Lessons I learned from launching my hedge fund (PERFECT ARTICLE 01)
4 Lessons I even have Learned From Launching my very own Hedge Fund
I would wish to share with you a summary of what I even have learned (and confirmed the knowledge I had) when building my very own international hedge fund.
1 – You would like to reconcile with technical challenges (im academy)
One of the foremost frustrating things I even have encountered when creating my very own hedge fund is that the incontrovertible fact that there’s something constantly malfunctioning.
The technical equipment brings new challenges and albeit I work with a team of fantastic computer professionals, there’s not one day without a mistake that must be fixed. The technology used for our hedge fund is basically complex and challenging and, to my surprise, the method of fine-tuning is as time demanding (or maybe even more) because of the programming of all applications and algorithms.
This is often something, I wasn’t ready for and that I hoped that now when Elon Musk can repeatedly land space ships, it won’t be so difficult to form a few programs work together and assure that all of them do what they’re intended to. Well, I even have learned a lesson:)
Now I mention now because sometimes I buy an “anxious” email from one among my students that somewhere, somehow, an unexpected issue has just occurred and something that ought to have happened, didn’t happen.
There is only one thing I can say about it – you would like to simply accept that as a part of ATS trading. even as there are some features on my fresh (and expensive) car that sometimes don’t work, there also are some technical challenges and weak moments in automated trading. within the past, I even have lost some money thanks to these issues.
Sometimes, I even have “earned” by missing a trade that might have led to a loss. But overall, thanks to these technical issues, I lost money. Still, I’m here and trading. We sleep in a world where even an iconic iPhone isn’t flawless – so don’t expect that ATS trading is going to be with none technical issues. we’ve chosen a business where this stuff occurs from time to time.
For me, the most important lesson I even have learned is: dedicate 2-3x longer for every step, to check and tune the programs, codes, technology, as these are all real, significant, challenges.
2 – It’s possible to create a stimulating ATS for each futures exchange
This point is more positive – because of a fully automated workflow, we manage to make a potentially interesting, strong, and robust strategy for any future market. In some markets (like FESX) we are battling too low avg.
Trade value, and in others (like US T-bonds) with the very fact that even one tick of slippage (that features a value of 32 USD), can really affect the live trading results – and thus in some markets, you would like to be really patient.
There’s one market that, thanks to the transaction costs, we keep falling in – which is Nikkei (NK). But even here, we do not give up:) Overall, we do pretty much in metals (GC, SI, HG) and also in energies (CL, NG,… ). Even grains are suitable, but you ought to take care of them here.
Thanks to the recent general fundamental changes you would like to create a system that trades both long and short. it’s really a requirement. Furthermore, you ought to search for systems with symmetric results.
3- you actually need swing strategies in your portfolio
It is a fact. you’ll build a stimulating and high-quality strategy for nearly any futures exchange, but you can’t roll in the hay without swing strategies. for a few markets, it’s impossible to create a stimulating intraday strategy.
To succeed in higher diversification, swing strategies should be a part of a portfolio. there’s another thing that must be considered for any hedge fund – there’ll be really big positions traded, which suggests that average slippage are going to be more significant (positions are going to be filled gradually at different prices) and thus you ought to have really high (resp. adequate) avg. Trade value.
Solely for this reason, it’s a necessity to incorporate swing ATS. But this is applicable also to smaller accounts (not only to hedge funds) once you want to be really diversified.
The good news is that it’s not so difficult to create swing strategies and once you have already got the workflow, the method isn’t too different from building intraday ATS.
The workflow is that the same, you simply got to change a few of the details and experiment more with different approaches.
4-Hedge funds can’t be built and launched by one person
You really need a team. Our fund consists of a 5-person team and that I think that it’s a bare minimum. The fund is such a demanding and sophisticated entity, that basically requires a team of specialists with specializations in several areas and you ought to leave the small print up to them. Otherwise, it’ll drive you crazy.
In our case, I even have two highly talented programmers (one C#, JAVA, C++, great database skills, etc., and therefore the other mostly JAVA, great database skills; both having really deep insight in trading, both live ATS traders, and both having, of course, top EasyLanguage and TradeStation knowledge), one person that specializes in client acquisition and law.
The workload is consistently enormous and therefore the first steps are really not simple, specifically to urge it all running (especially when experiencing endless technical challenges). Im academy.
You actually got to be hooked into it, be hooked into it, and have the desire to finish this challenge as you actually need tons of energy to finish such a demanding project. the great news is that it’s possible – everything is feasible once you follow your goals.
Yes, in our case it’s taken longer than I ever have expected, for much longer, but on the opposite side, we cannot miss anything. The opportunities have always been here and that they always are going to be – a day. it’s important to possess really robust and solid foundations (which is additionally something I teach in online courses).