All the Resources, Half the Knowledge

[etink 10]

I work in IT for a large trading firm, and I have a degree in CS. I have full access to our broker and to our servers, and am a competent programmer.

 

I have the markets under my fingertips, and the ability to access them, but I have no idea what to do with them. Despite having worked here for over a year, I know very little about actual trading. Edit: about trading strategies. I know how our traders do what they do(eg, bids, offers, order entry, etc), but I know almost nothing about the why.

 

Naturally, I turned to the internet. I can find lots of information on options, derivatives, and futures trading, but my firm is equities-only, and day trading only (taking home overnight positions is generally frowned upon).

 

So, where do I go from here? If I had a strategy or plan I liked, I could code it, backtest it, tweak it, trade it in simulation, and eventually live if it proved to be profitable. But I can't - I'm stuck at the ideas/learning stage.

 

What are the best resources for someone in my position? Any websites or books you can recommend would be greatly appreciated.

Edited March 9, 2009 by etink

[brownsfan019 17]

Attached are some books I would recommend.

 

Having all that programming knowledge would be a tremendous start IMO. Now you'll need to see what kind of trading you like and then work on it. Keep in mind this could take years before you really start to get it, so don't give up.

 

Some things you'll wan to consider:

• Can/will you go long and short, or just long
  
• Focus on a few stocks or create a scanner to go find stocks in play that day
  
• Will you try to catch the monster move of the day or take small profits over and over
  
• Go with the overall trend or against it?
  

 

Just a few ideas to get you started.

Amazon.com.pdf

[BlowFish 10]

Do you want to make trading systems or find a methodology to trade in a discretionary fashion?

 

If the latter having a clear idea of what you want to do and focusing on that is likely to shorten your journey. Of course there is a catch 22 there as you need enough background to make that choice.

 

Read here....take a look at 'the best of TL' and start reading those threads. See if anything resonates.

 

Seems to me you are wasting a resource that many would kill for and that's the expertise at your firm. Take traders for beers and pump them for as much info as you can without being annoying. Hell, be annoying as long as you buy the odd round I am sure they will indulge you.

[etink 10]

brownsfan - Thanks for the book recommendations! Several of these look great; I'll be picking them up soon.

 

BlowFish - As I wrote in the thread description, I'm interested in algorithmic trading, not discretionary trading. I've tried tapping the expertise of many of our better traders, but they all respond the same way - they can't really explain what they're doing in any way that would translate into an algorithm, they enter and exit when it "feels right".

 

I don't have enough posts to send a PM, so let me also thank the poster who replied to me privately. May I post your reply to this thread, so that others may benefit from it?

[BlowFish 10]

Hi Etnik, I must look at my settings. The thread description does not show for me by default, just get the title and text.

 

You might enjoy John Ehlers books, he comes from a signal processing background and he applies that discipline to trading. His systems (that he sells separately) seem to have decent (and more importantly consistent) results from ratings sites like futures truth.

 

I rather like Dunnigans work. It is as applicable to learning to read price action as it is to designing systems based on price action. You can get "New Blueprints for Gains in Stocks and Grains" & "One-Way Formula for Trading in Stocks & Commodities" as a combo.

 

I should say right now that I am not a 'system' trader, though do have a few books on the subject. Some are a bit esoteric. I can't think of a good 'how to design and test' type book off the top of my head...... actually Katsz's Encyclopedia of Trading Strategies is not bad at all.

 

At some stage you will need to think about risk, position sizing and all that malarkey. Van Tharp is well thought of for that sort of thing, i quite like "The Futures Game, Who Loses, Who Wins, and Why. That is good on risk and also has a section on monte carlo simulations which might be of interest.

 

As I eluded to before, the problem probably won't be getting recommendations it will likely be focusing down on what is important to realise your goals. There are many good trading books that will no doubt increasing your knowledge but might not get you that much closer to your goal.

 

Cheers.

[etink 10]

As I eluded to before, the problem probably won't be getting recommendations it will likely be focusing down on what is important to realise your goals. There are many good trading books that will no doubt increasing your knowledge but might not get you that much closer to your goal.

 

That's the hard part! When it comes to testing and tweaking, whether it's for risk parameters or to maximize PnL, that sort of thing I'll figure out over time, and most likely with a lot of pain. :doh:

 

It's the initial strategies (or lack thereof) which are tripping me up. I'm hoping to find a good list of known-good basic strategies which I can implement and test, if such a list even exists. For example, to just make one up: "trade GOOG and SPY in tandem, if either moves X% away from the other, buy/sell the other and go flat when they return to within Y%".

 

Am I asking for something unreasonable? On the one hand, if it were this easy, I'm guessing a lot more people would be doing it. But on the other hand, everyone has to start somewhere, right? I'm guessing no one sets out intending to build an extremely complex model. Aren't there "building block"-type strategies to cut my teeth on?

[MidKnight 12]

Evidence Base Technical Analysis by David Aronson was a good book. Its all about finding an edge objectively. Trading like a hedge fund by Altucher will give you some ideas to try out. Test them out Aronson style.

[BlowFish 10]

 

It's the initial strategies (or lack thereof) which are tripping me up. I'm hoping to find a good list of known-good basic strategies which I can implement and test, if such a list even exists. For example, to just make one up: "trade GOOG and SPY in tandem, if either moves X% away from the other, buy/sell the other and go flat when they return to within Y%".

 

 

All bar the last book I mentioned (The Futrues Game..) have strategies or ideas. Katsz takes some of the better known types of system and tests them. He also provides c code he used to test (you used to be able to send of for a free disc). He also talks about how exits can turn marginal systems into good systems. He tests a few of those (exits) too. Dunigan is great for a variety of things including how to quantify price structure. If you can quantify it you can write a system to trade it (which is what the one way formula is all about).

[zdo 20]

etink,

 

If you haven't already, try doing a trial of TradeStation and pore through the contributed systems. You can cull some testable ideas and go from there. Note – consider TS as a prototyping environment…and, btw, the pascal is easy to port If nothing else, there is some ‘graduate level’ content on the nuts and bolts of testing and correctly interpreting test results in the forums. IF you do this, let me know and I can refer you to specific contributors...

 

hth