I don’t think it is a scam. Most likely it is just some inexperienced guy who doesn’t really know how things work.
is your friend KMD?
My friend knows the guy with the algo and I have met him once. The goal of my friend is to bring capital to it, almost market/sell people on it. However, he doesn’t have a finance background so he is wanting me to do all this analysis to then build a presentation/marketing materials/pitch book. It’s just all kind of premature in my opinion with 4 months of data and not even a reasonable basis and sound thesis in how it actually works…Plus I am sure there are ethical and possibly legal implications of not disclosing the type of leverage that has historical been involved in this trading. Ie 500x.
I literally spent maybe an hour tops running some descriptive statistics just based on what the guy provided and What I gathered was that it appeared profitable with high standard devs for the returns. Been working 80 plus hours so can’t really devote much attention.
The more time is passing, the more it isn’t making sense.
I have very little info about any back-testing related to or whether doubling up losing trades is a part of the strategy. However, I think even a moderately savvy investor will share the same sentiment in that the absence of years of success, it is simply a really risky proposition.
He is actually getting frustrated with us because we are still doing research on it and is saying he has someone with 100k bringing it to the plate. I do not think he is “rich” and wants people to market and raise capital for it so he can take a part of the profits is his plan.
This is the model of bad incentives for the manager. His optimal strategy is to make a 500x directional bet and become rich with a 50% probability. If he loses all the money, he presumably will not have any meaningful loss himself, since he doesn’t seem to have contributed much personal capital. He does not even have a professional reputation to uphold. What foolish person would pay money to this?
Supposedly my friend who introduced me to him knows someone really real that has allegedly sold over 10 million dollars of various online products and now does marketing consulting for different companies on his own thinks that he knows some real estate investors who target rehab properties/foreclosure solely from a cap appreciation standpoint that do not really know much about it, but he calls it a trading “robot” LOL
I told him he need to consult with a securities lawyer for some obvious reasons. Seems borderline.
i can’t see how any automated trading programs can make money - consistently. Having a program for trading is not what Algos and HFT do.
Having only a pre-programmed trading code and using your computer/network at home or office is no different from technical trading.
if you want to see HFT/Algo, look at Citadel and Two Sigma. They spend millions to have the most cutting edge and fastest networks and computers. They have these pre-programmed trade rules and commands but it is all made possible by technology.
Make sure that the modeler has a rock solid grasp of train vs test.
He should be applying Data Science techniques on past data to train his model – and also should have some percentage of random data held-out to then _tes_t his model on. Maybe 70-30 train vs test.
He should also apply more advanced train/test techniques like K-Fold Cross Validation in place of just the simple train/test method above.
Just saying that he’s “back-tested” his model won’t cut it.
Well, there are too many holes in his story and thesis for this “proprietary” algo he developed already. So while I appreciate the advice, I won’t be inquiring with him.
The joint sentiment I have gathered is that it is a scam, and coupled with my own observations, I have to share believe as much at this point.
What is your background? I would like to learn more about data science but not sure really where to begin…