So, it’s been some time since you’ve been thinking of making more money out of your successful trading strategy. And why should you not? After all, you’ve worked hard for it and there is only a small % of people who are successful in this business. The idea is to add more funds to your trading strategy and get more profits.
So how do you go about finding more money? Do you ask your family, your friends or VCs? Well, you can do that but it’s slightly more complicated than that. I will try to cover the various options, their intricate nature and all the things you would need apart from your trading strategy to make someone finance your trading.
What you’d need to be ready with?
Before you go asking for money, I'd like you to be ready with some things that will make you look like a serious trader who means business.
1. A Good Track Record
Your strategy has been making money for you. But since when? 3 months? 6 months? And how have you been tracking the performance? what format? Excel sheet? Your handbook? On your broker’s software?. If you’re looking to get serious money from anyone, you’ll need to have at least 2 year’s worth of consistent profitable track record. This is because many people get lucky and are able to have profits for a few months, this doesn’t guarantee that their strategy will work for a longer period.
Anyone who’s going to invest money into something will always be extra cautious. So your track record has to be from a trusted source, here are some online services that you can make use of for keeping a journal of your trades.
Easy to use, trusted by many traders and provides good analytics for your trades and their performance.
Supports a wide variety of brokers based on MT4 platform. Offers decent analytics.
2. Tune It!
If your strategy has made a lot of profits in a relatively short time then probably it also means that your strategy has a larger risk appetite. This is something investors try to avoid, they like to have their money in relatively stable assets. So you’re good, even if you’re able to get consistent single digit % profit year on year with relatively low risk. So tune your strategy to reduce the risk as much as possible.
It is possible that the core or nature of your strategy doesn’t allow you to reduce the risk, that’s also fine, but in this case, it’s a little difficult to get external funding, you’re better off on your own money.
Now that you have a good track record and have tuned your strategy to get the investment, where do you get your funds from? Here are some ways
A lot of social networks related to trading have started in recent years. Many of these networks have functionality to let other people follow you and invest in your trading strategy, what you get out of it is part of the profit or fees from the platform. This could be a good way for you to earn more money out of your successful trading strategy. Here are some of the famous social trading platforms,
eToro is a global investor community with a significant number of active people. This is like a facebook but for traders. eToro offers something called as ‘Copy People’ , this feature lets other people copy your trading strategy, the platform automatically executes trades for your followers same as your trades just the proportion of position size varies based on the amount of money your followers have put in, the platform also manages risk and exposure based on your strategy.
Here’s a screenshot of how the copy people interface looks like.
Your followers can see all the information they’d require to make an informed decision on whether to follow you or not. This information includes your account’s month of month performance, the average risk taken, the total number of people who copy your strategy, total trades, your portfolio of instruments, average holding time, trades per week etc.
eToro pays you a certain fee for every follower (or copier in this case) you have.
Started in 2007, ZuluTrade has always put emphasis on social trading, especially in forex social trading. Equipped with thousands of signal providers with a professional and advanced search tool, your followers can analyze your strategy in minute detail, and they can replicate your performance. The best feature would be the ability to customize risk and money management.
Here’s how their social trading platform looks like. It provides all sorts of details one would require to make a trading decision.
The idea is to get as many live followers as you can and when they trade using your strategy you get a cut from ZuluTrade. The commission starts from $5 per $100k traded in total by your live followers. Pretty decent, eh? Here are more details on their partner program, if you wish to know.
Other benefits of social trading is that you become popular. And popularity has its own value that you can monetize. A popular trader is also an influencer who can tie up with brokers, data-providers, exchanges and other trading services to help these organizations reach out to more people and in turn help you make money outside of your trading. Becoming an influencer is a whole different ballgame maybe we’ll cover that topic separately.
Compete and win!
If you’re not too keen on social trading, you can look at participating in competitions that allocate huge capital to top performing strategies. Let’s look at some,
Quantiacs holds a competition worth $2.25 million every quarter. Quantiacs is a marketplace for user-generated trading algorithms. They connect trading systems with external capital from institutional investors. Quantiacs is quite well-known in quant community and winning a competition here will surely make you famous. Quantiacs offers toolbox for Python and MATLAB to create and backtest your trading systems.
Here’s a screenshot of the currently on-going competition.
There are other similar projects as well, Quantconnect and Quantopian are such examples. Quantopian has a strong community of quants, a lot of useful discussions happen on the community forum.
All of these sites will offer you a platform either supported by Python or MATLAB to help you get your strategy on-board. These platforms will also equip you with historical data, bevy of indicators and economical data to get you started with. You can check them out here Quantopian & Quantconnect.
Prove Your Strategy And Get Funds, Simple!
If you think, getting people to follow you and copy your strategy isn’t your cup of tea and you’d rather prefer a direct platform where you just throw numbers and get direct funding. Or you just don’t want to reveal your strategy/trades because it’s the holy grail, well, then that’s possible too.
Here are some platforms that are direct and would be happy to fund your strategy -
Since there are so many of them, I will just focus on the most prominent ones, you can explore the rest in your own sweet off market hours.
OneUp trader focuses on simplifying the funding process. A good platform to connect with investors who are looking to put their money in traders who have proved their worth. OneUp trader works on a monthly fees basis along with profit sharing scheme with investors. State of the art analytics, a community of traders, free data fees and vast funding network are some of their selling points.
With more than 27,000 trading accounts, Psyquation has become popular among traders who are looking to step up their game. With its wide investor network, the available capital for funding is quite huge. They have also tied up with a large pool of brokers to provide a seamless trading interface.
Psyquation boasts about their analytics platform that gives you a research based advice. Here’s an overlook of their leaderboard.
Other fundraising platforms:
In case you are not looking to get funding for your trading strategy but want to venture as an entrepreneur in this field we have the perfect success story to inspire you. This case study talks about Derek and Maxime, finance experts from two different nationalities who were connected during QuantInsti’s Executive Programme in Algorithmic Trading and started their own firm in algorithmic trading domain. Click here to read the story.