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I have a precise investment strategy using Bollinger Bands, 3 minute charts, and specifically defined QQQ price movement requirements that dictate buy and sell points. The decision steps are determined by my rules, not by hunches or any emotional factors. The strategy typically involves making about 25 two-way trades a day and closes out at the end of each trading day at 4 pm Eastern. I have back-tested the strategy daily for the past six months and have not had any losing days.

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  • What are you trying to do? Are you planning to market it or license it? I also would test the algorithm over a longer historical period.
    – Eric S
    Commented May 2 at 17:28
  • I am planning to get it coded as an algorithm to run on my Morgan Stanley brokerage account. I am just concerned about others not copying it exactly or close to it. The reason the strategy has worked every day for six months is that it is set up to cut losses early and let gains run until sell criteria are met. I plan on back testing it daily for some additional months as you suggest.
    – tblan723
    Commented May 2 at 21:53
  • If you want to keep it secret, then a patent is the last thing you want since you have to disclose the algorithm.
    – Eric S
    Commented May 2 at 23:51
  • You can’t just check for a few more months. 2023-2024 has been very good for this fund. 2022 not so much. These sort of strategies work until they don’t and when they don’t they may fail badly.
    – Eric S
    Commented May 3 at 0:46
  • One thing I have noticed is that the daily volatility range does affect the returns for a given day over the months. So, if QQQ 2022 volatility was significantly lower than 2023, the amount of profit would have been less than 2023. However, even the lowest daily volatility days over the past six months didn't turn them into losses, just less profit. Thanks for the confirmation that a patent would be a bad idea.
    – tblan723
    Commented May 3 at 12:54

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Beating the market every single day for 6 months straight is a very implausible result, are you sure there is no error in your test methodology?

Assuming you have something that works, I suggest you keep it as a trade secret rather than attempting to patent it. By patenting you will have to disclose your trading scheme fully, and there is the possibility that someone will study your strategy and come up with a trading scheme that is inspired from it but sufficiently different to be a legitimate design around of your claims.

To get a worthwhile patent, it's necessary to generalize a bit from the specific thing that was first invented in order to make it harder to design around. I think this would be more difficult to do for a trading strategy than for other types of inventions but I'm admittedly having difficulty pinpointing the exact nature of the distinction.

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  • Thanks for the trade secret idea- I was concerned about how to keep others from tweaking it to get around a patent
    – tblan723
    Commented May 2 at 21:48
  • I get your wonderings about how the strategy could work without a loss for six months. I have been back testing and refining the strategy for several years. The current edition is the result of working out the bugs of past strategies I've tested. I have no elusions about the strategy always being profitable going forward, but I'm comfortable with moving ahead with this latest one. Can't wait forever!
    – tblan723
    Commented May 2 at 21:58
  • @tblan723 The main question is whether your brokerage guarantees secrecy on their end.
    – Eric S
    Commented May 2 at 23:54
  • @tblan723 If your algorithm runs locally on your computer you are probably safer with regards to secrecy.
    – Eric S
    Commented May 3 at 0:48
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Pure business method patents were effectively ended by the Supreme Court’s Alice decision after being dealt a serious blow by Bilski.

It is very easy to characterize a trading scheme as abstract and not having “something more”. If you do not have a technical solution to a technical problem in a business method claim it will be almost impossible to avoid section 101.

An example case concluded that a garage door opener patent that was granted and upheld by a lower court was invalid because it contained the abstract idea of wirelessly transmitting the state of a physical object.

https://patentlyo.com/patent/2019/08/chamberlains-invalid-abstract.html

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  • I don't doubt that it would be an uphill battle to try and patent a trading strategy. Yet I don't see from the text of the Alice decision why it would be automatically impossible - the decision makes clear that the concern for an abstract idea rejection is pre-emption. An accurate rendition of a technical trading strategy into a claim, especially if it includes fairly complex rules, doesn't seem like it would foreclose substantially all uses of any particular abstract idea.
    – bhuff36
    Commented May 3 at 18:14
  • Having re-read 2106, I still don't see a claim to a technical trading strategy as being directed to an abstract idea in the first place (and, hence, requiring "something more" to save it). The closest USPTO "enumerated groupings of abstract ideas" is the "mathematics" category, but while technical trading algorithms are ultimately based on calculations I wouldn't say the calculations are particularly mathematical in nature. Just my 2c though.
    – bhuff36
    Commented May 4 at 19:44

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