I have been pondering on selling my trading strategy for the main purpose of raising extra cash and would like people’s opinion and find the best formula to do so.
My main concern is that once the strategy is released, there is no turning back in terms of it being copied without my notice. I would either do it in a one time offer or release it as a signaling service.
If sold once it would be in the form of a crowdfunding-like campaign where it is all or nothing. (Either I reach a certain target and the people willing to invest get the full strategy or the target is not met and the strategy is not disclosed and both parties end up with nothing)
A signaling service is also an option but a lot more complex to set up and maintain. But as a trader myself and having bought strategies in the past I hated the idea of a signaling service as the money drain is constant and you have no control over whether this service will exist one year from now.
I would also like to know if there would be enough interest In the strategy because I have a feeling everybody is into cryptocurrencies these days and my strategy is only invested in stocks.
Details on the strategy:
It’s a trend following end of day strategy (no day trading required) that requires no margin (so no leverage used) that switches between long and short positions depending on market conditions.
Most of the trades are smaller cap stocks
The system makes use of a dynamic stop loss and take profit.
The strategy has been backtested back to 1990 and forward tested since april 2020 to evaluate it properly.
There is only one limit to this strategy and that is the volume on small cap stocks.
If volume would be of no issue (If one could find a broker where you can trade all these stocks as a CFD) you could even achieve greater returns.
Strategy results:
Stock orders:
1990-2000:
2000-2010:
2010-2021:
CFD orders:
(Results without volume restriction: only possible if you can trade these stocks in cfd)
1990-2021:
All backtests were done including commision. The stock data was provided by Norgate Data and both delisted and listed stocks were included.
I am very aware of the reactions this post might get so don’t hold back on the negative or positive questions. I’m looking for feedback in any shape or form.
Did you account for survivorship bias? Doing 30+ year backtests without using survivorship-bias free data gives overly-optimistic results by factor as great as 5x or more.
I also trade small cap stocks. You are allready accounting for volume in some way... allthough I do not know which way.... so my reacting might be b.s. but I am pretty sure that if you sell this strategy, and people will start trading it with big volume, you will kill your own strategy.
I know that even my 25k trade sometimes has big effects on the stock I want to buy or sell.... imagine you sell your strategy to 10 clients all wanting to place trades like that... And they all will want to trade it at the same moment.... You need some pretty big stocks to handle volume like that.
Unfortunately I don't live in the US. And I am not acquainted with the rules in the US, but where I live you already need to have a lot of equity to start up a fund.
This is a valid concern that I have too. I have accounted in for average volume per month on all of these stocks, but will look into this if I can raise the bar on the volume part without compromising the strategy too much.
I will do some testing and post back with the results.
One thing you should definately also look at, if volume is a problem, if you can get in to the market a day early and a day later hoping that the results will be simular. That way you are spreading your orders over multiple day's.
It will also help you find out if your system is as good as you hope.... it should hold up....
I know mine does, but it holds stocks for 4 weeks. Buying and selling a day sooner and later is easy that way. No idea what your system does.
Well because you are asking for feedback ... I personally would never buy a system like this nor encourage anyone else to. There are just way too many unknowns and it raises far too many red flags.
I've never understood why traders who say they are profitable, attempt to sell the actual automated system to people rather than just trade the system themselves. It is simply not credible.
If this actually does produce income, then be patient and trade it and increase your capital by using the system. Then scale up incrementally as your account allows or develop another system an add that.
It should be noted that one company recommended in this thread (C2) have stolen our intellectual property (AFL language idea, syntax, function names) to create their verbatim-copy language. Please refrain from recommending them. The post in question has been deleted.
A calamar of 2 over that many years imho is next to impossible.
When I get a result that is too good to be true, it will usually be just that. Did you make sure there are no future leaks? Are there too many variables optimized (if yes-try forward testing to check if result is comparable) ?
If indeed you have found a holy grail, sell it one time and make it count
You havent clarify, which market you have tested this strategy, did u try using the same logic to test on diffrenet set of markets? Please be more specific. I might be interested to buy your strategy
@vmonkey Your statement is 100% valid. But extra cash Injection would benefit any strategy, certainly if your starting equity is very low. I will certainly keep trading it myself.
@amiuser This is definitely not the holy grail. As said the volume issue would definitely prove a big issue for large capital
@siraj I have tested this on the Russel 3000. So I would think that is quite a big pool of stocks, but only US stocks of course.
@Henri My initial tests were done on stocks with average monthly volume of 250.000$. I don't know how that hold's up on large accounts. In the end years of the strategy there are stocks that get a full position size and others that don't.
@makky, how is the performance of your strategy, if you swith to Buy only trades instead of Buy trades and sell trades. is it showing reasonably same results?
