Marc,
Agree that P123 let’s normal retail investors play in this space.
For what it’s worth, I have seen many internal traders at some of the big quant shops with 5-7 year live trading records and realized out-of-sample 2 Sharpe ratio’s and 20% plus annual returns (in some cases over 40% AR for more than 7 years - documented by people I know who’ve done due diligence). Many of them go out on their own as prop traders. You don’t hear about them in the popular press, because they don’t advertise much or have web-sites (often) and they aren’t seeking or accepting retail investors. They are funded by large seed funders and super HNW’s mostly. I can’t get into most of them due to the min’s (often $5MM or $10MM or more), but they are out there and I’ve seen them and know people that invest - and many of them do amazingly well.
Many of them are trading short-term and very short-term systems. Many are trading at least a large number of systems that have nothing to do with fundamentals. At the 1 and 5 min levels, how can they? Many of them are using the same methods you dislike so much, or seem to.
Apart from exceptional math and programming skills / teams, one key to what they are doing is having data that is a) really, really high-quality (I met a team of 2 guys from MIT that spent 3 years and a lot of money cleaning and preparing their data set before they even started) and b) data that is not everywhere. They are often paying for, or generating, really unique data sets. They are often using real-time analysis of order book dynamics and changes in those dynamics (bids vs. asks), for example, or proprietay earnings upgrades.
I don’t think P123 users can compete with them. They are pretty amazing and very sophisticated and coming out of the best prop trading shops where they’ve built and honed these models with millions to billions of dollars of tools / data behind them.
One interesting thing for P123 to explore is, in addition to R2G, have a ‘data license’ area where people can post proprietary data for sale to model builders - with very strong documentation on why and how it’s PIT and where it comes from. It may turn out to be useless, but it may allow P123 users to ‘import’ or run systems on whole new data sets. These would be additional monthly license fees for users - so it’s an additional revenue stream for P123 - and can bring in data vendors. A key would be really documenting why and how the data works.
A core issue with what P123 is trying to do now is it’s trying to be a ‘one stop shop.’ I believe R2G is better as a stand-alone business.
Best,
Tom
Best,
Tom