I wonder if anyone did this to any of the larger investment banks, hedge funds. And what are the standard system metrics that are given - i.e. is TradeStation-type strategy report enough? BTW - what is the chance of being considered by a major institution with an excellent system but that has not yet been traded with the real money - only on a demo. Thanks! Dima
Interesting post. I wouldn't think you could get your foot in the door without having already established your reputation with a career at an IB ... taken in that context, the question about presenting a system that has only been paper traded can be seen in its correct light.
The main focus is "what makes me unique?" (a somewhat polite way of saying "why should you hire me and not the thousands of other portfolio managers you have access to?") You will have to discuss the Big Ideas behind your trading strategy and show them to be unique. (You want the decisionmaker to say "We're not doing THAT right now", i.e., you are not redundant). You will also have to show yourself not to be a complete novice, to have an understanding of trading beyond "this strategy backtests real good, Cecil", and the sophistication to realize that these people aren't just putting their money at risk, but also their career. If they hire you and you lose money, they look bad. Presence of good results is nice, but absence of bad results is essential.
Let's see... 1. Tradestation... That won't work, no one will take a Tradestation code or model. 2. You do the work, meaning you will have to code and create the execution engine yourself. None of the firms will take your system and implement it for you. Also, larger the firm, the more custom their execution platform is. You should be expecting to code you automation engine via FIX or at least know how to send messages via sockets. Do you expect SAC or Citadel trading with IB or some retail broker???? 3. Are you willing to provide them with the source code? If you are not, why not? They are more interested in your ability as a developer. Any newbie can make one system with luck. One good system is worth nothing. One good developer is what they want. Every once in a while, they'll call you in to develop a model with specific profiles of the market. (You don't have to, or be able to because you can only make money off of what the market provides you, but you will need to clearly tell them why you can't develop a model within their need) 4. The fund you deal with... You have to consider that the funds already have their own trading style. How is it going to appreciate their performance? Getting their past fund record and running a test showing how your system will improve their performance is equally important. 5. Most of the reputable firms know more about trading systems than you. (Considering you are using TS, not a custom tester). One simple question they will ask is what you will do when the system fails. How are you going manage it? 6. No grey box. But expect to be monitoring them full-time. If you tell them that you manually enter orders... you'll be out the door with a cute smeer. We all know that a perfect systems does not exist... so we emphasize on how you monitor the system as much as working hard to develop a model. The question you will get will be something like, "How are you going to manage the system?" 7. Obvious question you'll get is "Why aren't you trading it on your own, if you think it's great?" For me, I was trading most of the systems from home directly with a clearing firm. Though, I needed better environments to trade a few models I developed, like low latency and computer power (basically a remote server close the exchange... it was high frequency arb model). So I approached a few firms to allow me to use their execution platform. There's more... But I think it's good for now... nothing wrong with starting a freelance developer career early.
Great words! The same principle applies to strategy development - opportunity loss is preferable to the loss of capital! )
1. What you mention may work for a job interview but it's completely different approach. 2. You need to provide them with the full results. These guys won't decide on accepting your deal based on impression. These guys aren't average retail trader. They'll ask for your test results and come very close to reverse engineering them, to expose the risk quantitatively. As mentioned above, one system is nothing. They'll be looking at how good you are as a developer. They don't want to waste time with a one hit wonder, but a long relationship with good people. Think of it, if you see a system only with good results, wouldn't that signal something???? *Curve fit! Curve fit! RUN RUN RUN!!!!"