Wednesday, February 07, 2007

Adding to Your Edge: A TraderFeed Poll

In this post, I'd like to ask a favor of blog readers. I'm taking a poll regarding an idea, and I'd like your sincere opinion. I'm not looking for folks to agree with the idea and I won't be discouraged if there's a lack of interest in the concept. Your honest opinion and comments are all I'm looking for. You can post your reactions as comments to the blog, or you can feel free to email them to me at the address at the end of the "About Me" paragraph on the TraderFeed home page. Your comments can be anonymous if you like, and no email addresses or identities will be shared with anyone else.

Three groups of participants are particularly sought for the poll:

1) Developing traders who have not yet established consistent profitability and are open to adding to their edge;

2) Successful traders who have worthwhile trading methods, but have never attempted to actually backtest and improve upon those ideas;

3) Successful traders who develop mechanical trading systems by appropriately backtesting entries, exits, stops, money management strategies, etc.

The poll question is this: Suppose it were possible to create a cooperative structure uniting these three groups of traders in which three things would happen:

1) Developing traders could subscribe to real time signals from a variety of backtested trading systems. They could use these signals for decision support, with the tested ideas providing ideas regarding market direction, guidance for position sizing, price targets, and stops. Over time, the trader would become familiar with these signals as a new set of market indicators and would develop a feel for how to integrate those into his or her existing setups and skills. For a single, reasonable subscription price, the trader would have access to signals that, otherwise, would require many months of system development or many thousands of dollars to purchase.

2) Successful discretionary traders could collaborate with system developers to backtest and improve their trading ideas and adapt them to new markets and time frames. The successful discretionary traders who lack programming skills and/or the time to backtest their ideas could form a partnership with successful system developers, creating a win-win. The discretionary traders learn about what is working in their methods and how to improve returns. The system developers gain access to new market approaches and inspirations for trading new markets and time frames. I recently wrote about a successful trader who shared ideas with Henry Carstens. I have since talked with both, and both have greatly benefited from the collaboration, creating methods more robust than either could have accomplished individually. This could greatly add to the edge of a successful discretionary trader.

3) The successful discretionary traders and system developers could make the signals from their collaborative efforts available to developing traders, creating a constantly updated portfolio of trading methods that provide edge. When new systems are developed jointly between traders and programmers/statisticians, the revenues from subscriptions would be shared fairly between them. This would create a diversified income stream for both groups. Moreover, as the developing traders become more experienced and generate their own ideas, they, too, could collaborate with programmers and make their work available by subscription. The result would be an ongoing flow of new trading methods that would benefit all participants.

Now for a few important additional considerations:

* All intellectual property would be kept confidential. Signals from systems and overall system logic would be shared, but traders would be able to keep their specific methods proprietary if they so choose.

* Subscription prices would be kept low to developing traders, given that they often have limited capital. This is meant to empower traders, not exploit them.

* The signals would be transmitted electronically (email, IM), keeping overhead down and ensuring timely broadcast. This would permit global participation among traders and, over time, would encourage traders from various parts of the world to collaborate on ideas covering the entire range of global markets.

* Every new system would be accompanied by hands-on education regarding how to use the signals. That would be included in the subscription.

* The vision would be to create a Web 2.0 approach to the trading process, in which system development and education would occur in a social network. The "customers" who would utilize the signals could also be the "business owners" who develop (and benefit from) new methods and signals.

In short, what I'm proposing is a kind of trading co-operative, linking system developers, experienced traders, and developing traders. My vision is for a collaborative structure that benefits all parties, instead of the all-too-common "charge a big fee and make big promises" approach to trader education and development prevalent at conferences and the media.

My poll question is simple: Which of the above three groups of traders best describes yourself, and would you have an interest in pursuing something like this?

I realize many operational details and legalities need to be worked out. At this point, however, I'm just interested in determining traders' interest in becoming part of a network that would blend research and trading skills and seek mutual growth and success. I look forward to hearing your honest feedback and will summarize the responses (anonymously, of course) in a future post.

Thanks so much for your interest and support.