Is 100% Mechanical Trading Possible?

[Tams 20]

Great, thanks for heads up on that.

 

Would you happen to know if multicharts can chart range bars or renko bars? That's fairly new to tradestation in 2010 and I like both a lot - not sure if Multicharts is doing same?

 

Range bars has been a standard feature since version 1,

renko bar was introduced in Version 6 beta.

 

TS SUPPORT :: View topic - MultiCharts 6.0 Beta

[AgeKay 10]

Can anyone recommend a simulator that's any good? One that will replay historic data....

sounds like fun

 

X_Trader on the TTSIM gateway is the most realistic simulator you will find because they use EPIQ to fill you. X_Trader can replay historical data but then you have to use another product, I don't remember the name.

 

Ninja is it...Pretty realistic fills, replay, etc...

 

NT has the most unrealistic fills I have seen. The developers don't seem to even know how orders are matched on most exchanges.

 

I havent seen much of platforms (Xtrader and CQG (excellent platforms but dont know the programming capabilities - APIs are too expensive - never tried), TWS - not sure they have).

 

No experience with CQG or TWS, but the X_Trader API is ok. There isn't anything you won't be able to do. And if that's still not enough, they also offer a FIX API which is free.

 

Unfortunately Nt doesnt have static DOM so I stuck with Transact and Sc for now...

 

NT does have a static DOM. They call it "Static Price Ladder" if I remember correctly.

 

 

The comment above that Nt being for novice is BS because you can connect your own .Net (or even C++ app) to the NT and use whole power of .net or whatever. I know cos i did it year ago.

 

I don't know about NT 7 but how did you do it with NT 6? There was no way to communicate with NT outside of NT.

 

I heard an excellent analog to this recently: You may be able to parallel park your car easily yourself, but telling a computer to do it for you is a significant undertaking. And in the event that you can't parallel park on your own in the first place, it will be near-impossible for you to make a computer program that does it for you.

 

Go way, we don't need programmers from the real-world that actually know what they are talking about. All of our dreams will be shattered.

 

Also, if you dont believe automated trading works, check this out: HFT article

42% of the market!!! Now I know HFT is different from "our" kind of automated trading, but it is still automated trading...

 

Another excellent point made. There is definitely profitable automated trading but it's different from what people on these forums think. It's not your 1-2-3 indicator combination that is automated, these algos go way beyond that. And going back to your earlier point, this is an significant undertaking and extremely competitive space.

[AgeKay 10]

Reddit had an AMA (ask me anything) session with a 100% automated retail trader last week. He stated his credentials as:

 

"I used to work as a software engineer and started developing and trading automated strategies in my spare time in 2006. I went full time in 2007 and have been profitable every quarter since."

 

ALthough I know next to nothing about automated trading, I found his answers to questions most interesting. Here's the link, and the meat comes deeper into the questions (once you get past some of the fluff).

 

IAMA 100% automated independent retail trader. I trade around 800k to 1.5 million shares a day and make 2cents/trade on average. AMAA : IAmA

 

This is great. I just read it and he confirms a couple of things I said in my last post and earlier posts. Isn't it funny how all professional traders keep telling the same thing, but the retail traders refuse to listen? I've summarized his quotes in this thread.

[SIUYA 11]

nice find - the few things I found most interesting out of all the discussions was;

- nothing works all the time, there is constant tweaking and research and refinement.

- its traded as a portfolio of systems, with lots of small positions each time

- There is still a lot of work involved on a daily basis, there is no set and forget.

- while they dont look at charts - all price action/movement/charts are derived from the price....so its all the same source - it seems its all a matter of how you wish to visualise it. Either is a chart form - which can cause us to see things that are not really there, or based on actual evidence of things that work as shown via backtesting.

ie; you actually have to be able to visualise the edge yourself and program it, rather than just looking at a chart and saying thats a pattern. (if that makes any sense)

re; emotion/discipline - ideally the testing and the automation should fix all those issues, so long as you thoroughly test, believe and understand the system. AND then be prepared to modify it or drop it, or stick to it when it loses..... all much the same, except like any tool the computers allow some tasks to be made easier.

I personally dont agree with the martingdale strategies, I understand them, but even in his own words, says that the losses are brutal..... I wonder how much impact his hedging, options and spread of strategies limits these losses, while for most people it would ultimately lead to their ruin.

Good luck to them. Its great to see alternative views.

Edited May 4, 2010 by SIUYA

[shshao 10]

Jim Simons is one of the richest people in the world, on the Forbes list, and he's done it using mechanical trading systems. See Jim Simons - James H. Simons of Renaissance Technologies

 

The best systems are built from scratch, not using Metatrader and TradeStation which are both too restrictive, limiting you to their formulas. There are systems that are built using raw tick data, such as

Moderated Message:

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[Studog 10]

Hmmm,

Moderated Message:

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Now, just as a prelude, loss of internet connection isnt a problem, plus this baby has the ability to change your original position. For example, if you set the program toenter a long position, went to bed but the market tanked, it would change its bias ( if you chose) and take a short,banging in the stop just the same, utilising risk setting etc that you set before bed. Entry, and exit executed without you being within 100kms of your PC.

 

All questions happily answered.

Stu

[TheBigMan 10]

The term programing when it relates to Tradestation is really just logical expressions. It is just like MS Excel when implementing formulas. If this, then do that, if this number is greater or less than , then do...... etc. You will pick it up quite quickly.

[MadMarketScientist 11]

I have found I have "programming block" so typically when I need some easy language for Tradestation programmed there are plenty of willing people out there that will be quite reasonable -- and get it done in a fraction of the time I ever would.

 

To the self-starters though -- more power to you!

 

MMS

[muskoka joe 10]

Reddit had an AMA (ask me anything) session with a 100% automated retail trader last week. He stated his credentials as:

 

"I used to work as a software engineer and started developing and trading automated strategies in my spare time in 2006. I went full time in 2007 and have been profitable every quarter since."

 

ALthough I know next to nothing about automated trading, I found his answers to questions most interesting. Here's the link, and the meat comes deeper into the questions (once you get past some of the fluff).

 

IAMA 100% automated independent retail trader. I trade around 800k to 1.5 million shares a day and make 2cents/trade on average. AMAA : IAmA

 

============

 

This was a quite interesting article and almost entirely quite believable. At one point though he says his first strategy was "highly accurate and 2:1". While that is fantastic --- it is almost wholly incompatible that a high accurracy 2:1 system could produce a drawdown from $35K to $26K --- to do so he was ridiculously over leveraged, and if he was naive enough to be that over leveraged it calls the rest of what he says into question.

[StockTrader6080 10]

I use the cooltrade fully automated system and get similar p/l results.

If you add to your holdings on 10% drops and take profits as the prices wiggle around, you can get the drawdowns and still not be over leveraged. As long as my trader is taking profits every day, monthy account balances just keeps growing.

 

Keith

[forrestang 10]

Has anyone here ever found ONE setup that demonstrates a positive expectancy? Something NOT discretionary, with SPECIFIC rules for setup, entry and exit?

[Tams 20]

Has anyone here ever found ONE setup that demonstrates a positive expectancy? Something NOT discretionary, with SPECIFIC rules for setup, entry and exit?

 

don't understand your question...

can you elaborate?

[forrestang 10]

don't understand your question...

can you elaborate?

 

Well, for a while now, my goal has been to find 'something,' ..... 'anything,' that leads to a setup with a positive expectancy, that is mechanical.

 

The simplest example of what I mean is, say you had a MA crossover system, simply buy when one is above the other, and reverse when it flips. Something like that, where there is NO discretion, just take the signals as they come. And assume that this generates a positive expectancy over a given sample size. So say given a sample size of a few hundred trades over a varied amount of time, one would generate profits from that setup.

 

So I was just wondering if anyone here has found such a thing?

[Yakalfer 10]

That is a good question ! ;-)

[cunparis 10]

So I was just wondering if anyone here has found such a thing?

 

I gave up on that a while ago. Every once in a while I come up with some new idea and I test the heck out of it and of course it is not profitable.

 

The problem is context. Context is everything. As an example: A system could signal a long but if we're a few ticks below yesterday's high then it's likely not to work.

 

Context cannot be automated. It takes a human to analyze the context because each situation is unique.

 

So for the past year I've been focused on learning to analyze the markets. Supply & demand, support & resistance, market profile, etc. I've come a long way towards understanding the context. However profiting from it is not easy. It takes years of practice.

 

IMHO your time would be more productive learning about context and forgetting about anything mechanical. Count on it taking several years. If you're not prepared to put in several years then best to quit now.

[TheNegotiator 13]

I believe they do exist. Whether they are common when you are talking about individuals with systems I doubt it. The complexities now are great and the resources to find, research and exploit specific opportunities before they disappear, could be too high for single retail traders. Not to say people don't trade specific signals and do well. I knew a guy who wrote systems a while back and he did well. His money management rules were good though and he had a portfolio of concurrent systems which complemented each other.

 

Just a point on this though- if someone has a system that is so good it needs zero interpretation and only precise execution, would they tell people about it? I know I wouldn't. System builders are always fearful of system death and that generally happens to over exploited opportunities.

 

TheNegotiator.

[Yakalfer 10]

http://championship.mql5.com/2010/en

[Uli Schmuli 10]

I have three setups that I trade mechanically. I have incorporated these three setups into a program in Tradestation. Together, annual return is 400%. This number is based on the margin requirement for each contract.

 

This is a forum, and as such I can say anything and typically there is no way to verify what I'm saying. And quite honestly, I'm not feeling so hot right now about helping other traders. I've tried to help literally hundreds, and there are only a couple over the years who get what I teach, and who trust that I'm honest and are willing to do THE WORK. I've experienced so much pain learning this craft, and I love it when I see others turn that corner into consistent profits.

 

If you are running Tradestation platform and trading Euro Currency Futures, I would consider sharing a demo version of this strategy so you can see it perform in real-time. But only if you're nice, and only if I like you. I'm not selling anything, but I make this offer so you can see for yourself that it is completely possible. However, automated trading does NOT mean unattended trading. There is no 'money machine.' Read the link somewhere else in the forums called the 38 steps to success. I didn't write it, but that's exactly my experience, right there!

[cunparis 10]

http://championship.mql5.com/2010/en

 

This pretty much proves my point that it's not possible. Here is my take on the winner:

 

 

The Profit Factor is 1.15. There is no room for error. Commissions, slippage, market change, anything basically could make this go negative (which is already what happened if you look at the equity curve).

 

It has 50% drawdown. If it continued it'd probably give back most of those gains. These systems have very short life-spans. If you're lucky they can do well in the beginning and then slowly stop working. Who can sit through a 50% drawdown to find out if it's just a drawdown or if it will never work again? I can't.

 

I've had systems that did great like this but they all stopped eventually. Some after a few months, some after a few weeks, and one after a few years. The one that lasted a few years went into drawdown so I stopped and then it came back so i started again and then it went into drawdown so I didn't stop and guess what? Never worked again.

 

I know most will keep searching for the holy grail so I don't want to be a negative nancy and will leave it at that. Good luck.

[TheNegotiator 13]

This pretty much proves my point that it's not possible. Here is my take on the winner:

 

 

The Profit Factor is 1.15. There is no room for error. Commissions, slippage, market change, anything basically could make this go negative (which is already what happened if you look at the equity curve).

 

It has 50% drawdown. If it continued it'd probably give back most of those gains. These systems have very short life-spans. If you're lucky they can do well in the beginning and then slowly stop working. Who can sit through a 50% drawdown to find out if it's just a drawdown or if it will never work again? I can't.

 

I've had systems that did great like this but they all stopped eventually. Some after a few months, some after a few weeks, and one after a few years. The one that lasted a few years went into drawdown so I stopped and then it came back so i started again and then it went into drawdown so I didn't stop and guess what? Never worked again.

 

I know most will keep searching for the holy grail so I don't want to be a negative nancy and will leave it at that. Good luck.

 

 

Maybe you shouldn't be considering systems with a profit factor of 1.15?

[cunparis 10]

Maybe you shouldn't be considering systems with a profit factor of 1.15?

 

I'm not, that was the winner of the automated trading championship!!!

[TheNegotiator 13]

Winning some trading contest does not mean that this is the cream of the crop. People manipulate rules in these kinds of things all the time. Imo most of the results are pretty irrelevant. Just like the way people use simulated trading. If you truly wanted to learn how to build and manage automated trading systems, you could. It is possible and people do do it.

[Yakalfer 10]

https://www.fxstat.com/perfomances

[TheNegotiator 13]

If you were to look at the pf generally in this contest:-

 

http://championship.mql4.com/2008/users

http://championship.mql4.com/2007/users

http://championship.mql4.com/2006/users

 

etc.

 

Also, take a look at this year's winning equity curve.

[Yakalfer 10]

http://www.strategyxchange.com/StrategyQuotes.asp