Proprietary Trading as a Business

The Yin & Yang (Balance) of Trading

At HBC ™, we specialize in coding and backtesting algorithmic strategies for financial markets. Our experts use market analysis and emerging technologies to maximize trading profits and reduce risk exposure. In this article, we will walk you through our trading plan and process, highlighting key steps and strategies.

Trading Plan & Process

1. Objective Planning Tools — We use objective planning tools to develop and document our trading strategies.
2. Develop, Document & Test Strategies — We focus on developing, documenting, and rigorously testing our trading strategies to ensure their effectiveness.
3. Identify New Trade Opportunities — We constantly monitor the market and identify new trade opportunities based on our analysis.
4. Monitor Market Positions — We closely monitor our market positions to ensure they align with our strategy and goals.
5. Automated Market Analysis — We use automated tools to analyze the market and identify potential trading opportunities.
6. Automated Trade Execution — We have automated systems in place to execute trades based on our predefined strategies.

The purpose of this process is to ensure the smooth running and sustainability of the trading business. It splits up the necessary goals into meaningful subgoals and prevents time-wasting and ineffective actions.

Target Key Performance Indicators (KPIs) for us include Assets Under Management (AUM), Percentage Returns, AUM Management Fee (2%), and Performance Bonus (20%).

Investment Universe: Market News Preparation

“Just trade the swings.”

Our investment universe encompasses a wide range of asset classes, including alternate-type investments (Forex, Indices, Commodities, Crypto, ETFs, Mutual Funds, Hedge Funds), derivative-type investments (Options, Futures, Contracts of Difference — CFDs), equity-type investments (Stocks, Venture Capital, Private Equity), debt-type investments (Bonds), and cash-type investments (USD, Bitcoin).

We stay informed about relevant economic indicators by closely monitoring sources like the Bloomberg Economic Calendar or FactSet Economic Calendar. This helps us assess the impact of economic indicators on financial markets and make informed trading decisions.

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TO BE CODED: When a company reports its quarterly earnings results, determine if the company exceeded, met, or missed consensus earnings estimates
- Economic indicators are released each week
- Compare the actual economic indicator number released to its respective forecast
- Is the actual economic number better or worse than the forecast?
- Did the economic indicator report positively or negatively impact the financial markets, if so, why?
- What has been the recent trend of the economic indicator report that impacted the financial markets?
"""

Tanulytics was created to answer this question: Can we build a well-functioning customized data-driven market environment for AMB?

“Markets are constantly in a state of uncertainty and flux and money is made by discounting the obvious and betting on the unexpected.” — George Soros

AMB Portfolio Company Earnings Reports & Major News Items

1. Check AMB Portfolio News Items — We review news items related to our portfolio companies on a daily basis.
2. Keep Informed of Earnings Results — We closely track the earnings results of our portfolio companies.
3. Analyze Financial Guidance — We assess whether the company’s financial guidance aligns with consensus sales and earnings estimates.
4. Evaluate Market Reaction — We analyze how the stock market reacts to our portfolio companies’ earnings results and financial guidance.

AMB Capital uses various research tools to design a diverse selection or strategy portfolio consisting of multiple inversely correlated strategies and combined alpha factors.

Position Sizing, Risk, & Money Management

Our general principle is to limit the per-trade loss to 1% of the entire account and base the position size on that. We aim to risk a maximum of 1% with the potential to gain a minimum of 2%+ on each trade.

AMB Capital’s risk management systems are designed to eliminate emotions from the decision-making process and ensure that our portfolio does not suffer significant drawdowns. This approach enables us to generate consistent income and provide our clients with confidence in a financially secure future.

Each trading strategy is categorized by its Profit Ratio (Avg Win on Winning Trades / Avg Loss on Losing Trades) & Win Rate (# Winning Trades / Total # Trades) and there are pros and cons to each type of strategy.

“Look down, not up, when making your initial investment decision. If you don’t lose money, most of the remaining alternatives are good ones.”- Joel Greenblatt

Systems, Strategies, & Rules of Engagement

Our exposure to equities ranges from 50% to 65% or more, while commodities make up 20% of our portfolio. Forex accounts for 10% of our holdings, and cash/margin comprises 5–20%. Instead of picking individual stocks, we focus on entire markets, industries, and sectors using Indices/ETFs.

Quarterly Portfolio Review

1. Rebalance Overall Portfolio — We rebalance our overall portfolio at the end of every trading quarter.
2. Create Monthly Schedule — We create a monthly schedule for the next 3 months to maintain our overarching Risk Management strategy.

Quarterly portfolio reviews allow us to balance our accounts every month by either taking profits off trading accounts or redistributing account balances to appropriate ratios. This distributes the risk on a higher level, across markets, strategies, and brokers.

Monthly Portfolio Assessment

1. Recalculate & Assess Performance — We recalculate and assess our portfolio performance at the end of every trading month.
2. Standard Deviation & Portfolio Beta — We analyze the standard deviation of portfolio returns and calculate the portfolio beta for stock accounts.
3. Alpha & Sharpe Ratio — We measure the alpha and Sharpe ratio, two key performance metrics, to evaluate the effectiveness of our strategies.
4. Produce Monthly Summary — We produce a summary of the month, highlighting key insights and lessons learned.
5. Create Weekly Schedule — We create a weekly schedule for the next 4–5 weeks, ensuring we have a well-planned approach to each trading week. (include upcoming earnings dates, other key events, long long-term trade opportunities)

Daily Trading Routine

1. Mind & Body — Allocate 1 hour in the morning for activities like meditation and self-care.
2. Slack — Spend 10 minutes checking Slack for important updates and communications.
3. Market Research — Set aside 30 minutes to analyze market news and trends.
4. Trading — Allocate dedicated time for executing trades and managing positions.
5. Learning & Journaling — Devote time to learn new trading strategies and techniques, as well as journaling trading experiences for reflection and improvement.

Our daily trading routine emphasizes the importance of taking care of the mind and body, allocating time for market research, leveraging communication platforms like Slack, executing trades, and continuous learning through journaling.

“Past performance is the best predictor of success.” — Jim Simons

Our mission at AMB Capital is to provide our clients with a clear path to a financially free & prosperous future in an uncertain world. We do this by protecting and growing our client’s financial assets. We tailor-make solutions specifically for you and provide a trusted avenue to financial growth and prosperity that you can rely on. We are built on the principles of ‘Disciplined People, Disciplined Thought, Disciplined Action’.