 25 markets with your 30k? So, your drawdown goes from 4% to 8%. Big deal. Oh, and there are plenty of brokers who charge 0.01 per share under 500 shares with no minimum so you can trade 1-lots if you want without affecting your commission rate. (Tradestation is one of those. Haven't you even looked at their commissions?) Your system sounds very good, but you've created all these unnecessary barriers for yourself. I think the bottom line is that if you really and truly believed in your system you would find a way to trade it with your own money instead of constructing all these bogus reasons that you need someone else's. I apologize if this sounds harsh, but successful traders are people who remove barriers, not people who create barriers where there are none. M
You don't seem to be facing the realities of trading OPM. YOU ARE AN UNPROVEN QUANTITY. Backtesting doesn't mean diddly to anyone except the person who did the backtesting. Why, you ask? Well, because I can make you an equity curve as good as you want and I can make up any story to go along with it, including how I used double-blind out-of-sample walk-forward whatever. Let's boil the situation down to its essentials: 1. You have little or no trading experience 2. Your system is unproven 3. You want someone to give you $1 million to trade with (actually, you aren't even able to determine your minimum capital requirement) 4. You don't want to pay them for their trouble It is a FACT that even CTAs and hedge fund managers with 25 year track records are only paid 20% of profits. That means clients get 80% of profits (and you don't want to pay them anything) . The most I've ever heard of is a 50/50 split. In the real world, the real risk belongs to the person contributing the capital. That's why they deserve the majority of the profits. If the effort fails, they're out $500k (or whatever the cutoff is). You're out nothing but some pride. Wake up, dude! M
You make an interesting observation. Trading 160 stocks could be putting too fine a point on it. The market isn't that finely resolved. It usually trends in maybe about 20 major groups on a given day. On top of that, add noise.
yeah i have been looking at trying to reduce the # of markets, but it doesn't seem to help. i will keep trying different filters... as far as i know, tradestation has a 100 share minimum ($1 minimum charge for equity orders -- so 10 shares will still be $1) i'm with you man...i will probably start off with just my measly capital. i definitely did not create this 'barrier' on purpose. its hard to explain, but it happened by accident. that's the purpose of this thread! thanks!!
i realize that. yes, i have only a few years of system development under my belt. correct, and there are different levels of proof -- for instance, i have spent months determining slippage for different markets/different entries/exits, but does that prove that the system works? no. but i have had enough experience to know what to expect. well, the minimum (to avoid my broker's minimum commissions) is what i stated above. i CAN, as i have shown also above, trade with my small capital, take the inefficiency, and still have a decent system. i didn't say that. i just said i'm looking for the best deal for me. isn't that what a successful business person does? M, i fully understand where you are coming from. I am not looking to trade OPM. I personally, in life, have gone solo most of the time. that is how i operate. i like following my own path, and even if you gave me the solution to a problem, i would have to figure out my own solution -- or i wouldn't understand it. maybe it is because i think different, or whatever -- but this thread is about finding different ways of increasing the effective capital of my system, in the most efficient manner to my bottom line. If someone gave me capital, and I only would allow 7k drawdown personally, then that overall system (with the new capital) would never be sized bigger than a 7k drawdown. that is, i view the extra capital as simply a leverage tool for my own capital, NOT as someone else's capital to trade. does that make sense? i'm thinking from a bank loan/equity line of credit perspective, instead of a management of other's money. anyways, thanks for the input, much appreciated. -funky
Unfortunately this system sounds like the typical "buy the dips on a large watchlist and sell fast...". There are many many such systems over at Wealth Lab. They work for a while, then those small profits get swamped by a few very large losers. Data and testing problems like survivor bias and impossible fills take another large chunk of "profits". Not to mention how hard it is to make 50 - 100 market order or On Close trades and even come close to those backtested trades. Hope I'm wrong and you are very successful. Good luck! Regards, C
hehe, i wish it was that easy.... this system has and will remain VERY stable. i cannot go into details, obviously, but it works off of basic human behavior. I actually developed this system for intraday, and it worked beautifully, except for the slippage. I took another 3 weeks to develop something for a longer term system, and now i have the slippage down to a very small fraction of the overall system. it sure is nice to double the slippage, and see that your system is still strong....man what a waste intraday was....at least for me it was.... that is something i have done. actually 30 at a time, but at a quicker pace. 30 stocks, 2 trades a day each, all automated. if there is something that i excel at...its math and computers. C, thanks.