Anthony Abry is the President of InStat Research. He is based in Portland, Oregon.
How would you describe InStat Research?
InStat Research developed out of a passion of the financial markets. For years I worked as a private trader, wealth manager and trading strategy developer. This was not a smooth path. In the 90's I was trading with fundamental research tools - studying financial statements, researching Value Line reports, and getting $100 Dow Jones Telerate company profiles faxed to me. It was difficult finding information and I excelled at it. Many of us "investors" believed we were really good, but in hindsight, we just caught the rising tide of the 90's and were just plain lucky.
Luckily, by 2000, I had stops in place - but I was still not 100% technical analysis. By the end of 2000, after getting stopped out numerous times, and always re-entering new trades because the research warranted it, I realized that price is the only measure to judge the current value of a stock. Financial statements were being created deceptively, news gave no profitable information, - there had to be a better way. I discovered technical analysis as a superior method to fundamental analysis for measuring and analyzing price.
Technical analysis, however, is not as easy as it looks. There is no set curriculum and many voices exist on the internet. The best tool for measuring and quantifying methods was a computer and I became competent by programming various published trading strategies. In the process I also discovered many myths on trading strategies performance - and therefore learned to question every assumption out there. My technical analysis therefore evolved into a quantifyable technical analysis. A big help along the way was completing the technical analysis curriculum of the Market Technician Association. It would have saved me years in my development if I would have discovered them earlier.
InStat Research developed out of my desire to help clients develop and implement sound investment strategies. Our clients are very diverse and in various stages of their own development cycle. Our job is to help identify where the client is, where the client wants to be, and identify various pathways of getting there. For instance, one client with solid technical analysis skills just needs programming. We use Amibroker as our main platform because of its flexibility and speed and provide programming services for it. Another client needs several strategies developed and later wants it implemented via an automated or semi-automated system. For that client, a longer term and very collaborative relationship is more desirable. There is no watching the clock for billable hours and ultimately benefits the client with value added hours.
We don't have static services or products. The world is evolving and our clients tell us what they want. If our clients want the updating process to be automated, then we will install their program on the cloud, have it update itself, run a backtest and send a list of trade recommendations to them.
Please describe your approach to understanding the markets
Markets are such an interesting mix of crowd psychology. We are all part of it and are influenced by mass media, the psychology of decision making, financial behaviors and so forth. The consequences of which are seen in the flow of funds among the various asset classes. It is measurable and it is real. It can give us good risk reward ratios, and high probability entry and exit points. Quantitative systems give us system performance metrics which let us know if we are still on track or not - when we are in sync. The markets do not give us 100% answers and when we are in a gray zone our brains play tricks on us. Even hindsight is not clear. Adherence to expectancy metrics is key to proper system performance evaluation. Those metrics are established in the first analysis phase and provide guidance in strategy implementation. The entry, maintenance and exit plan is therefore written in stone.
Do you personally use automated systems?
My personal systems are 100% automated. They have a big initial development cycle, and then are a snap to implement. They get traded according to plan.
What key statistics do you use for your systems?
I am very conservative. When developing a system I spend a great deal of time on defining what I am comfortable with and the corresponding vitals of the system. The vitals let me know when the system is sick. That means, knowing, with confidence, that a certain number of consecutive losing trades are part of a healthy system which is temporarily out of sync with markets versus a systems which is broken. Win/loss ratios, payout ratios, consecutive winners and losers are all very important. Monte Carlo simulation is used to determine account and trade size. Multiple systems offset each others in/out of sync cycles and make life a lot easier.
How do you see the future of the financial markets?
It is very exciting. There is so much opportunity and such a low barrier of entry. However, people need to realize that a low barrier of entry comes at a price. There are a lot of brains in the markets, a lot of competition. It takes a lot of study, observance, backtesting, modelling and passion as the driving force to succeed. The 10,000 hour rule (i.e. practice for 10,000 hours in order to become a professional) holds true - more than ever. New products will be developed, new ways of implementing strategies will evolve. And the old tools for measuring value will not only still work but also provide a proven way of dealing with the never ending world of uncertainty.