Automated trading systems for Dax & EuroStoxx

[horace]

Hi all,

Thanks for reading in the first place. Let me introduce myself.

I'm an active trader since 2002. I started trading (as most) on a discretionary maner. As time went by I figured out I wouldn't be able yo make any consistent money unless I designed, developed and totally automated some trading systems that really worked for me.

Thankfully al this has gone by and now I'm a well established system trader and renter. I primarily trade and rent my systems within Spain which is where I live. The time has come when an expansion to the US would help.

I'm approaching the forum cause, as you know, trading is a very solitaire business and I have no contacts to evaluate and eventually start this venture in the US. Therefore I'm looking for some help on finding good contacts that can help me to start renting my systems in the US.

Any help will be greatly appreciated.

Please forgive my horrible use of the english language.

Thx,
Horace

 

[Yamato]

Hello Horace, I watched your videos and enjoyed them. Thank you for your meticulous contribution, here and on your blog. I have a question, out of curiosity, but don't bother to answer if you feel it will be a waste of time. I am doing more or less what you are doing: since starting to trade in 1997, I have found out that discretionary trading didn't work for me, and have found out that automated trading works perfectly. The question is: why should I now go through the trouble of starting businesses, and selling things, when I can simply trade on my own, and most likely make more money and with less troubles? I keep on asking this same question to all those who trade profitably and still sell things and I do not mean that I don't believe you. I just want to know if there's something I am missing, that I should be doing, too. Because I am in the same situation as you and I don't see why I should work with anyone or sell anything I know. Are you doing this because you enjoy the field, or you feel the need to diversify your activities? Of course, I do understand writing on forums to "think out loud" while you're at home, but ultimately I would like to spend time away from my computer screen as much as possible, and maybe swim or watch movies rather than do things that will cause me to stay more at the computer. Otherwise why have I been doing all this? If I've been doing it is precisely to stop "working" and not to work even more.

 

[horace]

Hi travis,

Well, I hope your spanish is better than my english. It must be since you view and understand my videos. 
Well, I think the answer to your question is pretty simple.
Trading is a VERY DIFFICULT business. As you sure know, all trading styles undergo drawdowns periodically. All of them.
The only way I know of to make this drawdowns smoother is diversification. The issue is in order for you to have a good diversified portfolio, you need money.
On the other side, you need to earn enough money to pay your mortgage, the school and whatever out of your trading account.
So in order to have a relatively fixed income from your trading account you need enough money to diversify it and make drawdowns smoother but without loosing the ability you generate cash for you to pay your invoices.
So the question is: Do you have that much money dedicated to trading? For most traders the answer is no.
Take my case for example. One of my best trading strategies (that has been profitable year over year since 1992) is undergoing a drawdown that is 8 month long for now. It has earned 300€ in a 25.000€ account. Can someone live on 300€ for 8 months. Not me. Renting this winning system I earn some money that enables me to live another month to get to the end of the drawdown.
My approach is renting the trading systems in a way that I’m not forced to make a business out of it. No website, no trading signals, no conferences, no webinars… only good known traders that want to test the system for their own. It’s more like a friends and family approach.
A hope I can soon get to the moment when my account reaches the level needed to trade solely and exclusively for my own.

Feel free to contact me whenever you want.

H

P.S: you can surf my new blog at Sistemas de Trading

Hello Horace, I watched your videos and enjoyed them. Thank you for your meticulous contribution, here and on your blog. I have a question, out of curiosity, but don't bother to answer if you feel it will be a waste of time. I am doing more or less what you are doing: since starting to trade in 1997, I have found out that discretionary trading didn't work for me, and have found out that automated trading works perfectly. The question is: why should I now go through the trouble of starting businesses, and selling things, when I can simply trade on my own, and most likely make more money and with less troubles? I keep on asking this same question to all those who trade profitably and still sell things and I do not mean that I don't believe you. I just want to know if there's something I am missing, that I should be doing, too. Because I am in the same situation as you and I don't see why I should work with anyone or sell anything I know. Are you doing this because you enjoy the field, or you feel the need to diversify your activities? Of course, I do understand writing on forums to "think out loud" while you're at home, but ultimately I would like to spend time away from my computer screen as much as possible, and maybe swim or watch movies rather than do things that will cause me to stay more at the computer. Otherwise why have I been doing all this? If I've been doing it is precisely to stop "working" and not to work even more.

 

[Yamato]

Thanks for your thorough reply. I am from Italy, even though I spent a few years in Boston. Yes, my Spanish is good enough to understand your videos. Congratulations on the quality of your work.

About the drawdowns: I know. That is why I have built several trading systems, and plan on building more, at least until I manage to have all positive weeks.

About the capital needed: the things you said make sense. However, instead of spending time starting a business, one could dedicate that time to building more trading systems that will trade with the money one is not using, since you're not using your capital at all times. That's what I am trying to do. Actually, I am still working as an employee, so our situation is not the same.

I will contact you in private, with a proposal to swap trading systems. If we can develop some mutual trust - which is hard, because one may think one's system is better than the other's - I'll give you one of my systems, and you'll give me one of yours. In general, the way I see it, trading works best if it is kept a solitary experience, also in order to avoid arguments, that often happen when dealing with money. But I also have to say that if it weren't for three people who helped me in the past, I wouldn't have gotten this far.

 

[amnonco]

look travis it's pretty simple.
let's say you have an account of 100K (no matter what currency), and you make consistent 10% a year. that means you earn 10K a year. no one can live with that.
but you already have a track record of 3 years, because you traded while you worked or rented or whatever.

3 years of audited track record with consistent 10% with acceptable DD, means you can probably start a hedge fund with about 10-20M. yeah it takes time and effort. but then - WHOA - you make 10% of the 10M (that's 1M) and you get 20% in incentive/performance fees (that's 200K).
"who wants the trouble of a hedge fund?" you ask?
okay, the longer your track record, the easy it is to rent/sell your system. why do it? because it diversify your streams of income.
at a theoretical point in the future, you won't need to trade for your income. in other words - you turn from self employed to business owner.

get the picture?

to horace - think about starting a hedge fund. if you already have an auditable track record, this shouldn't be that hard, and the pay should be quite good.

 

[Yamato]

Amnonco, you're flattering me: me starting a hedge fund? I couldn't even run a hot dog stand. I am not a good salesman. I have good quality, but I can't sell it. And I have good quality because all my life I've focused on quality, rather than on selling what I have. Whereas those brokers on Wall Street Warriors Season 2 were very good at getting customers, but were ripping them off, because they are only good at selling (they invested their customers' money mostly on Sandisk).
Thank you for the encouragement though, and for the time you took to help me out.

To get further into details, I don't have three years of audited records, but only two years of profitable automated trading, and those two years are not audited. My % return is much more than 10% a year. I would say at least 50% a month. So, tell me: what could I do with it? I don't know how to start a hedge fund - in Italy the legal implications and paper work may be too much for me. I am just a BA in Political Science from a US university (not valid as a university diploma here in Italy), and I might not even have the degrees and licenses necessary to start a fund. If anyone can give me any ideas, let me know. I definitely would like to raise funds, and do so legally. I am definitely willing to sell my signals, but I wouldn't be too happy to give my entire code. Also, right now I could say that I am living off my trading capital, and keep my banking job salary in another account, but I don't feel like it's safe yet to quit my job. Yet I am on the verge of a killing spree. I could go off on a shooting rampage any time. There we go again - this idiot in front of me has turned his radio on again.

 

[amnonco]

look, you can find 120981203498102397123 reasons (though it may take a while) for why you shouldn't start a hedge fund.

let me address some of your points:
salesman? selling? solution: find a suited partner. pay for 3rd party marketers.
non audited track record? get it audited as soon as you want to start. (there are costs, I know).
50% a month?
1. it that's true - then your CAGR% shuold be about 13,000%. that means you can turn 10,000 Euros into E1.3M in just a year. you don't need a hedge fund. you need a yacht.
2. if it's not true, but you still have a decent track record with reasonable DD, then you can find attorneys in your hometown that deal with hedge funds, and they will summarize your costs+help you find professional assistance.

your making 50% a month and living off your trading capital? that's a mistake. switch it.
trade on an ever growing trading account, and live off your salary. after 1 year, buy a house, after 10 years buy the bank.

 

[Yamato]

I shouldn't be talking to someone who's implying that I may be lying, but I'll reply to the non-insulting part of your post.

Thanks for the advice. I will follow your advice, and, despite my small capital, not start a fund or try to raise funds in any way. However, I do have to use part of my trading capital for living expenses, because otherwise it seems like monopoly money, and when that happens (until recently), I just waste it with discretionary trading, at which I am still unprofitable (after 12 years of trying). This is how I blew out my account 3 times in the past year and a half, because I lost money with discretionary trading faster than I made it with automated trading.

 

[amnonco]

Im not calling you a liar, just trying to make your mind clear.
declare X amount to be your trading capital, trade on it. make 50% a month. once in a while take some money out of the trading account, but NEVER too much. always increase your capital.
NEVER trade discretionary trading if your system is a proven way of making money.

in other words. start a hedge fund OR get a shrink

 

[Yamato]

Yeah, I know - I need a shrink. I wrote in my profile that I have many psychological problems. I hope I'll follow your advice (which is also my own advice).
The account is growing (I only need 300 dollars a week), addiction allowing. The "days since last relapse" cell reads "2" - better than nothing. If we really want to get into details, this week I took out 300 and made over 1000 so far. I am confident that the account could keep growing at this pace.
Then one day - I hope not - what might happen is that I'll come home very frustrated, get close to my charts, stare at them, and suddenly say "**** it" and place a trade, to uplift my mood after a bad day at work. When you are really frustrated placing a trade feels like drinking a beer. "Let's place a trade to forget about my problems, and if I make money, I'll feel good". Those days sometimes end with a -4000 loss. That explains why I am talking about lack of funds. Other times I come home, and the system has lost 500 on a trade. I try to recover from it, and end up losing 2000.
Your favorite book is "Reminiscence of a stock operator", so you shouldn't be too surprised if you meet mentally unstable people on financial forums. Your buddy Livermore went from zero to millions a few times, and we know how he died. Ok, I am done editing this post (after editing it 20 times).

 

[amnonco]

definetly get a shrink.
your editing this post 20 times+the erraticness of your writing is hilarious.
anyway, my other favorite book is trade you way to financial freedom by van tharp, this one talks about mechanical mechanical mechanical.
you trade for the money. if you feel like placing a trade to feel better, or because you need the rush, you should find other activities that generate the same feelings in you (sex? drinking? driving? casino? b.a.s.e jumping? playing bridge with the old lady? whatever.).

don't trade.
I guess I'm more pragmatic than the average joe, so I simply cannot understand this "I can make tons of cash trading systems but I lose it all on a whim" attitude...

 

[Yamato]

Well, no problem. You're being slightly disrespectful again ("erraticness", "hilarious"...). I'll reply to the respectful part of your post.

Your advice sounds reasonable. Who would disagree with you? The problem is that when someone smokes, or has other addictions he's not being reasonable and not acting in his best self-interest. Of course, if you're asking me to reason about it, I'll agree, but when the addiction takes over, it's a different matter. You can't be perfect, and for sure you're doing things that are not in your best self-interest - in that case you're doing the same exact thing as me. Only, with trading, the consequence of losing money is immediate, so one realizes his problems faster.

 

[amnonco]

no disrespect man.

to the point.
why are you trying to defend your shortcomings?
get over it.
work hard to win psychologicaly. otherwise you'll just lose money.

 

[Yamato]

Well, all right. Peace. You gave me the right answer. I was about to put you on my ignore list for telling me "the erraticness of your writing is hilarious"...

 

[amnonco]

i meant that as a good thing.
your writing was funny. that's all.
anyway
good luck

 

[Yamato]

Oh ok, so now you are saying I am funny... You mean, let me understand this cause, ya know maybe it's me, I'm a little ****ed up maybe, but I'm funny how, I mean funny like I'm a clown, I amuse you? I make you laugh, I'm here to ****in' amuse you? What do you mean funny, funny how? How am I funny?

 

[amnonco]

a) a shrink
b) you're kidding
c) this is your robert de niro impression
d) all of the above

 

[Yamato]

Goodfellas (1990) - Memorable quotes

 

[horace]

Hi amnonco,

I'm actually trying to do so. I've two major problems.

1) Earnings for the manager. Here in europe there's no possibility of establishing such a success fee of 20% so you need to register the fund off-shore

2) The paperwork and administrative overhead is crazy.

At the moment I see no chance of doing it (even with a hedge fund incubator) because I can't see the way to earn more money doing so that what I earn now.

Anyway, ideas are always welcome.

H

look travis it's pretty simple.
let's say you have an account of 100K (no matter what currency), and you make consistent 10% a year. that means you earn 10K a year. no one can live with that.
but you already have a track record of 3 years, because you traded while you worked or rented or whatever.

3 years of audited track record with consistent 10% with acceptable DD, means you can probably start a hedge fund with about 10-20M. yeah it takes time and effort. but then - WHOA - you make 10% of the 10M (that's 1M) and you get 20% in incentive/performance fees (that's 200K).
"who wants the trouble of a hedge fund?" you ask?
okay, the longer your track record, the easy it is to rent/sell your system. why do it? because it diversify your streams of income.
at a theoretical point in the future, you won't need to trade for your income. in other words - you turn from self employed to business owner.

get the picture?

to horace - think about starting a hedge fund. if you already have an auditable track record, this shouldn't be that hard, and the pay should be quite good.