How did you approach the hedge funds that you sold your trading systems to?

Wall Street Nole ‏@WallStreetNole: How did you approach the hedge funds that you sold your trading systems to? Was it hard to get in the front door? Expand


I had no idea what to do. The only way I could survive was if I returned a 100% a month on my money and used all those gains to just pay for food, mortgage payments, basic needs, and then start all over at the beginning of each month. My apartment was up for sale but I lived only a few blocks from ground zero and sadly the entire area smelled and my the playground was closed for asbestos and…on and on. It was just bad. The Red Cross would regularly stop by to talk to me to see if I was “doing ok”. But there was nothing they could do. Were they going to pay my mortgage.

I never slept. I was so stressed. I would take several mile walks every morning. I would take walks every afternoon after the market closed. A half block from my house was the FBI headquarters. Almost every day I’d see another van pull up to their building and a dark-complexioned guy would be pullled out with chains around his arms and legs and walked into the building, presumably to never see the light of day again.

Friends? I had none. All of my “internet” friends had disappeared. And I was too ashamed to make any new friends. I was a failure. I was afraid to talk to anyone. I was sure I was going to zero and that when that happened I was sure I was going to die. My expenses were unnatural because of the lifestyle I had plugged myself into when I had money. One time I thought I could borrow money off of my house and then I was planning on disappearing with my family. I was desperate in every way.

But I had to trade. I had to make money. I developed trading software that was based on modeling patterns in the markets. I would look at a pattern like: what happens if a stock falls 20% in 5 minutes (for instance, in a bad court decision, or a bad FDA decision). I found out that statistically those stocks had a strong chance (> 90%) of bouncing in the next hour. So I had automatic triggers on about 3000 stocks that if they fell 20% in a 20 minute period my system would automatically buy, then sell on any 5% pop. Volatility was huge then (2002) and this situation tended to occur quite a bit. Sometimes I’d go out to lunch (pre-smartphone, pre-ipad) and by the time I came back I had made several trades and a few thousand dollars. You can say, “that’s great!” but I needed much more than that to survive.

Meanwhile, nobody was even looking to buy my house. Nobody was looking to do any business with me. And on the days when i would lose money (for instnace, if the stock that went down 20% ended up going down another 50% after I bought it) it was as if I had been kicked in the stomach and hit over the head with a baseball bat. I probably cried every day. I probably felt a cramp in my stomach every day. I wanted to die. Everytime I stepped in the shower (which was a rare event) I would try to breathe in the water to drown. A lame way to attempt suicide but I was lame in every way.

Finally, I had to get healthy. There was no choice. I had two daughters to feed. I was bitter because I felt all the people I had helped over the years had abandoned me. Only I could help myself. Nobody else was going to come to my rescue. So I started taking longer walks. I started eating healthier. I made friends. I was grateful to be alive. And I began to surrender to what happened. Yes, I had fucked up. But now it was time to move on.

Every morning, after my walk, I would read about the financial services industry. I was determined to start a hedge fund or start working for a hedge fund. I read every biography I could find. I recently gave away about 200 books about trading and financial wizards and hedge funds and so on.

I started emailing people I wanted to meet. I would write, “can I just buy you a coffee”.

Nobody would respond to me. All the most famous hedge fund managers in the world didn’t respond to me. Probably about 20 people didn’t respond to me the first day. 20 more people didn’t respond to me the second day. They were very busy and had better things to do than meet a loser like me. I don’t blame them. I would’ve done the same thing as them.

So then instead of making a list of people who I could meet, I made a much more important set of lists.

For each person I wanted to meet, I gave them ten ideas. If I wanted to meet a value-focused investor I would send him a list of ten companies I thought were undervalued and why. If I wanted to meet an investor focused on arbitrage I would come up with ten interesting arbitrage situations and just send them and say I had more if he wanted to meet.

20 people didn’t respond to me. So I came up with more people to write. More people to send ideas to.

With Victor Niederhoffer, the author of “Education of a Speculator” and a hedge fund manager I admired for a variety of reasons, I gave him ideas for trading systems based on the software I had written. I gave him the specific systems that worked for me. Was I worried someone would steal from me? Never. Nobody can steal from you if you align yourself with infinity. The ocean is happy to give up a glass of water.

With Jim Cramer, I sent him ten ideas for articles I felt HE should write. Not even articles I could write for him. I gave him ten solid ideas of articles that I thought would provide a lot of value for readers. Readers who wanted to make a ton of money. In other words, readers like me. I had done all the research for the articles. I practically poured that research onto him.

Both responded. Jim let me start writing for And in doing so, I began a career of financial writing that culminated in me writing for a dozen different publications, several books about financial stuff, and ultimately led to me starting, which I sold to Jim’s company, Here’s 10 things I learned from Jim Cramer.

With Victor, I eventually started managing some of his personal money very successfully. I was up about 130% for him over the next year. This led me to managing money for other hedge funds. This ultimately led to me running a fund of hedge funds, where I allocated money to other traders.

It took about 2 years from that point but I was fully back on my feet, making a good living. Then another 2 years before I was generating real wealth. All the time, continually coming up with ideas for people, giving them away for free, and repeating the process while I built up my network. The wealth created from building a network, created from giving ideas away for free, compounds. I am still reaping the benefits of that process.

  • anonymous

    That’s a remarkable struggle James !
    I am also about to begin my struggle … James what can you suggest me to do : I have found a trading system for currency pair last year. It’s been already a year since it is still working, and all my simulations from 2005 gives me 8-50% yield per year. I have checked if it works with different brokers (since the price movement is not the same) and the system works with every broker !
    Now what can I do to find money and make more money out of it ? I have no reputation of a former hot shot trader, and I have no connections. I have just studied some finance in college, I am computer savvy, that’s all !
    ps – the system doesn’t rely on any bull shit moving average indicator that you can easily find on internet, and that shall give you fake results if even automated. I have been doing excel trading, I have been reading books like Trading Chaos, the system basically relies on Elliot wave and Fibonacci plus a very simple approach on when to get in and when to get out.
    I shall put all the results and statistical analysis of the trades in my upcoming website
    Ultimately I am thinking about giving away the secret about how to use my system, write a book and sell it for $9,99 if something like 10000folks shall pre order it ! Or keep using my 10 000$ working capital and in 10 years I shall probably get almost 100 000$ provided that the average yield will be about 24% per year…( ln(10)/10)