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charcoalstick

How Do Bank Traders Trade? Using Chart?

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Excellent Stanlyd, you are welcome. You have a handy resource to explore the language. I have done nothing with R but certainly plan to in the near future. I see a few others using it these days.

 

My best regards,

MK

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Wonderful information. What data source do you guys use in any of these mathematical packages? I'd really like to get a few years of ES data (as small timeframe as possible, but 5 minute would be great) on a continious price adjusted contract (price and volume is a necessity).

 

The main bottleneck I've noticed with Excel is working with large data. It handles small data just fine, but I was doing an analysis on just 5000 points (abet, slightly complicated analysis), and the chart took a while to draw and would lock up occasionally.

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Data is probly the biggest pain at our level for this stuff.

You could probly buy what you want from http://www.tickdata.com.

I think at some point though your going to have to store your own data and most the software available to us isn't really built around storing massive amounts of tick data. The only real off the shelf solution I can see is open quant or neoticker, then export your data as a CSV file/files for analysis. Even with those 2 i'm not sure at what point you would overwhelm its DB capabilities though.

At some point I think you need to bring in your own time series database. This is where matlab would probly fit into things best as there is a toolbox for connecting datafeeds to it then most time series database would easily hook into matlab. The big problem there though is the datafeeds supported jump right from interactive brokers to bloomberg/reuters without esignal/dtn in the middle.

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Interesting. I bought Mathematica (at a super discount, so I don't feed stuck to it), and it has SQL connection ability (so does Matlab). I could import all the data to a mySQL database, and then use that. mySQL is very efficient at retrieving data, so this may be the way to go.

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I use Neoticker and do what Darth2.0 describes. Export to csv and massage if need be via a script (I like Ruby, but Perl or Python would also be well suited - personal preference here). I know of one fellow who stores all his neoticker data into a SQL database. He uses neoticker and wrote his own neoticker datasource. You can do that with neoticker via the neoticker API.

 

I hope you enjoy mathematica!

 

All my best,

MK

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Guest Tresor

Hello everyone,

 

Could someone in a few words in plain English explain how software like Mathematica or Maple can be used in trading / strategy development / modelling / other. Maybe some screenshots? What mathematical knowledge and programming skills are required to benefit from such software?

 

Would there be any websites available with videos for newbies on this subject?

 

Thanks

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Hello everyone,

 

Could someone in a few words in plain English explain how software like Mathematica or Maple can be used in trading / strategy development / modelling / other. Maybe some screenshots? What mathematical knowledge and programming skills are required to benefit from such software?

 

Would there be any websites available with videos for newbies on this subject?

 

Thanks

Unfortunately, I don't know of any great educational resources of uses of Mathematics packages for financial analysis. To give you an example of what you can do, I have been working on my gap trade method for a while.

 

The age-old gap trade involves you fading the gap, closing at the last market close, or closing the position at market end for a loss. This has unlimited risk, finite gain, and trades during unfavorable times (gap-and-go's, where the market opens and kills the fade, happen every so often). Basically, gap trades can be "easily" improved by adding some rules, such as implementing risk control (stop loss), and finding biases when gaps close a) more often, and b) for a higher p/l.

 

So, I take a bunch of market data (this one can be easily done with 5-min data) and try to find biases. Do gaps close more often on certain days of the week? Do certain gap sizes affect if it closes? What is the optimal risk/reward? What methods of risk control should be used to keep as many winners in and losers out? Does gap size in relation to yesterday's range have an exploitable bias? Does the open price in relation to value areas of yesterday help? etc, etc, etc

 

I have no formal quant training, so I stumble around until I figure out what works. I recommend for you to read Way of the Turtle, especially the chapters on avoiding curve fitting. You're trying to find biases, not curve fit the thing to past data hoping it continues to work. For instance, gaps bigger than 10 ES don't have enough data to analyze, so I do not trade them (even if some were exploitable). The variables I optimize peak at certain points (such as stop loss size), which makes me confident I'm not benefiting from a few trades but an overall trend.

 

I've been working on my gap trade for a while, and I plan on writing it up (along with the methods I used to find them, including any source code), when I am comfortable with it.

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What mathematical knowledge and programming skills are required to benefit from such software?

 

Would there be any websites available with videos for newbies on this subject?

 

Thanks

 

The math knowledge/programming needed to benefit is pretty extreme.I think the issue you can run into pretty quickly with this stuff is a little knowledge is more dangerous than no knowledge at all. Anyone can buy a commercial neural net retail trading program and spit out data that may or may not be meaningless. Without the theoretical background though I think its pretty much impossible to know if your analysis makes sense.

The only reason to use Matlab/R/whatever is that stuff is already there for you to use. You could probly write a monte carlo engine in most trading software that has a robust programming language but its just a waste of man hours at some level.

The 2 books that got me going down this path are Evidence Based Technical Analysis and Pairs Trading. I think I did a review of Pairs Trading in the book review section here.

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Unfortunately, I don't know of any great educational resources of uses of Mathematics packages for financial analysis. To give you an example of what you can do, I have been working on my gap trade method for a while.

 

The age-old gap trade involves you fading the gap, closing at the last market close, or closing the position at market end for a loss. This has unlimited risk, finite gain, and trades during unfavorable times (gap-and-go's, where the market opens and kills the fade, happen every so often). Basically, gap trades can be "easily" improved by adding some rules, such as implementing risk control (stop loss), and finding biases when gaps close a) more often, and b) for a higher p/l.

 

So, I take a bunch of market data (this one can be easily done with 5-min data) and try to find biases. Do gaps close more often on certain days of the week? Do certain gap sizes affect if it closes? What is the optimal risk/reward? What methods of risk control should be used to keep as many winners in and losers out? Does gap size in relation to yesterday's range have an exploitable bias? Does the open price in relation to value areas of yesterday help? etc, etc, etc

 

I have no formal quant training, so I stumble around until I figure out what works. I recommend for you to read Way of the Turtle, especially the chapters on avoiding curve fitting. You're trying to find biases, not curve fit the thing to past data hoping it continues to work. For instance, gaps bigger than 10 ES don't have enough data to analyze, so I do not trade them (even if some were exploitable). The variables I optimize peak at certain points (such as stop loss size), which makes me confident I'm not benefiting from a few trades but an overall trend.

 

I've been working on my gap trade for a while, and I plan on writing it up (along with the methods I used to find them, including any source code), when I am comfortable with it.

 

Interesting stuff atto - I've been interested in the GAP play for sometime and I think your approach to your analysis is great. Look forward to see how this develops. As you forward test your data (and consequently, the analysis you'll be able to do on that data) should be really valuable.

 

Have you come across 'The Gap Guys' work (not sure if I'm allowed to post a url to his website). He has developed a system similar to the one I believe you are developing - he's able to analyse his data in loads of ways (which days are better than others, probability of filling certain gap sizes, probability of filling based on size of OHLC bars etc etc).

 

This dude was part of the TradeTheMarkets membership - who also play the GAP, albeit with a slightly more discretionary approach.

 

I think the GAP trade is possibly the most analysed of day trades and yet it still yields fantastic results primarily because its the little guys that create the gaps and the big guys that close it. As long as that dynamic remains, GAPS will always fill.

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Wonderful information. What data source do you guys use in any of these mathematical packages? I'd really like to get a few years of ES data (as small timeframe as possible, but 5 minute would be great) on a continious price adjusted contract (price and volume is a necessity).

 

The main bottleneck I've noticed with Excel is working with large data. It handles small data just fine, but I was doing an analysis on just 5000 points (abet, slightly complicated analysis), and the chart took a while to draw and would lock up occasionally.

 

Don't know if you got your ES data, but I could dump some your way from Tradestation?

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Don't know if you got your ES data, but I could dump some your way from Tradestation?

I have 5 min data for 3 years (OHLC + Volume). If you could do better, that would be great.

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Interesting stuff atto - I've been interested in the GAP play for sometime and I think your approach to your analysis is great. Look forward to see how this develops. As you forward test your data (and consequently, the analysis you'll be able to do on that data) should be really valuable.

 

Have you come across 'The Gap Guys' work (not sure if I'm allowed to post a url to his website).

I already trade it, and am constantly working to improve it (adding new biases to test).

 

Just looked him up, and yeah, he's doing a lot of the same stuff. I think I have more biases, but it seems to be working for him. My drawdown (per contract) is less than his, but the method looks similar.

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A recent research paper showed the majority of profits come from flow trading and trading (making) the spread. Less than 5% came form speculative activity.

 

While most pro traders will be aware of the levels, the use of charts and TA diminishes as you move out into the longer timeframes (daily and wider) where fundamental and macro-economic factors take precedence.

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