Quality Money Management : Process Engineering and Best Practices for Systematic Trading and Investment

(Michael S) #1

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feasibility issues, performance issues, or any other factor that could result in a less-than-
satisfactory final product. If both the product team and management make project risk
management a priority, discussion will be more fruitful. Product team members may feel
threatened by conversation that shines light on issues they might have missed or assump-
tions they should reconsider. But, teams that avoid a defensive posture learn faster, their
projects will move forward faster, and their credibility will rise in the eyes of seed capital
providers.^6
At the point of the Gate 1 meeting, the design must be ready for full-scale backtest-
ing, and a freeze is typically applied on the quantitative methods and business/trading rules,
apart from optimization routines that will be run as part of the backtesting stage. After this,
quantitative methods may be changed only through a change control process and a return to
Stage 1 for review, testing, and verification, including an evaluation of the change ’ s effect
on other parts of the trading/investment system. Management must review all design change
proposals at gate meetings to ensure that the change is required, and that the change will
likely accomplish the intended result.

12.2. Inputs/ Deliverables


At the gate meeting, management can expect the following deliverables:

● Full description of the trading system, including detailed discussion of the quanti-
tative methods and business logic along with a recommendation from the product
team as to how to proceed.
● Referenced research papers and documented business rules.
● Complete consolidated prototype built in Excel or other modeling software.
● Complete performance test results appropriate to the type of trading system, including
graphs, etc.
● Estimated time line and commitments for the backtesting stage.
● Estimated data and software expenses for the backtesting stage.

12.3. Summary


The benefit of gate meetings is tighter planning, leading to greater speed to market, and
ultimately to a higher probability of success for the trading/investment system.^7 Both the
product team and seed capital providers (presumably top management) should come the
gate meeting prepared to discuss the relevant issues and make go/kill decisions. As we
will discuss in the chapters on Gates 2 and 3, gate meetings are also good opportunities
to reflect on the stage just completed and to review the portfolio of new and existing trad-
ing systems and reprioritize projects.

12.3. SUMMARY
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