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What would you do with a working strategy, but need capital?

  • #1
  • First Post: Jan 4, 2016 9:34am Jan 4, 2016 9:34am
Hi,

The purpose of this thread is not a debate about different trading strategies or expert advisors. The sole purpose of why I created this thread is that I seek advice on what should be my next steps.

So let me explain my story so far, I`ll make it as short as possible so I don't want to waste anyones time as that's our most valuable commodity ... so --> I've started trading 3,5 years ago. I've had my ups and downs, and about a year ago I've learned MQL4. I've did my 1st EA, then second and now I have several working EAs. I've rented a VPS where I`m currently testing them (None of my EAs use indicators or martingale). The testing is running for few months and the results are according to the plan SO FAR. I`m planning to have the test run for a few more months.

The issue is that currently I don't have sufficient capital to fund a trading account that is needed...

What would you do if you had a working EA that has a consistent return each month, but lack the capital in order to fund it properly...

I understand that the options are limited, but this is what I came up with so far (with some advice of ff members claudia1 & heispark)

1. Start with a small capital 5k and let it grow over time...
2. Borrow money from friends or family etc ... (not a fan of this option, and I'll probably won't consider it but it's still an option)
3. Look for investors
4. Zulutrade / Myfxbook etc
5. ...

So the hypothetical question --> what would you do if you had a working strategy that consistently make monthly returns but lack capital to invest into your trading account?
  • #2
  • Jan 4, 2016 9:44am Jan 4, 2016 9:44am
Hey,

imho you should have a track record of at least 6 months (so you know that your method/ea has a proven edge) before increasing your capital further. Brokers nowadays do not require any minimum sum and growing your capital from a small sum proves to be one of the best ways of developing the required patience as a trader. Concurrently, you may find a day job to save capital since you dont have to monitor your trades anyway.

Once you have at least a year of track record, then finding investors may seem more viable. Trading off friends/family may cause unwanted stress/disrupt social relationship since not everyone has the capacity to view losses/profits in a blank, calm state.

Not sure about the rest but hope you find your way eventually.
  • #3
  • Jan 4, 2016 9:48am Jan 4, 2016 9:48am
Quoting limzy
Hey, imho you should have a track record of at least 6 months (so you know that your method/ea has a proven edge) before increasing your capital further. Brokers nowadays do not require any minimum sum and growing your capital from a small sum proves to be one of the best ways of developing the required patience as a trader. Concurrently, you may find a day job to save capital since you dont have to monitor your trades anyway. Once you have at least a year of track record, then finding investors may seem more viable. Trading off friends/family may...
Thanks for the reply. If you have a proven track record how would you seek out investors?
  • #4
  • Jan 4, 2016 10:05am Jan 4, 2016 10:05am
Quoting Sandmann
The issue is that currently I don't have sufficient capital to fund a trading account that is needed... What would you do if you had a working EA that has a consistent return each month, but lack the capital in order to fund it properly...
So your ea isn't good.
  • #5
  • Jan 4, 2016 10:13am Jan 4, 2016 10:13am
get a job, work and save some money to trade with
"If The Fool persists in his Folly he will become wise." - William Blake
  • #6
  • Jan 4, 2016 10:22am Jan 4, 2016 10:22am
Quoting mvp77
{quote} So your ea isn't good.
got a crystal ball there? You might wanna look into it and answer my question above?

Please stick to the point or don't comment at all... don't question the EA that's not the point above, don't question anything else just think for a second and advice what would you do?

You got a working EA, you got a proven track record... what would you do? How/where would you look for capital/investors?
  • #7
  • Jan 4, 2016 10:24am Jan 4, 2016 10:24am
It seems like forex scales well: IE it costs the same usually in spreads and comissions regardless of overall lot size.

IE if I have a strategy that yields this while trading 9 symbols:
A.)
FOR $10000 invested
use 0.7 Lot sizes
Expect $1000 per week

B.)
FOR $5000
IE: use 0.35 and
expect $500 per week (1/2 of 1000).

C.)
FOR $1000 (divide the original which was on $10000 by 10)
IE use 0.07 lot sizes
and expect $100 per week.

Seems like you could trade C.) for 50 weeks of a year, hopefully then have (100*50 = 5000 + 1000 initial = 6000) 6000 and then step up to B then just keep going. I would suggest trying to work it like this while working a side main job (for now).

Just my opinion though.

ALSO: just my opinion BUT- I personally hope and aim to have 100% of any capital committed in reserve. IE if I am trading 10,000 account size, I will hold 10,000 in reserve. I would suggest doing this to help in case of a negative account equity event. But I'd also be interested in hearing what others think about this. Eventually, I'll trade in a company structure and figure out how to make it so that they cannot come after me for more than my initial investment (hopefully).
  • #8
  • Jan 4, 2016 10:36am Jan 4, 2016 10:36am
Quoting skillz16
ALSO: just my opinion BUT- I personally hope and aim to have 100% of any capital committed in reserve. IE if I am trading 10,000 account size, I will hold 10,000 in reserve. I would suggest doing this to help in case of a negative account equity event. But I'd also be interested in hearing what others think about this. Eventually, I'll trade in a company structure and figure out how to make it so that they cannot come after me for more than my initial investment (hopefully).
thanks for the comment, I especially like the last paragraph. It's important to have a backup capital, you never know what happens in the markets.

I have the scaling figured, it's a lot less than you pointed above. 10% a week is playing with fire IMHO
  • #9
  • Jan 4, 2016 10:38am Jan 4, 2016 10:38am
Quoting Sandmann
Hi, The purpose of this thread is not a debate about different trading strategies or expert advisors. The sole purpose of why I created this thread is that I seek advice on what should be my next steps. So let me explain my story so far, I`ll make it as short as possible so I don't want to waste anyones time as that's our most valuable commodity ... so --> I've started trading 3,5 years ago. I've had my ups and downs, and about a year ago I've learned MQL4. I've did my 1st EA, then second and now I have several working EAs. I've rented a VPS where...
Raise the %profitability of your strategy and use that to compound a small initial account. Trading OPM is never worth it............ after your hard work why enslave yourself to another person(investors) again ?
  • #10
  • Jan 4, 2016 10:42am Jan 4, 2016 10:42am
Quoting tunera
{quote} you can simply put here on this thread a link to your trackrecords of your eas. If they make money, you will receive lots of private messages from investors. Very simple
thank you, once the testing is complete I`ll consider it.
  • #11
  • Jan 4, 2016 10:49am Jan 4, 2016 10:49am
Quoting skyway
{quote} Raise the %profitability of your strategy and use that to compound a small initial account. Trading OPM is never worth it............ after your hard work why enslave yourself to another person(investors) again ?
what do you mean by raising the %profitability? Do you have experience with managing OPM?

You're making a good point there, but it's hard to say that I won't enjoy managing other peoples money as I don't have any experience doing so.
  • #12
  • Jan 4, 2016 10:51am Jan 4, 2016 10:51am
Quoting Sandmann
{quote} thanks for the comment, I especially like the last paragraph. It's important to have a backup capital, you never know what happens in the markets. I have the scaling figured, it's a lot less than you pointed above. 10% a week is playing with fire IMHO
Yeah, interesting point. I actually have code that I think can come close to this. I'm most likely going to run on 1,000 and a lot less leverage and lot size though once I do it first in production so I'll most likely be hitting 5% per week or $50 (hopefully). But yeah, I can see your point. My numbers are also slightly unrealistic since I am still on a foreign broker and I would need to do a US one with much lower leverage reqs.

I still just run through my odds though, just view the $1000 as risk capital, and then hope to get it to around $5000 soon so that I can step up. I'm just getting started with a serious EA and backtesting, but it has seemed to me like once I have gotten it done, all I usually need to do is monitor the VPS's to make sure that the terminals are up and running and the signals are ok.
  • #13
  • Jan 4, 2016 10:56am Jan 4, 2016 10:56am
I tnink, you has your answers.
My Opinion - split your Money - take various Accounts.
Dont put the Money in one EGG.

I wish you all the best - trading Real with a EA !
But dont forget - you fight again BrokerzMania . . . thats The Enemy.

Ask yourself - Know you a winning EA Trader here for Example on FF ? Who is sharing proof statements ?
All the Best . . . .
  • #14
  • Jan 4, 2016 10:58am Jan 4, 2016 10:58am
Quoting Sandmann
{quote} got a crystal ball there? You might wanna look into it and answer my question above? Please stick to the point or don't comment at all... don't question the EA that's not the point above, don't question anything else just think for a second and advice what would you do? You got a working EA, you got a proven track record... what would you do? How/where would you look for capital/investors?
1 year of successful trading with EA sadly means very little at this point. Specially with demo stuff. So, you havent proven that you have a system ..whereas you would need to look for investors.

Play forward and while doing this raise your own money. Start with lowest the strategy allows and later on when you have live record of the EA talk to investors.
If you talk to them now you mainly look for retards giving you money. You can also do that, but thats a whole other agenda eh
  • #15
  • Jan 4, 2016 10:59am Jan 4, 2016 10:59am
Quoting Sandmann
The testing is running for few months and the results are according to the plan SO FAR.
In terms of, well, not really "advice" but a perspective, it's probably important to consider what your own position would be if you had a significant amount of funds to invest in something that has only been running for a few months with results that "are according to the plan "SO FAR". This last statement itself suggest that the plan is still open to change. I have to say that if it were me, I wouldn't invest in a similar proposal.

In terms of creating something that is more attractive to invest in, I'd suggest running the EA live for at least 12 months (this is assuming you've already back-tested it over a period of not less than two years). If in 12 months, the results are promising then publishing them live is obviously one way to attract investors - another way may be to attend some trade shows; talking with various high-net worth traders is always interesting. I chatted with one such guy at a trade show last year and am aware that he was looking for traders to help trade a fund that he'd been allocated. I'm not aware of the full details but I seem to remember that his minimum requirement was 12 months of verifiable live trading records.


Quoting Sandmann
2. Borrow money from friends or family etc ... (not a fan of this option, and I'll probably won't consider it but it's still an option)
I'm not a fan of that option either and would NEVER opt to do it. If you're confident with the EA then is it not possible to fund a 500 dollar micro account and just let it build over time?
  • #16
  • Jan 4, 2016 11:02am Jan 4, 2016 11:02am
Quoting The Fool
get a job, work and save some money to trade with
I am a fan of this option. Your dilema is exactly the same as anyone who has blown out their account. You study and improve your method but still lack the funding to proceed. Many of us have been there, myself included. My solution was to liquidate everything else. As trading is my profession, I didn't have a job and my prospects for employment where (are) dim. So I sold everything I didn't absolutely need, and cancelled services I didn't absolutely need. Sold my car, my motorcycle, and my home (renting was fine for a while). I cancelled cell phone service and all TV services except the internet connection. Skipped the Starbucks coffee and made my own with Costco beans. (BTW this option ended up the being the best thing ever!)

Bottom line, within a few months, (except the house), I had enough to capitalize my minimum investment, and moved slowly one trade at a time.

If you are still employed, start a strict home budget and save EVERY PENNY you can until you can capitalize. Asking for investment is not an option at this point, as your live results do not yet exist. Build your business like so many of us do, from the bottom up. You can do it!! It just takes WAY more time than we ever thought.
@xxxx§|[::::::::::::::::>
  • #17
  • Jan 4, 2016 11:08am Jan 4, 2016 11:08am
Quoting Sandmann
{quote} what do you mean by raising the %profitability? Do you have experience with managing OPM? You're making a good point there, but it's hard to say that I won't enjoy managing other peoples money as I don't have any experience doing so.
The formal structure for managing OPM that I have seen the most is this:

LLC created and used as a general partner to an LP or LLP. The investors will come invest through the LP. Your salary is paid through the LLC General Partner management company. I have also mostly seen/heard about the traditional 2 and 20% structure from the few hedge fund managers that I have talked with.

Personally, I prefer 5% hurdle rate (I [will hopefully eventually ]) guarantee investors 5% annually) and any gains over that, I am compensated with 25% of the overall gain. But I'm currently in this stage:

STAGES:
1.) Run my stuff with 1,000 of real money and a US account with my VPS setup.
2.) Iterate and "build" that up to hopefully 5k in a little over a year (eventually get close to 10k hopefully)
3.) If successful, will get lawyer and form the LLC and LP (LLP?). I believe that both of these will not cost more than $10,000 (from side savings, not trading profits).
4.) Will have family and friends possibly investing in the LLP part. Will register with the SEC but pretty sure that if you have fewer than 100 friends and family investing, that is not needed.
5.) If that works out and I need more capital, I'll get another lawyer and make sure I comply with securities law (section 1231 or something for LLPs?) since I need that to seek out outside investors
6.) Take state sponsored Series 65 and figure out what is needed to be classified as an RIA.
7.) Offer to outside investors.

Some of this is from here (this might help) and some is my own info:
http://www.wallstreetoasis.com/forum...all-hedge-fund

If anyone sees something big I have missed let me know- I'm also really early into this all right now.
  • #18
  • Jan 4, 2016 11:10am Jan 4, 2016 11:10am
Quoting simond2002
{quote} In terms of, well, not really "advice" but a perspective, it's probably important to consider what your own position would be if you had a significant amount of funds to invest in something that has only been running for a few months with results that "are according to the plan "SO FAR". This last statement itself suggest that the plan is still open to change. I have to say that if it were me, I wouldn't invest in a similar proposal. In terms of creating something that is more attractive to invest in, I'd suggest running the EA live for...
Great post, thanks
  • #19
  • Jan 4, 2016 11:16am Jan 4, 2016 11:16am
Also worth a look:
1.) Legally form your own LP or LLP where you do your own investment process "by the book" though with own capital. When you have a track record and a decent amount of own funds, approach a hedge fund owner and their General Partnership and see if you can "partner on."

2.) Elect "trader tax status" re this book by Ted Tesser:
http://www.goodreads.com/book/show/2...s_Tax_Solution

Then you might be able to build an "IRA on steroids" and will be able to hopefully deduct a lot more expenses above the line.
*I'm not sure how this option would work with an LLC or LP/LLP though AND you have to be full time (IE this is your only job) and trade often to be able to qualify.
  • #20
  • Jan 4, 2016 11:17am Jan 4, 2016 11:17am
Quoting skillz16
It seems like forex scales well: IE it costs the same usually in spreads and comissions regardless of overall lot size. IE if I have a strategy that yields this while trading 9 symbols: A.) FOR $10000 invested use 0.7 Lot sizes Expect $1000 per week B.) FOR $5000 IE: use 0.35 and expect $500 per week (1/2 of 1000). C.) FOR $1000 (divide the original which was on $10000 by 10) IE use 0.07 lot sizes and expect $100 per week. Seems like you could trade C.) for 50 weeks of a year, hopefully then have (100*50 = 5000 + 1000 initial = 6000) 6000 and then...
highly informative post. thanks!
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