Red Flags in Algorithmic Trading: What You Must Watch Out For

When looking for the right investment, it is critical that we find the appropriate knowledge to make the most educated decision possible. I’ve been in the investing space for over 5 years now, and over these 5 years, I have learned a ton. I have lost a ton, but more importantly, I have gained the experience to make the right decisions for my future moving forward. In this video, I want to go over a very specific investment, which is software or algorithmic trading, and certain things that you want to look for when you’re potentially on the market to license or purchase software. And take it from me, I’ve made all the mistakes previously. Without further ado, let’s get right to it. Welcome if you’re new to the channel. My name is Matt Jimenez. I am an entrepreneur who has worked with the greatest minds in finance over the last several years, and I’m here to pour into you guys everything that they poured into me. Now let’s get right to it.

With the advancements in technology in AI, quantum trading or software trading, or algorithmic trading, whatever fancy word you want to put in front of the word trading, doesn’t matter. It’s really boiling down to how software is outpacing the performance of humans at an alarming rate, and it’s either you use technology or lose to technology. Over the last year, I’ve been trying to find the most promising technologies that I could utilize in my portfolio to make sure that I win with technology rather than lose with it. But in doing so, I have had tons of mistakes that have cost me tens of thousands of dollars, and I’m just here to tell you exactly what to look for so you are not experiencing what I had to do. They say wise people learn from the mistakes of others rather than making the mistake and learning from themselves. So take it from me. The very first red flag, the first thing that you want to look for when you’re interested in licensing or purchasing software to add to your portfolio to help you keep up with inflation and overall portfolio gains, is the custodial services that are required to use this software. For instance, for the sake of this video, I’m not going to put any names in this, but I will be speaking from my personal experience. I will just keep the names blank.

So on my first endeavor, I had this software that was trading arbitrage, that was their strategy. And the only way to utilize their software was using their own custodial service. So not only were you unable to use the software on other brokerages, you actually had to use the software exclusively with their own broker, which is the number one red flag. If you have to leave your capital with a particular broker of their choice, let alone the one that I was using was actually the same exact name of the software, which that’s a massive red flag in itself. So, first red flag, make sure that the software that you’re looking to purchase or utilize, you’re able to attach it to a multitude of different brokerages. There is always going to be third-party counter risk when you’re getting other custodial services involved when holding your capital, but make sure that you have the flexibility and the sovereignty to choose the ones that you trust most. When looking for a broker, you definitely want to look for regulated brokers. Unfortunately, when you’re looking at regulated brokers, sometimes they don’t have the leverage that allows you to utilize the software or whatever trading strategies that are optimal for the performance of the software. Now, that’s number one. And to make it not so long-winded, make sure you have options.

Now on to number two, one of the second red flag, the biggest red flags is seeing the pay incentives of how the software is sold and/or managed. For instance, the one that I was involved in, the only way to utilize the software is if you deposit your money with them, and the person who allowed you to use the software through them would be taking a percentage of your deposit and a percentage of all the profits. Now, that is highly illegal, number one, and number two, that just goes to show that there’s nothing really being sold. Now the thing that you want to look for in pay incentives is getting paid just on sales. So for instance, if I had a product and I sold it to you, my…

Please visit Red Flags in Algorithmic Trading: What You Must Watch Out For to watch the full video!

Jeff Sekinger

Jeff Sekinger

Founder & CEO, Nurp LLC

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