LOL... I must be your anti-clone. What worked modestly for me in other years worked suiperbly in 2008 and 2009. Congrats on your performance.
This is why I wish I could get a job in Hawaii. Does anyone out there have a job for me in Hawaii (that is legal)? I hate having to choose between steady income and the market, but I live in the wrong time zone.
Of all the things you mentioned I think this is the most important. I have a Master's in Computational Finance from a University that parallels an Ivy League program and I can easily say the coursework I did in Statistical Finance are the reasons for my success. There are two elements to trading -- science and art. You have to learn the science first. Then you become an artist applying scientific methods. I strongly believe that traditional technical analysis will always lead to failure. And you also said, "you have to be looking in places that others aren't." Bravo!!
No need to goto Hawaii-If you live on west coast trade 6 am(scan the market, check news etc) market opens at 6 30 and trade till 8 AM or so put stops in place and walk away Check back on iphone if you cant check at work
Might we ask what level of leverage you were using? Or are those cash-on-cash returns? I'm still looking for strategies, and I think the sweet spot is exactly what you mention.. high Sharpe stuff that lacks the capacity for institutional money to be interested in.
a trader trades alpha..of course a good trader can beat the market. if you can't beat the market you should not be daytrading or swing trading or even position trading. institutions with large long position holdings cannot be the market. the investor who buys and hold is beta cannot beat the market.
Again, thanks everybody for the comments and questions. After the initial learning period, I kept beta with respect to the market index under 1, and controlled tail risk. The account was always diversified, with stock positions kept under 20% of equity at all times. So, no leverage was really employed, and the returns are cash returns as provided in the annual statements by my broker. Yes, but maintaining focus at work would be very difficult. Some of the analytical work could be done outside market hours, so if you lived in the U.S. on the West Coast, trading in the morning before work would probably be feasible. I interviewed with a (real) prop firm some years ago. They were trading futures in their own style, and were mainly looking for apprentices. It went nowhere. Looking at the web sites of the professional prop firms like Jane Street Capital, Wolverine, etc., it seems that most of them trade at higher frequencies than I do. It's probably the case that few providers of proprietary capital would be willing to tolerate a 12-month 25%+ drawdown like my strategy experienced in 2008.
MS: I absolutely love it. Perfection. Prop firms would want you to leverage your strategy, but be flat at the end of the day. You'll be asked: can't you just keep a much smaller core portfolio overnight? [ Which of course defeats the purpose of your strategy ]. Oh, and you'll get paid out quarterly, but there will be a 'holdback' on some of your split until the end of the calendar year. Want more capital? They have a credit borrowing facility at 5%. No, you cannot clear another firm - you have to use the firm's clearing 'partner' (haircut). But don't you have a bad quarter, or you're done. You could always float a private equity prospectus to a few FoF's to see if you can generate some interest. Just make sure to use color slides in your PowerPoint and mention 'Sharpe Ratio' and 'portable alpha' every other sentence.
Interesting. From your statements I infer that you trade comparatively illiquid products. I have had similar experiences. Small cap equities are way more inefficiently priced than big cap equities. Just a small example: often small cap stocks (marketcap < 500 M$) which have predictable seasonable sales and earnings patterns fluctuate a lot around the announcements in a predictable fashion. This doesn't happen with big caps, because there are enough traders who can figure it out. Also nano-caps often have extreme spikes, of which some are quite predictable. I haven't looked into options, but I guess it's the same thing.
I agree with the comments about illiquidity. For me, my edges are clearly larger with the smaller stocks. I go to a monthly traders meeting and there was some discussion about how important it was to trade liquid markets. I said I preferred to trade at the "limits of liquidity". Stocks so small that with my small account sometimes I can see that I have pushed the stock price. They looked at me like I was from Mars.