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Automated Trading

  • #21
  • Sep 6, 2007 9:29pm Sep 6, 2007 9:29pm
Quoting kharvell
I think the real question here is:

Do you want to be a... computer programmer who knows about trading?

...
YES I DO. {not a shout, just trying to emphisize} I've been a Trader and prefer the other option.
  • #22
  • Sep 6, 2007 9:32pm Sep 6, 2007 9:32pm
Quoting Bemac
YES I DO. {not a shout, just trying to emphisize} I've been a Trader and prefer the other option.
Exactly. At some point you just say to yourself, "Can I just automate this darn thing..."

Maybe you don't feel like trading for a week... you have that option and still be able to make money with an automated system doing the work for you.
Mr. Trend
  • #23
  • Sep 6, 2007 9:33pm Sep 6, 2007 9:33pm
Quoting Mr Trend
I would disagree. Traders who are successful feel no different whether they win or lose. Doesn't matter. So an automated system is nothing more than a nice way to, "make money while I sit on the beach."

People laugh at that statement. But I know people who do it.

IMO, there's nothing better than to come home from work, check the P/L, think to yourself, "Well that's cool, I made X today.", and go back downstairs and enjoy a movie with the wife.

Now is it enjoyable to trade. Heck yeah. There's nothing better than having an automated system doing it's thing, and perhaps trading on the hang seng every night for a little intraday. That's enjoyable.
This can get into a circular argument real quick when it comes to the discussion of emotions. IMO, if there is money to be lost, and you are trading for profits, there is always some fear of losing whether you get it down to .01% of your total emotion or you're scared sh*tless.

But I definitely agree, a good trader keeps the emotions down.
  • #24
  • Sep 6, 2007 9:37pm Sep 6, 2007 9:37pm
Quoting kharvell
This can get into a circular argument real quick when it comes to the discussion of emotions. IMO, if there is money to be lost, and you are trading for profits, there is always some fear of losing whether you get it down to .01% of your total emotion or you're scared sh*tless.

But I definitely agree, a good trader keeps the emotions down.
Agreed. I think we both are probably thinking the same thing at the end of the day.
Mr. Trend
  • #25
  • Sep 6, 2007 9:42pm Sep 6, 2007 9:42pm
Lesson Number Biggy for those observing....

"a good trader keeps the emotions down."
 Mr. Trend{Correction: Originally posted by Kharvell}
  • #26
  • Sep 6, 2007 9:46pm Sep 6, 2007 9:46pm
Quoting Bemac
Lesson Number Biggy for those observing....

"a good trader keeps the emotions down."
Mr. Trend
I thought I said that....


  • #27
  • Sep 6, 2007 9:48pm Sep 6, 2007 9:48pm
Quoting kharvell
I thought I said that....
"a good trader keeps the emotions down."


My apologies. You did say that. But I still intend to quote it.
  • #28
  • Sep 7, 2007 1:11am Sep 7, 2007 1:11am
Quoting Mr Trend
I would disagree. Traders who are successful feel no different whether they win or lose. Doesn't matter. So an automated system is nothing more than a nice way to, "make money while I sit on the beach."

People laugh at that statement. But I know people who do it.

IMO, there's nothing better than to come home from work, check the P/L, think to yourself, "Well that's cool, I made X today.", and go back downstairs and enjoy a movie with the wife.

Now is it enjoyable to trade. Heck yeah. There's nothing better than having an automated system doing it's thing, and perhaps trading on the hang seng every night for a little intraday. That's enjoyable.

We are firm believers and developers of mechanical trading strategies. We will not debate mechanical vs discretionary merits here as this thread is about auto trading.

Firstly there are a few forms of auto trading so we should be more specific.

- Auto trading using a signal providers signals is probably the most common. This often does not work and for many reasons, in fact too many to go into here but mainly the lack of discipline and patience and the use of discretion.

- Auto trading using EA's. This is more successful. But the areas where this can fail could possibly be due to the fact that the backtested strategy may not reflect a true and accurate report. More importantly you have to ensure that the internet connection and the trading platform you use are reliable and stable.

- Auto trading through a Broker. Your funds are automatically traded by the brokers platform. You can choose a system or supply your own.

We believe this will become a very successful method of investment for traders in the future.
  • #29
  • Edited 2:36am Sep 7, 2007 2:25am | Edited 2:36am
I trade a 1.2Milj managed account. I do not trade any personal account or take any personal position.

For that reason it is impossible to give my trading to an automated executing system.
Every broker that provides automated trading has in its contract that they can not be held resposible for any technical failluer.

I may not think about it that in the evening I have to phone clients and say: Sir I'm sorry but you lost a serious amount of money today due to a technical malfunction.
They would not accept this.

That is also the reason that the broker I choose to work with, is also a telephonic broker with a fully professional future desk. If my internet platform would fail that I can phone them emmidiatly and that they pick-up the phone within 3 ring tones and execute my order within 15sec.

If I would have to trade bigger amounts of money for me personnaly I would not trust this to an automated executing platform. Because one never knows what can go wrong.

I have a friend (trader) In holland. He works for a larger investment bank in Amsterdam. He takes his orders manuallly. He told me that for every trader in the trading room they have 3 technical guys continious on watch in case something happens.
For me that explaines enough that if they are so cosious that I need to be that also.

regards...iGoR
  • #30
  • Sep 7, 2007 2:46am Sep 7, 2007 2:46am
I used to not believe in EA trading, or rather I used to not TRUST them. However, I have been in contact for a while with a top-notch programmer who's coding my system into an EA and results so far are promising. He says that there's still a long road ahead before it's ready, but I am beginning to change my opinion about automated trading.

I hope he finishes it soon because Im chewing my nails in excitement!
  • #31
  • Sep 7, 2007 5:46am Sep 7, 2007 5:46am
I don't think automated trading itself is the culprit for failure. But when it gets in the wrong hands it is dangerous. If the user doesn't understand optimization, walk forward analysis, sample ratios, testing methodologies, and establish some kind of maintenance schedule then they are doomed.

Automation doesn't last forever and I think where most get into trouble is having an objective method for taking the system offline before their account is wiped out.
  • #32
  • Sep 7, 2007 10:10am Sep 7, 2007 10:10am
Quoting philmcgrew
I don't think automated trading itself is the culprit for failure. But when it gets in the wrong hands it is dangerous. If the user doesn't understand optimization, walk forward analysis, sample ratios, testing methodologies, and establish some kind of maintenance schedule then they are doomed.

Automation doesn't last forever and I think where most get into trouble is having an objective method for taking the system offline before their account is wiped out.
You really hit it on the head, Phil. All systems deterioate over time, and you need to have a good system building methodology as well...

Good post.
Mr. Trend
  • #33
  • Sep 9, 2007 1:02pm Sep 9, 2007 1:02pm
Quoting Blackeagle
If you believe mechanical systems work, automated trading is the way to go due to the fact that it eliminates emotions.
Agreed, but sometimes emotions are useful in trading. They are not always bad, sometimes they save you a big loss or reap you a large profit. Despite the fact that this is not fully correct of professional, but I believe that emotions are essential as long as your emotions do not run to the extreme.


Thanks,

Nader
  • #34
  • Sep 9, 2007 1:08pm Sep 9, 2007 1:08pm
Quoting Dave Floyd
Regarding automated systems, I actually do not know anyone personally who does it but do know that the big Managed Futures firm Winton Capital in London is automated 100% and their track record is spectacular. I met with some of the staff a few years ago and their roster was mainly stat and heavy math folks - not a trader among any of them.
.

Although I never heard of the firm before, I am sure that trading in general is a big chess board game where you are competing against some of the best minds all over the world. They are a mixture of mathematicians, floor traders, day traders, programmers, retails and so on.

I also do believe that if I am a smarter discretionary trader than the hundreds heavy math folks there, I would be taking the money out of their pockets.


Thanks,

Nader
  • #35
  • Sep 9, 2007 1:10pm Sep 9, 2007 1:10pm
Quoting narafa
Agreed, but sometimes emotions are useful in trading. They are not always bad, sometimes they save you a big loss or reap you a large profit. Despite the fact that this is not fully correct of professional, but I believe that emotions are essential as long as your emotions do not run to the extreme.

Thanks,
Nader
Hear what you say but the rules of a good autotrading system should prevent big losses anyway.

What I've seen is that people get emotional and stop using a system because drawdowns happen and they do not have proper money management in place.
  • #36
  • Sep 9, 2007 1:11pm Sep 9, 2007 1:11pm
Quoting narafa
.

I also do believe that if I am a smarter discretionary trader than the hundreds heavy math folks there, I would be taking the money out of their pockets.
That's what makes trading fun. They believe just the opposite. Your equity curve is how you keep score.
  • #37
  • Sep 9, 2007 1:11pm Sep 9, 2007 1:11pm
Quoting merlin
im not so sure about currencies, but i know on wallstreet its a well known fact that the automated systems are taking huge money out of the market. dont have a cite, but i think something like 80% of all volume on ECNs like arca and brute is done by automated systems.

one of the classic systems is an automated version of what turbokaos is famous for doing. placing limit orders far off the market, trying to catch someone throwing out a market order when they shouldnt be. you can see these orders "at work" on the order books, always shifting around looking for a victim!
Hey man, I thought that I am the only one who is doing this...lol...Turned out to be a widely known technique then.

To my surprise, I got filled before on one of those orders, couldn't figure out why the other party did so, although I think that even automated trading systems or trading bots do make mistakes and probably I got filled through the mistake of one of those bots


Thanks,

Nader
  • #38
  • Sep 9, 2007 1:15pm Sep 9, 2007 1:15pm
Quoting philmcgrew
That's what makes trading fun. They believe just the opposite. Your equity curve is how you keep score.
I know that they believe just the opposite and that they always think that if they can just program the complete or near perfect trading system, nobody would be ever able to beat it.

But to tell you something, the human mind is invincible. I never heard of a chess program that managed to stay unbeaten against human minds, this is why I do believe that we shall never hear of an automated trading system which is unbeatable

By the way, I am an Engineer and I love mathematics so much

Trading is fun, I totally agree. This is why I love it....


Thanks,

Nader
  • #39
  • Sep 9, 2007 1:28pm Sep 9, 2007 1:28pm
Quoting narafa
I know that they believe just the opposite and that they always think that if they can just program the complete or near perfect trading system, nobody would be ever able to beat it.

But to tell you something, the human mind is invincible. I never heard of a chess program that managed to stay unbeaten against human minds, this is why I do believe that we shall never hear of an automated trading system which is unbeatable
Automated trading systems (and chess programs) don't have to be unbeaten to be successful, they just have to have a positive expectancy. If you beat an automated trading system 4 out of 10 times they you are still the loser.

The point of an automated system in not to be perfect, it is to execute trades on your behalf. No amount of math can accurately predict the randomness of the market with a high degree of certainty.
  • #40
  • Sep 9, 2007 1:47pm Sep 9, 2007 1:47pm
Quoting philmcgrew
Automated trading systems (and chess programs) don't have to be unbeaten to be successful, they just have to have a positive expectancy. If you beat an automated trading system 4 out of 10 times they you are still the loser.

The point of an automated system in not to be perfect, it is to execute trades on your behalf. No amount of math can accurately predict the randomness of the market with a high degree of certainty.
Automated trading systems and chess programs are programmed to win until someone figures out how to beat them. If I beat a chess program once, it would never beat me again and it will keep losing all the way. You only need to figure out the weakness of the program and that's enough for you.

Automated trading systems are programmed to make money. And since markets change, programs that are making money now are not guaranteed to make the same money tomorrow. They are not even guaranteed to keep what they made yesterday and not lose it.

Of course, I don't mean that human traders are competing against a certain trading program. But it's a whole world full of minds as an automated trading program reflects a human mind after all (The programmer), without emotions. So, it's human minds against human minds.

The edge I am having against trading programs is that I can change strategies whenever I want to change while the trading program can't change strategies unless the programmer changes the code or the program is already built with different strategies for different conditions to be used.

Let me give you a simple example to clarify my point of view (Which is not contradicting yours by the way).

Let's assume that some programmer designed a trading program and introduced it into the market. The program worked very fine for 6 months generating nice profits. And then came another programmer who noticed that prices tend to fall strongly on Fridays when Mondays contains rallies, and found that prices tend to rally strongly on Fridays when Mondays contains sell offs. This programmer decided to program another trading system based on this observation without him knowing that prices tend to do this because another trading system is programmed to sell sharply and take profits on long positions during Fridays opened on Mondays and cover shorts and take profits on short positions during Fridays opened on Mondays.

After programing this system and introducing it into the market, it will distort the results of the original system as both are being built upon each other. In other words, the second trading system is being built upon some actions that are being created through another trading system and this will reduce the efficiency of the first system.

This way, programmers will always keep updating their trading systems and it will go into an endless machine vs machine battle where the best human mind will always win at the end of the day.

You just need to figure out the weakness of your opponent to beat him/her, you don't need to figure out your strength.


Thanks,

Nader
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