Ideas for patenting/selling a trading strategy
If you have a great technical trading system that gets you winning trading 80-85% of the time in backtesting, the question should be why are you not trading it? To get a better idea of how good your trading system is you should work out your expectancy per trade. This will tell you how much you should make on average for every trade you take. Expectancy not only considers your win rate but also you win size to loss size ratio. For example if you are getting winning trades 80% of the time but your average win size is $100, and your 20% of losses average $500, then you will still be losing money. You should be aiming for an average win size of at least 2.5 to 3 times you average loss size. This will provide you a profitable trading system even if your win rate is 50%. If your trading system is really that good and provides a win size of at least 2.5 times your loss size then you should be actively trading it. Also, if you put your trading system out there in the public domain together with your trading results you will actually find that, quite opposite to what the consensus above is, your results from your trading plan should actually improve further. The more people acting on the outcome of a signal in the same direction the higher the probability that the movement in the desired direction will actually occur. If you are looking to make money from your trading ideas, no one will pay anything unless you have real results to back it up. So if you are so confident about your system you should start trading it with real money. Of course you should start off small and build it up over time as your results eventuate as per your simulations.
It's not the concept of patents that is a failure.  It's the application of them.  The Copyright Clause of the U.S. Constitution states that Congress may grant exclusive production rights to authors and inventors **for a limited time**... in order to **promote science and art**.  It was supposed to protect people who put a large investment of time and resources into developing something.  It wasn't the *idea* that was supposed to be protected – it was the *investment* in developing the idea.  That is not how intellectual property is used today.  Companies have instructed politicians to change the laws so that they can use intellectual property rights to maximize profits and monopolize industries.  There was never any problem with the concept of patents.  The problem lies with government.  As long as businesses are allowed to legally bribe politicians, the laws will be altered to favor those businesses. "But speculation is absolutely intended to happen, and is considered necessary for healthy a investment environment.  What I am saying, however, is that this desire to rid the world of HFT appears to be moral rather than logical. There is very little reason to eliminate HFT as it stands, although there appears to be a propensity for very emotional responses to the basic concept. Ones I can appreciate. However I am suggesting they are misguided as the people who should be upset with HFT are the hedge fund managers and day traders they are outwitting, not you or me who buy and sell shares on a whim every so often. If you want to ban day traders that is a separate argument I don't want to go into.  The idea that these computer algorithms are all set to ""sell,sell,sell"" is provably nonsensical. If that were the case, all of the HFT participants would have gone massively bankrupt during the flash crashes. Also, it is quite patently the case that somebody has to be buying in order for anybody to sell. Saying ""this is what caused some of the crashes"" is just your desire for a simple explanation. It must have been more complex than this, and to my knowledge none of these crashes have been adequately explained although some poorly designed algorithms have been implicated. Note that in one of these cases IIRC a fund closed its doors due to the losses, and the market was largely unaffected. So it seems like a problem that self corrects in this case, and one that only *harms* the participant that erred.  Also, to correct a basic misunderstanding, selling happens all of the time, and does not inherently drive the price down. There are by definition an *equal number of sales to purchases*. What drives the price down is *the people buying being willing to pay less*.  EDIT: as another aside, a point I have made elsewhere and seems suitable to make here: flash crashes, whilst causing panic, are again something only the professional intra-day trading community are likely to be affected by. Their very name implies so. The reason being that anybody investing based on the *long term investment potential* of a company will only benefit in the temporary drop in price, as they can purchase more of the company at a bargain price. Any intelligent investor will not be fazed by the drop in price, as price has *no bearing on a company's real value*, and stocks do tend towards this value over time, whatever happens over the short term. The only case in which it could is if the company owns a large portfolio of stock that itself devalues dramatically that they intended to sell and as a result experience cash flow problems. This is so incredibly unlikely with a flash crash as to be ignored." You could try to refine your options strategy:  For instance you could buy the USD 750 call option(s) you mentioned and at the same time sell (short) call options with a higher strike price, which is above the share price level you expect that Apple will trade at in one year (for instance USD 1,100).  By doing this, you would receive the premium of the call option(s) with the higher option, which in turn would help you finance buying your USD 750 call(s). The net effect of this trading strategy would be that you would give up the extra profit you would earn if Apple would rose above USD 1,100 (the strike price of the call option sold short). Your total risk would be even less than with your actual strategy (in my view). Well the stated intended goal for the organization is to change the car market and they seem to have been very successful at that so far. I see where you're coming from, but I think you're using a different measuring stick than what is intended for their strategy.   They released all their patents. That should be a great indicator of what success means for them. Good idea, but you can already imagine how that will turn out: Patents will be used in some pro-forma way, without intention of serious commercial use, to avoid using them.  For trademarks, this already happens. After a merger, companies continue to formally use a brand/trademark of an acquired company that they have effectively terminated, in order to avoid other companies using that trademark (or a very similar one). Coolness - It's not only a matter of staying calm when being up or down. You must keep yourself from chasing a stock that appears to be running away. Or from betting all your money that something(like say a crash) will happen tomorrow because that would be great for you. Use your head not your heart. Empathy - You need to understand what other speculators, investors, institutions and algorithms are going to do when there is a new development or technical signal. And why. For publicly traded corporations, fundamentals and technical indicators only have the value that people(and their algorithms) choose to assign to them at that particular moment. And every stock has a different population trading it. There is no rule of thumb. Patience - To trade successfully, you must avoid trading at all costs. Heh. If you can't find any good trade to do, don't open positions in order to meet your targets, buy a new smartphone, or to fight boredom. Diligence - If your strategy relies on tight stops, don't make exceptions. If your strategy relies on position sizing, don't close when you are a few points down. Luck - In the end almost every trade can turn against you very badly. You must prepare for the worst and hope for the best. You can't buy luck, or get luckier, but you can attempt to stack probabilities: diversify, buy options to insure your positions, reduce holding time, avoid known volatility events, etc. There are strategies based on yields. Dogs of the Dow being a specific example while Miller Howard has a few studies around dividends that may be of use if you additional material. Selling off a portion of the holding can run into problems as how could one hold 10 shares, selling a non-zero whole number every year for over 20 years if the stock doesn't ever pay a dividend in additional shares or cash? "I'm just trying to visualize the costs of trading. Say I set up an account to trade something (forex, stock, even bitcoin) and I was going to let a random generator determine when I should buy or sell it. If I do this, I would assume I have an equal probability to make a profit or a loss. Your question is what a mathematician would call an ""ill-posed problem.""  It makes it a challenge to answer.  The short answer is ""no.""  We will have to consider three broad cases for types of assets and two time intervals. Let us start with a very short time interval.  The bid-ask spread covers the anticipated cost to the market maker of holding an asset bought in the market equal to the opportunity costs over the half-life of the holding period.  A consequence of this is that you are nearly guaranteed to lose money if your time interval between trades is less than the half-life of the actual portfolio of the market maker.  To use a dice analogy, imagine having to pay a fee per roll before you can gamble.  You can win, but it will be biased toward losing. Now let us go to the extreme opposite time period, which is that you will buy now and sell one minute before you die.  For stocks, you would have received the dividends plus any stocks you sold from mergers.  Conversely, you would have had to pay the dividends on your short sales and received a gain on every short stock that went bankrupt.  Because you have to pay interest on short sales and dividends passed, you will lose money on a net basis to the market maker.  Maybe you are seeing a pattern here.  The phrase ""market maker"" will come up a lot. Now let us look at currencies.  In the long run, if the current fiat money policy regime holds, you will lose a lot of money.  Deflation is not a big deal under a commodity money regime, but it is a problem under fiat money, so central banks avoid it.  So your long currency holdings will depreciate.  Your short would appreciate, except you have to pay interest on them at a rate greater than the rate of inflation to the market maker. Finally, for commodities, no one will allow perpetual holding of short positions in commodities because people want them delivered.  Because insider knowledge is presumed under the commodities trading laws, a random investor would be at a giant disadvantage similar to what a chess player who played randomly would face against a grand master chess player.  There is a very strong information asymmetry in commodity contracts.  There are people who actually do know how much cotton there is in the world, how much is planted in the ground, and what the demand will be and that knowledge is not shared with the world at large.  You would be fleeced. Can I also assume that probabilistically speaking, a trader cannot do   worst than random? Say, if I had to guess the roll of a dice, my   chance of being correct can't be less than 16.667%. A physicist, a con man, a magician and a statistician would tell you that dice rolls and coin tosses are not random.  While we teach ""fair"" coins and ""fair"" dice in introductory college classes to simplify many complex ideas, they also do not exist.  If you want to see a funny version of the dice roll game, watch the 1962 Japanese movie Zatoichi.  It is an action movie, but it begins with a dice game.   Consider adopting a Bayesian perspective on probability as it would be a healthier perspective based on how you are thinking about this problem.  A ""frequency"" approach always assumes the null model is true, which is what you are doing.  Had you tried this will real money, your model would have been falsified, but you still wouldn't know the true model. Yes, you can do much worse than 1/6th of the time.  Even if you are trying to be ""fair,"" you have not accounted for the variance. Extending that logic, then for an inexperienced trader, is it right to   say then that it's equally difficult to purposely make a loss then it   is to purposely make a profit? Because if I can purposely make a loss,   I would purposely just do the opposite of what I'm doing to make a   profit. So in the dice example, if I can somehow lower my chances of   winning below 16.6667%, it means I would simply need to bet on the   other 5 numbers to give myself a better than 83% chance of winning. If the game were ""fair,"" but for things like forex the rules of the game are purposefully changed by the market maker to maximize long-run profitability.  Under US law, forex is not regulated by anything other than common law.  As a result, the market maker can state any price, including prices far from the market, with the intent to make a system used by actors losing systems, such as to trigger margin calls.  The prices quoted by forex dealers in the US move loosely with the global rates, but vary enough that only the dealer should make money systematically.  A fixed strategy would promote loss. You are assuming that only you know the odds and they would let you profit from your 83.33 percentage chance of winning. So then, is the costs of trading from a purely probabilistic point of   view simply the transaction costs? No matter what, my chances cannot   be worse than random and if my trading system has an edge that is   greater than the percentage of the transaction that is transaction   cost, then I am probabilistically likely to make a profit? No, the cost of trading is the opportunity cost of the money.  The transaction costs are explicit costs, but you have ignored the implicit costs of foregone interest and foregone happiness using the money for other things. You will want to be careful here in understanding probability because the distribution of returns for all of these assets lack a first moment and so there cannot be a ""mean return.""  A modal return would be an intellectually more consistent perspective, implying you should use an ""all-or-nothing"" cost function to evaluate your methodology."