We are no different than cattle

Sometimes I get asked, “why don’t you just trade your own strategy?”

If this is so great, why would you make it available to others?

First of all, yes I do. I use my own trading system to trade my own money.

Onto the question, I think it’s a bit naïve, and I think it comes from a fear and assumption that if others trade like you, your ability to make a profit disappears. However, asking that question is a bit like asking why a hedge fund takes on client money. Because the argument would be the same.

Instead, ask, “how scalable is this strategy?” That’s the better question, and it brings us to a discussion around what sort of untaped profit potential we’re exploiting.

Before answering that I thought I’d bring in a little bit of a personal touch. Although I believe the AgoraOpus project should be bigger than myself, I understand that some context is important. My name is Christian, and I’m the founder of AgoraOpus. I’ve worked on the back-end of this, the model, calculations, and system required to produce the list of ranked companies for some time.

My career is in FinTech, where I’ve worked for the biggest fund in the world, some of the biggest banks, and for software companies focusing on the financial sector. I have an educational background in computer science, cybernetics and quantitative finance.

I find financial markets fascinating, but I have a somewhat different view on it than a lot of other people in my industry. While the academic side quickly conclude that the process of modeling asset returns is for the majority down to pure randomness, I’ve never been able to buy into this. Markets are made up of humans, and as we know, humans have emotions, desires, greed and a lot of other irrational approaches. And while you can argue that these aspects cancel each other, you can also argue that they often act together in a positive feedback loop.

We’re no different than cattle, and it’s arrogant to think otherwise. This is in many ways similar to the market dynamics described by reflexivity advanced by George Soros.

Accepting the fact that we’re all animals, you can take that insight and build upon it. I believe to do so require tremendous discipline, making it a good target for purely quantitative analysis, as that helps in codifying the process and remove emotions.

Naturally, comments like the above require some form of justification. I’ll be spending time documenting these on this blog. But I also strongly believe that the numbers should speak for themselves, which is why I build the portfolio construction website, as it publishes the list of companies picked based on this approach, and charts out the performance of these. Put your money where you mouth is.

Scalability

So why am I not worried about making these trading signals available? Well, there’s a few aspects I think make this scalable:

  • We’re a small actor, plenty of room to grow.
  • Tend to focus on liquid stocks (think S&P 500 members).
  • Performance is measured assuming big positions, not tiny single fill trade orders.
  • We’re naturally fuzzing the process by letting other trade off of this, rather than directly trading their money.

This blog post was written by Christian, the main portfolio curator here at AgoraOpus. With a background from FinTech, he holds a MSc in Quantitative Finance and a BSc in Computer Science and Industrial Automation.

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