Please cite your source for this. I know lots of traders THINK they need 1:3 risk to reward, but that does not mean this is a successful RR to have.

I'd much rather have a 1:2 risk to reward with 40% winning trades than 1:3 risk to reward with 25% winning trades, just as an example. I'd also rather have a 2:1 risk to reward if I had a 70% chance of winning comapred to 1:3 with 25% wins.

My point: risk:reward, by itself, means NOTHING.

Very insightful analysis, @bobwest. My dad does it on his 'play' money account and he spends the entire market day in front of his computer, making small and mostly profitable bets. That works for him because he enjoys it and he has built his small account into a much bigger account. No ego, no bragging, just executing his feel for the intraday market movements.

I know I harp on the automation of trading a lot, but for me, getting a 'feel' for what the market is going to do, as my dad does, is too time consuming. Automation eliminates my biggest problem: me. I eliminate the biggest problem, so in this case plan = automated system. Do automated traders have execution problems? Absolutely!

The only way I would do algo trading is build an algo and let other people invest in the algo at one of these brokers website to make money monthly. This way I get paid rather the algo makes money or not. Of course, i would test it for edge, but win win for me.

Thanks @goodoboy. There is no single right way to do this. I have known some other system/algo developers who have gone this route, either because of under-capitalization or they do not want to be involved in the trading side.

You're welcome.



It is stupid to me to...have other people invest in my algo(s) and I charge them a monthly fee.

Another way to think about it...

You have just said the entire hedge fund and managed money world (along with signal sellers, etc) is stupid.

It is all about risk - and is actually a great business to be in (ask any hedge fund billionaire).


A signal seller, hedge fund or CTA can get money upfront (management fee, subscription fee), regardless of performance. And then hedge funds/CTAs get 20% of profits. All with basically ZERO downside risk. Sure they can have $0 income if they suck, but they won't lose money like they could if they were trading.

That seems pretty smart to me.

Hello kevinkdog,

Yes, that is how hedge funds get paid.

If it makes money and it is Legal, it makes sense. Sell It and Do It.

If I was to get into algo development, I run all my systems at striker.com or optimusfutures.com to make about $100 per customer (or per contract). As long as the algo makes money, I make money from the algo and I make money from the customers monthly fee.

It is all about risk - and is actually a great business to be in (ask any hedge fund billionaire).

A signal seller, hedge fund or CTA can get money upfront (management fee, subscription fee), regardless of performance. And then hedge funds/CTAs get 20% of profits. All with basically ZERO downside risk. Sure they can have $0 income if they suck, but they won't lose money like they could if they were trading.

That seems pretty smart to me.

So, I am confused, are you saying that plan is a stupid thing to do, or not?


I should point out that signal selling sounds simple, but the reality is a lot different. You'd need a lot of really good performance to attract subscribers, and then most would bail at first significant drawdown. But good luck if you try!

Hello kevin,

I am saying that is idea is smart and great business sense.

For example, if I have an algo right now that I believe have Edge. I bet my money on the algo and run the algo at striker or optimum futures for other clients/customers to invest in the algo. I make money off my investment and monthly fee from the customers.