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Systematic trading

  • #481
  • Edited 4:17pm Dec 6, 2009 3:36am | Edited 4:17pm
Quoting challenger78
Mikkom, is any part of this picture out of sample?
First and last year (the not gray background)

edit: I think I found the bug, very complex one that had to do with faster execution/caching that allowed algos to evolve a kind of look forward bias. Looks like the results are not like the curve I posted after the fix. Oh well anyway I expected this.
  • #482
  • Dec 7, 2009 5:15am Dec 7, 2009 5:15am
Quoting mikkom
First and last year (the not gray background)

edit: I think I found the bug, very complex one that had to do with faster execution/caching that allowed algos to evolve a kind of look forward bias. Looks like the results are not like the curve I posted after the fix. Oh well anyway I expected this.
Anything > 0 is good
  • #483
  • Dec 7, 2009 12:22pm Dec 7, 2009 12:22pm
Quoting challenger78
Anything > 0 is good
I'm pretty happy for this too, at the moment I'm adding some more order management elemements to the framework and the results are quite encouraging.

2009 did not look like this before the additions so on the whipsaw periods, more complicated order management is definitely in order.
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  • #484
  • Dec 10, 2009 2:47pm Dec 10, 2009 2:47pm
In my never ending quest of increasing profits and decreasing loses I have started to look at more of a system trading style. I am trying a low tech style of what this thread is doing, instead of coding my own systems I am using EA created on the forum or modified for my style. I have encountered a few issues I have not expected and hope someone here is willing to help me.

1. I have numerous charts open, several of the same type. with 5 EAs running on the EU how can I tell what strat it is when it's closed? I notice a trade closed and I attempt to enter the numbers into a database but can't tell what EA the order came off off. How can I tell? I am sure it's a simple answer.

2. I have spent the past two years learning how to trade (i know in the grand scheme of things two years still counts me as a neophyte) I have come to realize that some degree of programming skills will be required for my future success. what language would you suggest learning to start.

3. What do you feel are the most important things in a computer system at your level. I'm talking hardware.

Thank you
A woman drove me to drink, and I forgot to thank her
  • #485
  • Dec 10, 2009 3:15pm Dec 10, 2009 3:15pm
Quoting simpleguy
1. I have numerous charts open, several of the same type. with 5 EAs running on the EU how can I tell what strat it is when it's closed? I notice a trade closed and I attempt to enter the numbers into a database but can't tell what EA the order came off off. How can I tell? I am sure it's a simple answer.
No idea (and this is wrong thread anyway) - I would suggest asking this in programming forum.

Quote
2. I have spent the past two years learning how to trade (i know in the grand scheme of things two years still counts me as a neophyte) I have come to realize that some degree of programming skills will be required for my future success. what language would you suggest learning to start.
This might sound odd but language actually does not matter in the long run - if you know how to code, you can do it in any language as long as you understand the paradigms.

If you are just learning, I would suggest using any mainstream language, java or c/++ is a good choice.

(I personally love erlang, lisp (especially dialects with pattern matching), ocaml and such but they are too far away from mainstream so it's hard to find trading related stuff - It's wise to go with mainstream choices)

Quote
3. What do you feel are the most important things in a computer system at your level. I'm talking hardware.
Memory, processing power, maybe HD space.
  • #486
  • Dec 10, 2009 5:41pm Dec 10, 2009 5:41pm
This may seem a silly question but is there any ECN broker (or any broker that doesn't take the counterside of the trade) that allows trading in micro lots (0.01 lots)?

My current strategy set consists of such a large amount of strategies that I would much more like to keep the risk per trade low and use many, many strategies simultaneously and this requires very fine grained trade sizes.

(I know many ecns provice possibility to use 0.1+ with precise additions so that's what I'm thinking of using if using micro lots is impossible)

edit: hmmmm after some checking it seems that MBT's minimum 0.1 lot is not 10,000 units as usual but 1000 units? Can someone confirm this? I can't find any info from their pages.
  • #487
  • Dec 10, 2009 6:24pm Dec 10, 2009 6:24pm
Yes, the minimum unit size of MB Trading is 1000 units.
I also had a bit of trouble finding it on the site, but then found it here:
https://www.mbtrading.com/rc/metaTrader4.aspx (Question 11)
It says "0.1 lot" there, because they treat 1 lot as 10 000 units.
  • #488
  • Dec 11, 2009 12:40am Dec 11, 2009 12:40am
Quoting saulimus
Yes, the minimum unit size of MB Trading is 1000 units.
I also had a bit of trouble finding it on the site, but then found it here:
https://www.mbtrading.com/rc/metaTrader4.aspx (Question 11)
It says "0.1 lot" there, because they treat 1 lot as 10 000 units.
Thanks, now I found it too. Looks like I'm moving to MBT.
  • #489
  • Dec 11, 2009 4:33am Dec 11, 2009 4:33am
Quoting mikkom
edit: hmmmm after some checking it seems that MBT's minimum 0.1 lot is not 10,000 units as usual but 1000 units? Can someone confirm this? I can't find any info from their pages.
It is correct, in MBT 1 lot is 10,000 units and you can go as low as 0.1 lot = 1,000 units. However, you would need a meta system to adjust trades as you can't hedge. I.e. if one of your systems is long, and another wants to go short in the same symbol, you can't do it. So you need a way to correct for this effect.

Also, I would definitely not recommend their MT4 solution for risking a lot of money with short term systems at this moment as it is not yet stable enough, despite what they say in their thread. But if you risk small money that you don't care to lose or your trading frequency is not too high, their MT4 is not bad. Just remember, in this case you do need defensive code for sure as there will be cases where their server will not be available, in some cases for 10-20 minutes, and I am not talking their usual rollover downtime at 5 PM EST. Also, keep in mind, that if such a downtime happens on their server, you won't be able to get through to them on the phone quickly cause they will receive a large amount of calls. If you happen to lose money in this situation due to their server failure, in most likelihood you won't be compensated, unless you chase it with the authorities, and even then I am not sure you will get your money back.

Other than that they are a fine company and they lowered their commission lately.
  • #490
  • Dec 11, 2009 6:29am Dec 11, 2009 6:29am
Quoting challenger78
It is correct, in MBT 1 lot is 10,000 units and you can go as low as 0.1 lot = 1,000 units. However, you would need a meta system to adjust trades as you can't hedge. I.e. if one of your systems is long, and another wants to go short in the same symbol, you can't do it. So you need a way to correct for this effect.
.
I actually don't plan to use mt4 anymore, it's going to be much easier to just send the trades via FIX or some other api. Maintaining 2 versions, one for development and one for actual trading is just too unreliable.

I'm, going to "hedge" in a sense that I might have situations where one system is long and other short but it's easy to do correctly wihtout mt4 (as it would be with any mt4 brokers - long/short combinatiosn should just balance themselves in background).
  • #491
  • Dec 13, 2009 10:08am Dec 13, 2009 10:08am
I have a small question.

Assuming you are trading an account based in different currency than your own (I live in europe and plan to open an account in usd), do you hedge your balance to make sure crashes in deposit currency don't affect your overall balance?

At least for me it sounds quite a good idea to hedge your "free" deposit balance against few global equity indices, few commodity indices and a currency basket. Only problem I see is that each trade will lower available leverage (especially if ETF's are used as index trades) so I'm wondering if it's worth it.

The easiest way to hedge would be a simple trade against the deposit currency itself but then the account would be vulnerable against my own currency (euro) fluctuations.
  • #492
  • Dec 13, 2009 10:37am Dec 13, 2009 10:37am
Quoting mikkom
I have a small question.

Assuming you are trading an account based in different currency than your own (I live in europe and plan to open an account in usd), do you hedge your balance to make sure crashes in deposit currency don't affect your overall balance?

At least for me it sounds quite a good idea to hedge your "free" deposit balance against few global equity indices, few commodity indices and a currency basket. Only problem I see is that each trade will lower available leverage (especially if ETF's are used as index trades) so I'm wondering...
Buy an outright against the principal, this will leave just your P/L vulnerable.
  • #493
  • Dec 13, 2009 5:26pm Dec 13, 2009 5:26pm
Quoting mikkom
I have a small question.
Assuming you are trading an account based in different currency than your own (I live in europe and plan to open an account in usd), do you hedge your balance to make sure crashes in deposit currency don't affect your overall balance?
To hedge against drops in USD, buy EUR/USD futures for delivery a year from now (or whatever term you like) - you will be obligated to buy EUR at today's fixed price for USD, your book currency. If the USD strengthens against the EUR, you would've been better off without the hedge - but of course, that's ok - you are hedging to eliminate uncertainty, not necessarily to profit.
  • #494
  • Dec 14, 2009 1:52am Dec 14, 2009 1:52am
Quoting kfmfe04
To hedge against drops in USD, buy EUR/USD futures for delivery a year from now (or whatever term you like) - you will be obligated to buy EUR at today's fixed price for USD, your book currency. If the USD strengthens against the EUR, you would've been better off without the hedge - but of course, that's ok - you are hedging to eliminate uncertainty, not necessarily to profit.
I know very well how hedge is done - No futures contracts are needed, hedging can be done easily with spot as well.

What I'm curious is anyone actually doing this in their own account to protect their balance (because of the leverage issue in both trading and hedging and the fact that fx trading is usually done with leverage so vulnerable balance might not be that important) and if they are, are they just hedging against one currency or larger array of instruments (to protect "real value" of account).
  • #495
  • Dec 14, 2009 3:37am Dec 14, 2009 3:37am
Quoting mikkom
I know very well how hedge is done - No futures contracts are needed, hedging can be done easily with spot as well.

What I'm curious is anyone actually doing this in their own account to protect their balance (because of the leverage issue in both trading and hedging and the fact that fx trading is usually done with leverage so vulnerable balance might not be that important) and if they are, are they just hedging against one currency or larger array of instruments (to protect "real value" of account).
I thought the same as you but I don't do it for 2 reasons:

1. the amount on the account is much smaller than the amount you control with your trades due to leverage, therefore you can ignore any profit/loss due to change in the value of USD vs your currency.

2. and more important, I see this as a form of diversification. I mean you already have some savings I presume in your home currency, it's OK to have some in USD savings too in the brokers account as you never know what happens very long term.

I mean if you really believe the USD will drop, just short it and make loads of money
  • #496
  • Dec 14, 2009 3:58am Dec 14, 2009 3:58am
I have an easy answer for you - incorporate that funding cash into your trading system. Also do any conversions you would expect to do upon withdraw. In other words, test to see if hedge/non-hedging would hurt/help you, if you think it's a significant source of risk. This will also help you detect if you can potentially run into any leverage and or funding limits, if that is a concern.
  • #497
  • Dec 14, 2009 6:04pm Dec 14, 2009 6:04pm
Quoting mikkom
I know very well how hedge is done - No futures contracts are needed, hedging can be done easily with spot as well.

What I'm curious is anyone actually doing this in their own account to protect their balance (because of the leverage issue in both trading and hedging and the fact that fx trading is usually done with leverage so vulnerable balance might not be that important) and if they are, are they just hedging against one currency or larger array of instruments (to protect "real value" of account).
Hey,
In all honesty every situation is a bit different.
If you like the comfort that a principal hedge provides than by all means you should look into it. If you just want to "let it roll" that is fine as well.
An obvious friendly reminder would be that hedges can bite back.
Not to mention, and having seen, some of the worlds best at FX take massive hits on hedges.Although, if the hedge is not working it could always be closed out.
From my experience a lot of the corporates live by these types of strategies only because they provide accountability.
By the same token I've also seen big "hedgies" submit paper tickets when they should be systematic trading outfits.
So again each situation is a bit different.

Regards
  • #498
  • Dec 16, 2009 3:20pm Dec 16, 2009 3:20pm
I have been doing a lot of testing and it seems market movements on this year have been quite different (on multiple pairs) than they have been in past 10 years.

Has anyone other noticed this? If you do a long time simulation do you get similar results for 2009 than you get for any other year since 2000?

I even tried to evolve models specifically for 2009 and the models that work for 2009 don't work that well for any other year during last 10 years - this is my usual acid test to check what years are similar in movements. If I evolve models for any other year, they tend to work quite well with other years in last 10 years (except 2009).

Also, if anyone knows some papers/articles about market type classification I would love to read them.
  • #499
  • Dec 16, 2009 6:01pm Dec 16, 2009 6:01pm
Do a search on Markov regime-switching models for a mathematical approach to evolving economic models.

I suspect what we are observing is partly due to the on-going financial dislocation. Weren't there some crazy moves in AUDUSD in October, 2008?
  • #500
  • Dec 17, 2009 2:07am Dec 17, 2009 2:07am
Quoting kfmfe04
Do a search on Markov regime-switching models for a mathematical approach to evolving economic models.

I suspect what we are observing is partly due to the on-going financial dislocation. Weren't there some crazy moves in AUDUSD in October, 2008?
Thanks a lot for the pointer.

I can understand some crazy moves on some currencies but this seems that something has changed on whole market. It might be that funds are employing different models or are too scared to invest in currencies or high freq models have managed to break through but something has changed. That's why I'm interested to hear opinions about how other peoples models are working.

What I'm really wondering if this change is more permanent or not.
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