Basically the story is that in order to trade this system, regulations require an account with at least $25K to day trade (plus drawdown cushion) that I don't have. I have expenses and can save very little if any, perhaps $1K per month which means I may be able to start trading in 30+ months. Not ideal, so I'm looking for suggestions and perhaps some sort of collaboration. I can provide more info and answer questions. From my perspective, what's most important is that the edge is real and not an illusion. This isn't random rules thrown on price data and then optimized. There's a fundamental reason why this strategy works, it can be thought of as collecting risk premium while not taking on a lot of risk. About the risk management: Every position is always protected with a stop-loss. Each sub-system (there are two) is restricted to one trade per day. Plus it's daytrading and no positions are held overnight. Also the instrument is very liquid, has great borrowing availability, and low margins of 25% initial at one large broker. About backtesting assumptions: All orders are market, save for profit target (limit) and stop loss. The report shown is for $50K lot size per sub-system. Slippage and commission are set to 0.03% per half turn. This works out to $30 per round turn or about 2.5 cents per share per round turn. The instrument's bid/ask spread is typically 1 cent. For 2:1 leverage with $50K initial capital used in the report, the historical max drawdown is less than $10K after cost assumptions. Since it's daytrading and stop loss protected, open drawdowns closely match closed drawdowns. (In other words, losses are closed rather than waited out.) As far as "proving" the strategy: The easiest thing I could do is trade someone's paper IB account. I understand paper trading has limitations yet this is low frequency not scalping, average trade is high and order types are mostly market. Since every rolling 3 months period should be positive, it should take about that long to reach a conclusion. Besides a private collaboration, I'm also open to other suggestions like a prop firm that might be interested. Thanks.
Not exactly sure what I am seeing there on that chart you linked, with the drawdown schedule, but it does not look healthy. Edit: Oh I see the other pics there. I see the summary screen...$77,000 in commish? Wowzers!
The $77K figure is commission and slippage combined, and cumulative since early 2009 so yes it adds up. If you look at it another way, even after 2.5 cents per share deducted per round turn, the average trade per share is still 14 cents which is good for daytrading.
At the place I work we get to see a fair number of pitches like this. All investors, myself included, would be interested in gist of the strategy (without giving away anything proprietary) rather than some magic simulated returns. That would be true regardless if you are trying to raise capital or get a seat at a serious shop. The fundamental basis of the strategy is probably the most important question. However, since this is a back-test and not a live track record, there is a whole bunch of questions that people would want answered before committing capital. The questions will range from "what is the asset class?" to "how many free variables are there in the strategy?" and "what sort of scenario would make it impossible to run this strategy?".
Well, let's talk in returns please What is the return on trade value? Do you have any hysteresis built into your strategy conditions? If so, what is the impact of that value? If not, what is the percent "in/out"?
How sure are you of getting just 0.03% commission? For retailers there's usually a minimum fee for commission that'll seriously screw up 99.9% of daytrading ventures (partly why you need serious money, like $25K, in order to have a fighting chance). $10-commissions are not unheard of, and can be cheaper or more expensive depending.. And you need to factor in real spread as well. You could possibly choose when it's too expensive, though that should be included in backtests for daytrading. For slippage, depending on the system, it could be random, for or against you. A typical "daily noise-variance" staring you in the face here could be 0.5%, though probably less for highly liquid and active instruments. As for stops "protecting" positions, for positions it's opposite and could quickly prove negative worth unless your backtesting accounts for that. How much adversity (even when just random variance) can your system withstand and will it be able to pick up on it before it's too late? Point is, in the real world, the finer details can kill your account very quickly when daytrading. QA need to be much more rigorous than just scanning feature-headlines. Unfortunately, the real-world execution required for this is out of the grasp of most retailers, so I would be very cautious of thinking a simple backtest can prove practical edge on any daytrading system. Ie. do you have real-world experience with this kind of trading to draw on practical experiences? This can be a starting point, though I'd never start with daytrading myself. Why wouldn't the backtest be overfitted? Have you tried forward testing it, ie. in other markets, other instruments or on untested timeseries/periods? Being a starting point, you could use those 30 months to research more what is actually feasible in the markets. You're most probably going to need the time anyway. Beware of lulling yourself into believing *anything* without striving for more solid proof. Forward testing going forward could determine weaknesses and more learning points as well, even when not using real money.
Seems like a good system with average 25-30 trades a month. If your figures are right and can be proven, then you might want to SELL this system at $2K a piece to two dozen people get to the $40-50K to start trading on own.
Interactive Brokers and ThinkorSwim both have free paper trading accounts that will allow you to test with current data. Why would you need to use someones paper trade account when you can get free setups? If your system is truly as profitable as claimed, I would think a 2.5 year wait would be preferable rather than risk others stealing the crucial info to your golden goose. You said you need $25K plus draw down capital, and that would take you 30+months to raise with an assumed net savings of about $1k/month. That means you have nothing saved at this point? Why is that? It seems awfully strange to not have saved anything at all. As no one is going to believe purported backtested data, your best bet would be to open a paper trading account and start a blog here noting your investment activities real time (as real as your PT account allows) and daily/weekly/monthly profits/losses. Even better, save until you can open a REAL full account at IB ($3K if under 25, $10K otherwise) and you will have the full set of their sim trading/report tools at your disposal to post your results. The odds are high that if you can establish a continued trend that runs similar to your back tested results, you will attract attention from those who would wish to help you financially for a piece of the action.
That`s nonsense.You can trade your system with as little as 500 bucks.Trade it live for some time,live results that what`s needed.