Mechanical System Design Project - Join hands?

[tech/a]

Julius.

While I agree that Preservation of capital is very important Return on Risk is in my view the key to consistent profits.

Stocks can be traded short term even intraday and if using CFD's and leveraged correctly can be profitable.

As an example.

Lets take a stock trading at $20 and risk is 30c
You have a CFD account with $20k in it.Your total Trading capital is $100,000
Your analysis tells you you should get a 90c move.
R/R is 3:1
Say 2% risk or $2000.
Thats 6600 shares (CFD's) at $20
The risk remains the same under heavy leverage.

So can be done OK.

 

[julius]

question Tech (I don't trade CFD's):

is there sufficient liquidity/market depth to allow for a position of that size to be entered / exited intraday?

 

[tech/a]

CFD's are a derivative not the Physical so YES or more to the point I havent had a problem.

Like you I'm still bemused myself as to where the Profit from a trade comes from.
But I'll ask and let you and I know-----

 

[Trembling Hand]

Wondering out loud about the suitability of intraday systems trading on Stocks rather than a Index Futures or Forex.

With Futures & FX you can pick a couple of instruments and find reoccouring patterns for that market.

With stocks you have many different ones all doing different thing @ different times with different spreads and liquidity. You have the problem of finding one that moves all the time and then in patterns that you can trade??

 

[Temjin]

Wondering out loud about the suitability of intraday systems trading on Stocks rather than a Index Futures or Forex.

With Futures & FX you can pick a couple of instruments and find reoccouring patterns for that market.

With stocks you have many different ones all doing different thing @ different times with different spreads and liquidity. You have the problem of finding one that moves all the time and then in patterns that you can trade??

That boils down to whether your intraday trading system is robust and flexible enough to trade "different" kind of markets. (i.e. different shares as opposed to just a couple of future commodities and forex pairs)

I believe the key is to keep your system AS SIMPLE AS POSSIBLE so its core fundamentals apply to different markets.

There is an advantage of trading in stocks because of the massive number of markets (i.e. shares) out there, thus, generating more trade frequencies. For forex, you are sometime very limited to a few pairs because certain pairs tend to correlate with each other very well. (even in intraday movements)

 

[nizar]

Hi, guys.

I’d like to share some of my thoughts. I am a professional software developer not a trader. Last few months I tried to learn how share market works and create a fully automated computerized day trading system. As I have lack of deep knowledge in financial markets probably I’m not too good at generating new ideas but I am good at picking up the existing strategies, encoding and backtesting them. I was able to test some popular strategies (gaps, Bollinger Bands, MACD crossover etc) and even some internet guru blackboxes (http://www.intradaytrades.com). But the outcome is quite disappointing so far. When you test different strategies on number of securities over period of time, the result is . In theory day trading can be automated as it’s not reallyabout zero affected by current market trend. But reality is that different strategies give you approximately same results in bearish 2001, 2002, 2007 and bullish 2005, 2006. So at the moment I decided to stop with testing and get more knowledge about the subject. But soon I understand that it can take few fulltime years to become an educated trader. Not sure I can afford it (family, mortgage etc ) Next idea was to join hands with a professional trader. I believe that two (or more) professionals can work out something valuable.

My contribution can be:
• 10 years commercial software development experience
• General understanding of how shares work and the ability to pick up and encode ideas for careful testing, examination and optimization.
• Fully automated contemporary framework with the ability to collect real-time and historical data, make decisions based on your instructions (high level programming language) and execute orders with popular brokers (US based indeed: IB, MBT etc). The framework already has most of popular indicators and functionality to backtest and optimized your strategies.
• Historical data (trades, 1 and 5 min bars) for number of instruments.
• Help with installation and set up of the framework at your side.

My target is to create one or few strategies which can be run fully on their own and give your stable low income (5-10% a year from your cash, or more using 2x or 4x margin)

I am not interested in extra money for the ATS development (I am pretty happy with my current position and salary ) but I’m definitely interested in market education and finding a professional trader to learn from.
Please don’t blame me as a novice who wants your system for nothing . I don’t ask for your “Holy Grail” trading system. As far as I know many traders have less profitable system they don’t use in everyday practice. My idea is to get some extra steady income using one of these.

Please keep in mind that some strategies (like pattern trading) heavily depend on person’s skills and experience and are extremely hard to be automated.


Regards

Sounds very interesting. I have sent you a PM.

As Temjin has said, I am currently in the process of designing something similar to what you are doing here, an intraday system, but it will trade forex.

Is there any reason why you have singled out the stockmarket as opposed to forex or futures?

The best IMO is to have a system that trade stocks and another that trades forex given the historically low correlation between the two markets.

Are you familiar with NeoTicker software?

Automation through MBT is exactly what i was going to be doing.

 

[julius]

That boils down to whether your intraday trading system is robust and flexible enough to trade "different" kind of markets. (i.e. different shares as opposed to just a couple of future commodities and forex pairs)

I believe the key is to keep your system AS SIMPLE AS POSSIBLE so its core fundamentals apply to different markets.

There is an advantage of trading in stocks because of the massive number of markets (i.e. shares) out there, thus, generating more trade frequencies. For forex, you are sometime very limited to a few pairs because certain pairs tend to correlate with each other very well. (even in intraday movements)

er ... forex pairs correlated ? what about correlation between stocks ?

systematic risk ring any bells ?

 

[julius]

Nizar,

Could you please expand on Neoticker RE: auto trading ?

 

[nizar]

Nizar,

Could you please expand on Neoticker RE: auto trading ?

NeoTicker according to my understanding is what most professionals use as a systems design tool for automated trading.

The other option is OpenQuant, but this is more targeted towards programmers while NeoTicker for traders.

NeoTicker uses I think C++ programming language and can interface with EFX group for execution.

http://www.tickquest.com/NeoTicker/automatedtrading.html

NeoTicker also have a forum which I have found quite helpful.

 

[julius]

Did you realise Amibroker also has AT capability?

 

[nizar]

Did you realise Amibroker also has AT capability?

Yes but Ami doesnt even have monte carlo analysis does it?
Because of this, I dont really see it as a serious software.

I know many will disagree because it can do hundreds of functions or whatever, but for me its missing the critical one.

 

[Trembling Hand]

What about the size of the move to cover the brokerage with stocks.

Futures less than a tick.

 

[Sir Burr]

Yes but Ami doesnt even have monte carlo analysis does it?
Because of this, I dont really see it as a serious software.

I know many will disagree because it can do hundreds of functions or whatever, but for me its missing the critical one.

How about Tradesim, is that serious? Tradesim needs the trades and Amibroker provides them plus "hundreds of functions or whatever" included.

 

[nizar]

How about Tradesim, is that serious? Tradesim needs the trades and Amibroker provides them plus "hundreds of functions or whatever" included.

Yeh well each to his own.

I think TradeSim is great because it does what i want it to do.

Everyone has their own requirements and they should find a product that suits them. Ami doesn't meet my requirements. Simple as that.

 

[howardbandy]

Yes but Ami doesnt even have monte carlo analysis does it?
Because of this, I dont really see it as a serious software.

I know many will disagree because it can do hundreds of functions or whatever, but for me its missing the critical one.

Hi Nizar --

It might be helpful to explain how you use Monte Carlo analysis, and what makes it "the critical function" for you.

The latest release of AmiBroker has built-in walk forward testing, which I think is extremely important -- more so, for me, than Monte Carlo analysis. It is in Version 5.05.1. Even those of you who do not have an AmiBroker license can download it and try it out.
http://www.amibroker.com/

I know that Monte Carlo features are high on the developer's "todo" list. But Monte Carlo is a very broad term, meaning different things to different people.

Thanks,
Howard

 

[Sir Burr]

Everyone has their own requirements and they should find a product that suits them. Ami doesn't meet my requirements. Simple as that.

I agree 100% Tradesim is fantastic, I use it.

My simple point was that you need a trade list for Tradesim to function. You can probably use many charting packages to export a trade list to Tradesim but you can have your cake and eat it with the Tradesim plus Amibroker combo.

If you are not keen on paying the big bucks for Tradesim, how about free:

http://www.tickquest.com/product/equitymonaco.html

 

[tech/a]

Personally I think the Amibroker/Tradesim Combo to be one of the best.
After reading Howards excellent publication and being an M/Stock/Tradesim user since Tradesims inception,its my feeling that Amibroker is far more dexterous than Metastock.

I think Howard has made a very strong point here in that its more about how the tools are applied than the tools themselves.

 

[tech/a]

Julius.

Recieved this response from Thomas N40K on another forum re my question on CFD's.Thomas was Risk Manager for the Currencies desk at ABN Amro Tokyo for a few years.

John,

Your profit will come from your opposite party. In the case of non-exchange traded CFDs, your opposite is simply the provider. Yes, they lose money if you make money, and vice versa.

How can they afford it?
Three ways:
1. they have a much larger capital than you.
2. they hedge their exposure
3. a combination of the two above.

In the case of DMA providers, No 2 above applies. They hedge every single position completely.

so, if you're long NAB, and NAB goes up, and you're with a DMA CFD guy:

1. you make money on the CFD
2. CFD guy loses money on the CFD
3. CFD guy's hedge, ie long NAB shares, is in the money
4. Money made on NAB hedge/shares is passed on to you as your profit.
5. Net net, CFD guy is square, and doesn't care which way the market goes.

If you're not with a DMA guy, it may stop at no 2. Or if they're partly hedged, no 3 may not be the same amount as 1 or 2.

In the case of exch traded CFDs, it works like futures. It's a zero sum game. The longs make what the shorts lose and vice versa.

 

[julius]

Because of this, I dont really see it as a serious software.

Well that's a big call nizar...

Amibroker doesn't do 'hundreds' of functions, it does practically any function, provided you are willing to code it. You can achieve virtually any kind of data manipulation you like via exporting exploration results into excel, shazam, etc

Remember automation comes at the expense of flexibility. Many 'serious' system developers prefer the latter.

 

[julius]

Tech,

Thanks for that. I understand their role as a hedging instrument, but I am still skeptical as to whether they are appropriate for intraday mechanical trading.

Not that it couldn't be done, but I think there are better alternatives...

Practically, are there any CFD brokers which would provide an API to facilitate this kind of system?