Next step for Stock Market trading process

markjbloggs

I have developed a closed loop trading process for the US stock markets, and have been using it for 3 years to prove its capabilities. For 2008, it has returned 41% so far, with similar returns for the 2 previous years. To date, I have financed it from my own meagre resources but now I want to look into "taking it to the next step". I would be surprised if the outperformance of this process over the markets was not of interest to someone in the Financial Services Industry.

My question is - as I have no experience of the Financial Services Industry (my background is Engineering), how would I approach companies in Financial Services with a view to commercializing this process?

Any suggestions would be welcome.

elgransenor

markjbloggs wrote: »

I have developed a closed loop trading process for the US stock markets, and have been using it for 3 years to prove its capabilities. For 2008, it has returned 41% so far, with similar returns for the 2 previous years. To date, I have financed it from my own meagre resources but now I want to look into "taking it to the next step". I would be surprised if the outperformance of this process over the markets was not of interest to someone in the Financial Services Industry.

My question is - as I have no experience of the Financial Services Industry (my background is Engineering), how would I approach companies in Financial Services with a view to commercializing this process?

Any suggestions would be welcome.

Would be amazed if you can go anywhere with this for the simple reason that nobody ie nobody/no computer program can predict with sufficient certainty the movement of prices of shares.
I do not wish to be overly negative but hardened financial traders or even a layman of average intelligence would view this as the financial equivalent of snake oil and/or a cure for baldness.

markjbloggs

It is not a prediciton system, it is a trend following system. It reacts to movements in the stock markets and makes no pretences at predicting the future.

Obviously, a validation test under conditions imposed by an interested party would be an essential part of taking this process forward. I agree that if I were an outsider looking in on this, that my reaction would be hugely sceptical too. But, no amount of discussion in any forum is going to change that, so I am asking for advice on the basis that the process does work.

elgransenor wrote: »

Would be amazed if you can go anywhere with this for the simple reason that nobody ie nobody/no computer program can predict with sufficient certainty the movement of prices of shares.
I do not wish to be overly negative but hardened financial traders or even a layman of average intelligence would view this as the financial equivalent of snake oil and/or a cure for baldness.

homeOwner

What are you claiming this system can do?

markjbloggs

homeOwner wrote: »

What are you claiming this system can do?

Outperform US market indices. This year, the process has returned +41% so far, S&P 500 is -32%. In 2007, return was +27 % and S&P 500 was +3.5%.

No guarantees on absolute return, it is market dependant.

elgransenor

markjbloggs wrote: »

It is not a prediciton system, it is a trend following system. It reacts to movements in the stock markets and makes no pretences at predicting the future.

Obviously, a validation test under conditions imposed by an interested party would be an essential part of taking this process forward. I agree that if I were an outsider looking in on this, that my reaction would be hugely sceptical too. But, no amount of discussion in any forum is going to change that, so I am asking for advice on the basis that the process does work.

With all due respect to you, if it is not a prediction system and merely follows trends, what use is it to anybody?
This is a question you will have to answer for any would be investor I feel.

markjbloggs

elgransenor wrote: »

With all due respect to you, if it is not a prediction system and merely follows trends, what use is it to anybody?
This is a question you will have to answer for any would be investor I feel.

Go long on the uptrends, then sell on the downtrends. Obviously, it will not work all of the time, but it does work for this process 50-60% of the time, which is enough to generate the returns I have outlined above.

amen

why do you need an investor?
if what you are saying is true borrow 10K and start using program and watch your income grow

markjbloggs

amen wrote: »

why do you need an investor?
if what you are saying is true borrow 10K and start using program and watch your income grow

Let's take that suggestion a little further - say borrowings are €100k and using this years rate of return of 41%.

- Cap Gains works out at over €6k for the year
- Cost of financing the €100k is €7-8k/annum

Out of your €41k gain, you are left with €27k income - not bad but certainly not enough to live on and grow the 100k (This ignores opportunity cost for the 100k, not to mention the fees and other costs assocaited with acquiring that loan).

blobert

If you had some kind of system that could reliably return 20-40% annually I'm sure it could quickly make you extraordinarily wealthy. I'm not sure I would share it with other people either.

Is there a way of testing it further to prove its reliability, ie that it will consistantly perform? A friend of mine was convinced he had a system. It made him big returns for about 2-3 years, he then started loosing money and hasn't mentioned it much since.

I'd be happy to help you test it if you want to do more research:)

homeOwner

markjbloggs wrote: »

Outperform US market indices. This year, the process has returned +41% so far, S&P 500 is -32%. In 2007, return was +27 % and S&P 500 was +3.5%.

No guarantees on absolute return, it is market dependant.

If you are confident of your product I would suggest that borrow a large sum of money from where ever or who ever will lend it to you, or re-mortgage your house if you have one and make yourself a millionaire in a few years. You will then have people beating down your door to invest. That kind of success is hard to keep under wraps.

The best of luck with it.

ixus

@markjbloggs: If capital is the issue, why not get yourself into a Proprietary trading job and not divulge your techinque? This way you can use other peoples capital, make your own money, keep your technique to yourself (give it further back testing) etc.

One of Mark Shipman's books described how he became wealthy by trend following similar to yourself (potentially).

Spread betting is another cost effective way of doing this IMHO.

gerry87

what is the level of risk involved with this method? And do you mind me asking what sort of sums you have been trading with to date? How long have you been using it? What do you want from a financial services company? Them to buy it? For how much?

markjbloggs

gerry87 wrote: »

1. what is the level of risk involved with this method?
2. And do you mind me asking what sort of sums you have been trading with to date?
3. How long have you been using it?
4. What do you want from a financial services company? Them to buy it? For how much?

1. Taking 2008 as an example, I have been long 47% of the time, in cash the rest. I do not use shorting or options. I use stop losses extensively.
2. 10k far. I am in the process of putting in another €20k.
3. I started developing the technique six years ago, and have been trading with it for the past 3.
4. Like I said, I have no experience of the financial services industry, so I do not know how to approach them. Ideally, I would look for a trial period of 6-12 months to let them see the technique in action, then take it from there.

Arion Online

Hi,

I am in the market for a similar type of software. Would it be an idea to get a group of independent people to use your software and based on their findings put a business plan together, possibly approach a few angel investors and off you go.

If you want to put a group together, I would gladly assist

markjbloggs

I'm afriad the software is very non-user friendly and would, in it's current state, be useless to anyone else. So I would prefer to keep things simple and be the sole user until such time as the capabilities of the technique can be sucessfully demonstrated.

Would an approach like this be of interest to any angel investors you know?

Arion Online wrote: »

Hi,

I am in the market for a similar type of software. Would it be an idea to get a group of independent people to use your software and based on their findings put a business plan together, possibly approach a few angel investors and off you go.

If you want to put a group together, I would gladly assist

homeOwner

markjbloggs
Presumably your system is only identifying trends and giving suggestions/predictions on what to buy/sell, you still then have to execute your orders with a broker?

This assumes that you have given it correct information. Are you getting real-time feeds from markets, how are you keeping your system up to date second by second?

markjbloggs

Correct, you still have to execute the trade with the online broker and set up the stops. It can get a little hectic when a lot of "buys" are identified, so the system is set up for a maximum of 10 buys at any one time.

I get 15-minute delayed quotes on stocks (real time on indices) from MSN using Excel. Go to Data, Get External Data, New Web Query to set it up on Excel 2000 - it's quite simple to do. The 15 miniute delay is not ideal, but sufficient for what I do.

homeOwner wrote: »

markjbloggs
Presumably your system is only identifying trends and giving suggestions/predictions on what to buy/sell, you still then have to execute your orders with a broker?

This assumes that you have given it correct information. Are you getting real-time feeds from markets, how are you keeping your system up to date second by second?

homeOwner

Personally I think people will be very reluctant to put their money in a trading system that is working off data 15 mins old.... but maybe they will...

markjbloggs

homeOwner wrote: »

Personally I think people will be very reluctant to put their money in a trading system that is working off data 15 mins old.... but maybe they will...

Sorry, I should have clarified that I complete 15-20 trades a month, and that the 15 minute delayed quotes is sufficient for this - it obviously would not suit a much more active system that does a lot more trades.