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100% mechanical systems

  • #1
  • First Post: Jul 31, 2007 7:56am Jul 31, 2007 7:56am
I'm getting just a bit tired of reading "mechanical systems lose money."

I think Aparsai is posting some pretty good numbers so far w/ his forward tests.

My partner and I are standing up a 100% mechanical system in a few weeks.... we have top notch money management in place, and I personally believe we will outperform most human traders.

Anyone not believing in mechanical systems should check out www.atdesk.com. They were just purchased by Citigroup for $680 million.
  • #2
  • Jul 31, 2007 8:25am Jul 31, 2007 8:25am
Hi tdion,

I believe that the technology provider you refer to is not a "mechanical trading robot" as we think of when we talk about EAs. ATdesk is more of an automated execution partner. They are in the middle of the equities trading food chain.
They make sure that when you trade a stock especially in large volumes that you can get quick execution. This means alot for larger investment companies since a penny or part of a penny shift means a lot of money. I do not believe that their software automatically makes the decision to trade this way or that.

I wish you success in your own mechanical work.
  • #3
  • Jul 31, 2007 8:35am Jul 31, 2007 8:35am
Quoting tdion
I'm getting just a bit tired of reading "mechanical systems lose money."

I think Aparsai is posting some pretty good numbers so far w/ his forward tests.

My partner and I are standing up a 100% mechanical system in a few weeks.... we have top notch money management in place, and I personally believe we will outperform most human traders.

Anyone not believing in mechanical systems should check out www.atdesk.com. They were just purchased by Citigroup for $680 million.
Citi loses money every year trading...

I think the numbers came out something like they make around 600 million in profits from customer's commissions, but loses on average 300 million a year trading..
  • #4
  • Edited 9:54am Jul 31, 2007 8:37am | Edited 9:54am
Actually ATD has two divisions. One is exactly what you speak of.... ensuring lightning fast execution of orders for clients.

The other side of the house is an automated trading operation.

And Superdesign: ATD was just purchased as a standalone business. They are profitable trading, and just raised $60 million in venture capital before the buyout.
  • #5
  • Jul 31, 2007 8:52am Jul 31, 2007 8:52am
Quoting tdion
Actually ATD has two divisions. One is exactly what you speak of.... ensuring lightning fast execution of orders for clients.

The other side of the house is an automated trading operation.

And Superdesign: ATD was just purchased as a standalone business. They are profitable trading, and just raised $60 million in venture capital before the buyout.
Does their auto trading involve forex?

Trading 4x verses equities requires much different system parameters.
  • #6
  • Jul 31, 2007 9:05am Jul 31, 2007 9:05am
They only trade the Nasdaq and NYSE. In fact, they execute 6% of the entire US stock market volume each year. There are no plans to enter the FX market, however my point is that autotrading can be profitable.
  • #7
  • Aug 10, 2007 11:08pm Aug 10, 2007 11:08pm
usually people who can't program say this and that about mechanical trading systems.

it is one of the most profitable ways, as it removes emotions completely. also, thanks to 24/7 forex, it makes money for us as we sleep!
{Promotion Removed}
  • #8
  • Aug 11, 2007 12:48am Aug 11, 2007 12:48am
I'm in the process of designing my own EA (just taught myself MQL yesterday, got done 500 lines!) on an idea that i've been toying with for a little while and so far forward testing has been decently profitable, hopefully I can carry this over and eliminate all emotions with a completely mechanical system.
  • #9
  • Aug 12, 2007 1:12pm Aug 12, 2007 1:12pm
Quoting tdion
I'm getting just a bit tired of reading "mechanical systems lose money."

I think Aparsai is posting some pretty good numbers so far w/ his forward tests.

My partner and I are standing up a 100% mechanical system in a few weeks.... we have top notch money management in place, and I personally believe we will outperform most human traders.

Anyone not believing in mechanical systems should check out www.atdesk.com. They were just purchased by Citigroup for $680 million.
I agree 100%. There appears to be some fundamental disagreement with mechanical autotrading for a lot of people who won't even consider that such a system can work - never mind the details or whether or not it already works for some people!

I am working on two mechanical systems, both of which are profitable, although not to the level I have specified to be traded live (actually enough profits, but not enough trades).

I started a thread to discuss autotrading systems and considerations. I am going to update it Monday morning with a number of ideas and myths. Please check it out tomorrow, and let me know what you think;

http://www.forexfactory.com/showthread.php?t=41603

Thanks,
-Duke
  • #10
  • Aug 12, 2007 1:35pm Aug 12, 2007 1:35pm
I think a lot of people looks at mechanical systems to solve other problems, like for example bad discipline. When things go belly up it's much easier to blame the system than to address the actual problem.

I also think that if you can trade you will be able to do both discretionary and mechanical, you might like one more than the other but that is about that.

Enjoy
  • #11
  • Aug 12, 2007 2:05pm Aug 12, 2007 2:05pm
Quoting tdion
Actually ATD has two divisions. One is exactly what you speak of.... ensuring lightning fast execution of orders for clients.

The other side of the house is an automated trading operation.

And Superdesign: ATD was just purchased as a standalone business. They are profitable trading, and just raised $60 million in venture capital before the buyout.
I'm rather curious as to whether you have any hard info on this; ATD's main purpose isn't lightning fast execution, but the placement of large block trades. Because large block trades stuffed into the market can cause adverse feedback effects to the trade or portfolio itself, they get broken up into smaller pieces and get traded tactically. (ATD itself was formed in response to the '87 meltdown, which in turn was caused by program trading that wasn't sufficiently sophisticated to deal with the feedback effect).. FWIW, most of this info is available on their website.

This is very different than speculative trading; the ATD trading is essentially defensive, speculative trading is essentially offensive. A program trading system (like ATD's) will try and keep the selling price of a security above a particular level (the one guaranteed by ATD to the customer initiating the trade) as it executes the trade; it not only has the basic market numbers, but can measure the effect of successive smaller block trades in order to gauge how fast or slow it can put the trade on. That's a very key bit of information (a direct measurement of the depth of the market) not available to smaller traders. Especially in FX, where there is no accurate measurement of volume.

Anyway, if you have other info, please post it; I would be happy to read & learn.
  • #12
  • Aug 12, 2007 2:29pm Aug 12, 2007 2:29pm
I live in the city where ATD is headquartered. The information I posted on ATD came straight from one of their employees whom I had lunch w/ 3 weeks ago. My concern was that ATD would enter the forex market w/ Citi's liquidity, thus changing intraday characteristics of pairs. He claimed they will not enter these markets.

The business model is exactly as I have described.... one division is executing trades as a clearinghouse for clients such as eTrade, etc..... down the the sub 10 nanosecond execution time per transaction.... their main competitor for this service is Knight.

The other group creates and deploys various stock trading math models. Though ATD (speculatively) doesn't make as much as it did before stock price decimalization occured a few years ago, they make enough to take over the entire equities trading group of Citi (thus the purpose of the buyout....)



Quoting HalifaxCB
I'm rather curious as to whether you have any hard info on this; ATD's main purpose isn't lightning fast execution, but the placement of large block trades. Because large block trades stuffed into the market can cause adverse feedback effects to the trade or portfolio itself, they get broken up into smaller pieces and get traded tactically. (ATD itself was formed in response to the '87 meltdown, which in turn was caused by program trading that wasn't sufficiently sophisticated to deal with the feedback effect).. FWIW, most of this info is available on their website.

This is very different than speculative trading; the ATD trading is essentially defensive, speculative trading is essentially offensive. A program trading system (like ATD's) will try and keep the selling price of a security above a particular level (the one guaranteed by ATD to the customer initiating the trade) as it executes the trade; it not only has the basic market numbers, but can measure the effect of successive smaller block trades in order to gauge how fast or slow it can put the trade on. That's a very key bit of information (a direct measurement of the depth of the market) not available to smaller traders. Especially in FX, where there is no accurate measurement of volume.

Anyway, if you have other info, please post it; I would be happy to read & learn.
  • #13
  • Last Post: Aug 12, 2007 2:46pm Aug 12, 2007 2:46pm
Quoting tdion
The other group creates and deploys various stock trading math models. Though ATD (speculatively) doesn't make as much as it did before stock price decimalization occured a few years ago, they make enough to take over the entire equities trading group of Citi (thus the purpose of the buyout....)
This is interesting, because it indicates a big part of 'speculative' business is simply arbitraging the tiny spread differences between various market makers. That's been a hot item (usually referred to as algorithmic trading) but is, again, different from general speculative approaches, except perhaps scalping,and is a dimishing returns market as others focus on it, so it's a great time to sell it. I am intersted though in any info you might have on their prop trading directions, if any.
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