Building a Trading Business Through Iterative Trading
Summary
The article advises new trading businesses to begin trading with available skills and tools, then build operational capabilities in response to real market experience. It argues that constructing a large technology stack before trading can waste effort because a trader’s needs and market opportunities may change. The proposed cycle is to pursue simple, manageable edges, learn from execution, and improve research, technology, risk controls, and processes gradually.
Examples include hedged crypto perpetual basis trades, cross-venue pairs trades, equity and bond risk-premia strategies, and short-volatility exposure. The article describes what each approach can teach about execution, funding, cross-exchange risk, rebalancing, position sizing, and asymmetric losses. It mentions one return figure for a DeFi implementation, but provides no supporting methodology, risk-adjusted comparison, or independent evidence. The examples are illustrative rather than universal recommendations; their profitability, capacity, operational demands, and risks depend on markets and conditions. In particular, short volatility can incur occasional large losses, while DeFi introduces additional counterparty and operational risks.
Key ideas
- Begin with trades that can be managed using current resources and build capabilities incrementally.
- Market feedback can reveal which technology and processes are actually needed.
- Crypto basis and cross-venue funding trades can teach spread execution and venue risk management.
- Risk-premia strategies offer experience with rebalancing and position sizing.
- Short-volatility exposure can earn a premium while carrying occasional large losses.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.