Is 100% Mechanical Trading Possible?

[cowcool 10]

I am yearning for a 100 % mechanical trading system that is profitable?. Is this possible?

 

Thx!

[Tams 20]

  Quote

I am yearning for a 100 % mechanical trading system that is profitable?. Is this possible?

Thx!

 

the short answer is: YES

 

 

 

 

 

 

 

 

 

 

of course conditions may apply.

[sevensa 10]

  cowcool said:

I am yearning for a 100 % mechanical trading system that is profitable?. Is this possible?

 

Thx!

 

Yes, of course this is possible.

[Tams 20]

this is the trading process:

 

you monitor the price/volume movements,

(HH, HL? LH, LL? 50 Week High? at pivot point? reached support/resistence?, etc.,)

 

you analyze the price/volume behaviors,

(bounce off double top? break out of formed channels? stuck in congestion? volume increase with price? etc.,)

 

based on the above...

you can come to a decision on where you are in the bigger scheme of things

and what opportunities are available

(are you in the midst of a major up trend? in the midst of a minor downtrend retrace?)

 

you act on your conclusion -- how best to capitalize on the opportunity

(e.g. buy call? sell put? buy stock on margin? short ETF? enter a credit spread? long on buy stop? etc.,)

 

 

if you can quantify the above, you can mechanize your trading.

[JEHs 10]

I have not seen a "system" where you can say for certain, "if price does this, then I will do that" every time and have it make money. I would venture to say that most traders who have a "system" or "plan", have, as a strong element in that plan, their own intuition.

For example, you could look at Joe Ross's 123 and RH trading, and it looks good, but if you trade it every time, you will loose money. You have to have that little extra that says, "this is a good one" or, that one doesn't look so good, I will pass". I have seen many traders say, "Look, if price does X at such and such a level, then I will do Y and over time I will be a winner". I would look at the chart and say, why not when it did just that back here, why did you pass on that one? Sometimes there is a good answer, but often the answer is, "it just didn't feel right".

This make the whole concept of a "plan" hard to grasp. A "plan" implies having a set of rules you follow every time, but I think intuition plays more of a role then even the successful traders realize.

Trader Vic, in his first book, said he mentored 35 traders. Had them in his office, gave them access to everything he had including his watchful eye and detailed advice. In the end only 5 managed to be successful.

I know there are some mechanized systems that do OK most of the time, but I think here we are talking about trading at a human level.

 

John

[swansjr 10]

I run two systems that I've developed that are 100% automated in TradeStation. You can make money doing this. No system or trader makes money all the time but like any other form of trading, you are putting the odds in your favor.

 

I also do discretionary trading on the side. Actually, I 'm learning discretionary trading on a simulator during the market hours. I hope to actively trade non correlated markets against my automated systems for diversification.

[sevensa 10]

  JEHs said:

I have not seen a "system" where you can say for certain, "if price does this, then I will do that" every time and have it make money. I would venture to say that most traders who have a "system" or "plan", have, as a strong element in that plan, their own intuition.

For example, you could look at Joe Ross's 123 and RH trading, and it looks good, but if you trade it every time, you will loose money. You have to have that little extra that says, "this is a good one" or, that one doesn't look so good, I will pass". I have seen many traders say, "Look, if price does X at such and such a level, then I will do Y and over time I will be a winner". I would look at the chart and say, why not when it did just that back here, why did you pass on that one? Sometimes there is a good answer, but often the answer is, "it just didn't feel right".

This make the whole concept of a "plan" hard to grasp. A "plan" implies having a set of rules you follow every time, but I think intuition plays more of a role then even the successful traders realize.

Trader Vic, in his first book, said he mentored 35 traders. Had them in his office, gave them access to everything he had including his watchful eye and detailed advice. In the end only 5 managed to be successful.

I know there are some mechanized systems that do OK most of the time, but I think here we are talking about trading at a human level.

 

John

 

Just remember that just because you haven't seen something, or think something is not possible, does not mean that this is impossible.

 

Imho think this is a common misconception that people think successful traders are profitable because they use intuition or have some magical gift. Some probably do, but I would venture that they are in the minority. When I created a trading plan with strict rules, my trading turned around. When I don't follow the plan and follow my "intuition", my account very quickly tells me why I have a plan. I think having a solid plan provides you with much better odds to be successful than trading on intuition/gut feel/seat of your pants.

[Blaiserboy 10]

  swansjr said:

I run two systems that I've developed that are 100% automated in TradeStation. You can make money doing this. No system or trader makes money all the time but like any other form of trading, you are putting the odds in your favor.

 

 

I am wondering if the systems have regular small losses or do they lose for a period of time, causing you to stop their application.

[BlowFish 10]

If you are going the full mechanical route it might be wise to run a couple (or more) systems on several instruments. This approach is more robust.

 

There is a bit of an art (so I am told) knowing when a system needs tweaking when it needs a rest (some stop working then start again) or when it needs retiring.

[swansjr 10]

  Blaiserboy said:

I am wondering if the systems have regular small losses or do they lose for a period of time, causing you to stop their application.

 

My best system has losses like any other trading method. I would say it's regular small losses.

 

My other system I stopped trading recently because the results for the past year have been more-or-less a wash. I would like to refine it more or move on to another concept.

[Blaiserboy 10]

  swansjr said:

My best system has losses like any other trading method. I would say it's regular small losses.

 

My other system I stopped trading recently because the results for the past year have been more-or-less a wash. I would like to refine it more or move on to another concept.

 

 

Thanks for that.. I am new to mechanical trading, am trying to get a feel for what the reality may be.....

 

Thanks again

[swansjr 10]

  Blaiserboy said:

Thanks for that.. I am new to mechanical trading, am trying to get a feel for what the reality may be.....

 

Thanks again

 

Glad to help.

 

I’m relatively new as well. I started writing EL code for automated systems on January of 2008. Since then I’ve developed and tested dozens of ideas. To this day I have one system that has excellent results. I’m confident with it and I have no problem trading my money with it.

 

My word of advice is this: My successful system is basic, so keep your ideas simple. At its core it’s only a few lines of code. I don’t think it’s a mistake that my best system is simple.

 

I’m also finding value in my discretionary day trading. I’m starting to form an opinion that to develop good automated trading systems you must also understand discretionary trading. That may be an overstatement, but I found my discretionary trading to help a lot.

 

In short, if I spend a year testing ideas I might get one good system.

[Blaiserboy 10]

I read in the Tushar Chande book that to increase the variables over a set few would lead to a lot of difficulty, I quite agree with the idea of simplicity

[Uli Schmuli 10]

I run an automated system that for the first six months of this year has returned 450% (trading Russell 2000 index futures using $2k margin per contract) This strategy wins about 55% of the trades that it takes. At times, when I see a trade that will trigger, and it 'just doesn't look right' I let the system take the trade anyway. I know that over time the parameters that I've defined will ensure that each trade taken will be in my best interest.

 

The only reason that any trader can make money is because there are patterns that repeat over time, and specifying these patterns is known as 'defining your edge.' If you don't have an edge defined, you are just gambling. Hope is not a strategy.

 

I would recommend Mark Douglas' book "Trading In The Zone" if the concept of the probabilistic mindset is not familiar to you.

[Blaiserboy 10]

I have that book........

[waveslider 10]

Mechanical trading is very possible, more than possible -common.

 

Possible on the scalping level and on daily, even weekly- why not?

 

On whatever level, I think you have to be there overseeing it, I do and glad I was today.

 

If you are asking essentially is are there exploitable patterns can be defined with code (so that a computer can execute them). The answer is yes.

 

Discretionary traders will tell you that successful trading can be done better by a human. Yes that's true too, since computers are not able to evaluate, have no intuition, have a hard time adapting, etc.

 

But computers don't make mistakes! They only do what they are told.

 

This thread needs more depth and runs the risk of taking us back to "disretionary vs. mechanical" argument - danger....

[Dyos 10]

  swansjr said:

I run two systems that I've developed that are 100% automated in TradeStation. You can make money doing this. No system or trader makes money all the time but like any other form of trading, you are putting the odds in your favor.

 

I also do discretionary trading on the side. Actually, I 'm learning discretionary trading on a simulator during the market hours. I hope to actively trade non correlated markets against my automated systems for diversification.

 

You pay Tradestations fees and you still make money? Imagine if you went to an honest broker you could double your returns!

[Uli Schmuli 10]

  Dyos said:

You pay Tradestations fees and you still make money? Imagine if you went to an honest broker you could double your returns!

 

Dyos, what the heck are you talking about?

[flyingdutchmen 10]

  Dyos said:

You pay Tradestations fees and you still make money? Imagine if you went to an honest broker you could double your returns!

 

if you trade enough rt's or shares all fees exept marketdata is waived,

if one would trade stocks only your only fee would be 3usd each month for amex nasdaq nyse data

 

your statement is noncense,

most likely a failed and/or frustradet tradestation user ?

[Dyos 10]

I used to trade Forex with Tradestation back in the day. Their fees were outrageous. I have heard their stock platform is more reasonable.

[Dyos 10]

I used to trade with them back in the day. But it was forex. I know their stock platform is a little different.

[sevensa 10]

  Dyos said:

I used to trade Forex with Tradestation back in the day. Their fees were outrageous. I have heard their stock platform is more reasonable.

 

I am curious then why you would be making statements like below about the honesty of a broker if you haven't used them since "back in the day" and rest is heresay? What experience do you really have with TS?

 

  Dyos said:

You pay Tradestations fees and you still make money? Imagine if you went to an honest broker you could double your returns!

[Dyos 10]

  sevensa said:

I am curious then why you would be making statements like below about the honesty of a broker if you haven't used them since "back in the day" and rest is heresay? What experience do you really have with TS?

 

Someone is a little touchy. It was simply a comment based on my trials and tribulations. If you want a real platform for forex there is simply no alternative to Metatrader. Tradestation simply does not compare.

[waveslider 10]

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

sounds like fun

[JEHs 10]

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