Questions That We Ask Ourselves All the Time.
Q1: What does our business model look like?
A: Our current business model looks like this:
Q2: How do we generate, test, and iterate over the hypotheses that underlie our business model?
A: We collect historical and real-time foreign exchange market data on select currency pairs and run experiments on them to either confirm or debunk our preconceptions about the Forex market. We study exchange rates fluctuations along with known timing of economic news releases to observe patterns and/or detect anomalies. We mostly plot charts in Excel as it is the simplest, but also program in R and C# when necessary. We run backtests and walk-forwards with our strategies on top of 3rd-party trading platforms (e.g., Quantopian, QuantConnect, Spotware, etc.) and iteratively tune for better performances.
Our views about the market are primarily grounded in empirical experimentation, but are also informed by new academic research findings.
Q3: Which of these hypotheses appear the most uncertain?
A: Those that pertain to the market. They are by far the most important, and yet most uncertain, business model hypotheses, upon which our value proposition is based. The characteristics of the Forex market changes over time. So how our trading strategies capture values, and in so doing make the market work more efficiently, must change accordingly to fit the evolving market environment.
How do you map a world when the land moves beneath your feet? Keeping up with, and adapting to, unpredictable market changes is hard.
Q4: Is our business model scalable and repeatable?
A: We don't know that yet. We think scalability is constrained by the capacity of each opportunity that we are able to identify, and we need to figure out how to add up a good number of such opportunities to scale well. Humans are tasked with finding haystacks in a known field of opportunities; while machines search for needles to trade. For the most important task of actually identifying the field, we selectively outsource to recognized experts in the academic research community who had joined our advisory board.
An even bigger challenge, however, is repeatability in the long run as markets evolve. Finding the way once is luck. Finding the way twice takes a good map. We need a good map that charts a field of productive haystacks to ensure long-term success in the trading business. And our business model evolves over time to meet that challenge.
Q5: Do we really believe we could build a system to beat the odds in one of the world's riskiest businesses?
A: Absolutely, without a doubt. Beyond this system, over a longer time horizon we aim to realize a first-rate trading environment that lets even mediocre traders produce outstanding results. Think of it as our Big Hairy Audacious Goal (BHAG). It'll take years. But what have we got to lose by trying? It's a good hypothesis worth betting on.