Is 100% Mechanical Trading Possible?

[Tams 20]

Hi Tams,

i am useing MT4 only. pls how i can use auto trading methard. i am useing multi trading accounts so pls guide me...

 

 

forget about autotrading...

you have a reading disability... you have read my post, but did not understand it.

 

read it again might help.

 

 

 

 

p.s. alternatively, if you don't want to read, I can teach you for a fee of US$250,000.

[forrestang 10]

forget about autotrading...

you have a reading disability... you have read my post, but did not understand it.

 

read it again might help.

 

 

 

 

p.s. alternatively, if you don't want to read, I can teach you for a fee of US$250,000.

 

 

You must be having a bad day?

[Tams 20]

You must be having a bad day?

 

 

nah... never a bad day.

 

I just have no patience with people who don't want to read... LOL

 

I told him to start with a book,

and he came back to ask me to guide him.

 

I already guided him -- go start with a book for crying out loud.

 

 

 

p.s. guess why I knew he uses MT4?

a few would understand, not everybody tho. LOL

Edited December 14, 2009 by Tams

[MoreYummy 10]

I know how you get he is using MT4.

 

On second thought maybe not. :rofl:

[amswak 10]

Here is my experience with automated trading:

 

I first started daytrading a little over a year ago. I failed miserably. I had about one good month, then the fact that I didn't really know what I was doing caught up with me...fast.

 

That was when I decided to start coding automated strategies. I am an engineer and the code came easy, so I thought it would be a cinch. Again, the fact that I still didn't know anything (other than now being more fluent in EasyLanguage) caught up with me.

 

Four months ago I stepped back and went the discretionary route. My favorite indicators are channels (price and bollinger), John Ehler's smoothed adaptive momentum, and an adaptive RSI. I have had great success.

 

Last month I started trying to build automated strategies again using my favorite indication combos and, what do you know, they are looking promising. They automated strategies are still in simulated mode, but at least they are showing promising real-time numbers.

 

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.

 

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...

 

I think you get the point. It is possible. Difficult. But Possible.

 

Happy Holidays!

 

Hunter

[Uli Schmuli 10]

Hunter,

 

Do you have a spy cam in my office? My experience exactly, right down to the being an engineer part ;-)

 

Uli

[SangreDeToro 10]

absolutely possible - i went down this route because a trade plan must be an algorithm and if its an algorithm it can be coded.

[maxima 10]

Check out TradeVec.....MANY sophisticated automated traders are starting to use this platform.

I tried to look into it again but is still in beta... Do you know when are they going to release the product?

[Szymon 10]

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

 

Thx!

 

Yes this is possible, a lot of hard work but once you understand how the market works then you can design a very good mechanical system that gives excellent results with profits.

 

Here is a sample of a system at work using a dummy account. Is uses minimum 20 lots but can be changed to 2,1, etc...

 

Good luck

 

Regards

 

Simon

[andy2m 10]

I also think it's possible, actually I hope so :-) I've written my own simulator/executor of mechanical strategies, now I'm able to backtest (and optimize) strategies and once I will have found one I can put it into the executor to trade it fully automated.

 

I'm in the process so I can't say if this adventure will have a good end. What I can say is that it's possible to build up a machine that is able to trade even complex ideas. After finishing my software I was sometimes looking at the executor what he did and was amazed how he put in the orders, moved the stops and so on, nice to watch. Of course that should be possible, it's just an engineering task but my question before starting was: will such a system be technically stable and safe enough (so that I can put real money on it). My answer is: yes. When I trade real money then a 2nd computer runs in my parents house to observe the trading computer and in case of anything it executes going out of the The technical basis is done.

 

I think there are many advantages in technical trading, you can do other things, can trade many markets simultaneously, even at night, fast in executing (scalping possible) . It was a lot of work writing my own machine but before I checked any other system I could get (2 years ago) and I didn't find any good one for me. I've done some extended trys using Tradestation but I was always disappointed that the reality was not as good as the simulation. I believe one reason is the accuracy of the data. My own system uses 5sec bars and additionally tick, volume and order sizes and now it's accurate enough, means when I run a real trading day again in the simulator it's about 95% correct - that's enough to be able to find working systems in the sim.

 

The big point actually is to find system ideas. I say to myself: if I have found only one that works there will be many more. "Works" is definded as constantly making money, steady upslope capital curve etc. at least over some weeks/months. So far I've only dealed with relatively simple strategies without "self learning" stuff. This can work very good for some days but then "suddenly" there comes a "painful day" where it gives away a good amount of the money earned before. E.g. I have a strategy that is mostly successful in fading the 2nd breakout: on normal days I get more gain than loss, sometimes win sometimes loose but with good money management I win. But then it happens that there comes a real trend day, the market going in one direction steadily - and that's pure poison for this system, it looses the whole day. I made the same experience using other trading ideas and the result is: with "simple ideas" it's possible to program a small gain over long time, not more. The market (I actually trade only Eur/Usd) is very clever finding new ways in behaviour even if in the end it's the same again and again.

 

Things like Ross Hooks are easy to gauge and I thought "yes that must work", after programming the machine tells it's own version: yes it works often, but there are also many times where it doesn't work. I looked back at the chart and had to agree, the machine (= the pure technical idea) was right, I had overseen some non working RH.

 

So this is my contribution to the thread starter's question. I still believe it's possible but one must find a working strategy. This has to be easy, adaptive and clever at the same time :-) I'm actually working on integrating a Neural Network and other "learning stuff" into my system and I believe I will overcome the drawbacks mentioned with it. I also do some statistical research on daily behavior (like Taylor swings) to be prepared for special types of days. I don't think I will able to avoid losses but I want to avoid the "painful days" as I have them now. The market repeats itself and in the same moment it changes it's behaviour constantly, and the changes repeat themselfes. I believe a mechanical system must be able to deal with this fact.

 

Happy trading!

Andy

[maxima 10]

So Andy tell us.. You wrote the whole backtesting system from the scratch in just two years? Is that right? You must be talented young fella.. What programming language do you use?

[andy2m 10]

Yes I did. I'm a professional software developer so I know my tools. But I must admit it's my 3rd attempt, before I have written two systems in Excel which didn't really help me, but there I learned about markets, indicators, data etc. I also had tried to trade manually but have found that's not my thing.

 

Evolution: First I wrote a small trading robot dealing with the API of my broker, written in Visual Basic 6, it already had the capability to attach different strategies and could send orders, react on fills etc. Then I decided I need a simulator so I made it work with collected data from the past. But that was too slow (it needed 3mins to simulate one day using 5sec bars), I ported the engine part to C++ (now only 2secs for one day). This made it possible to add a parameter system, means parameters are read from a database and performance results are stored back, so I can do brute force optimizing. The last step was to synchronize the source codes of both simulator and trading robot so that now I can use the same strategy code in both.

 

Of course this is easier written than done :-) It was a lot of work and I wouldn't start that again. I had flexible jobs at that time so it was possible.

[maxima 10]

C++ (now only 2secs for one day).

unbelievable!

[andy2m 10]

unbelievable!

 

Yes but one thing must be said: I first used C++ implementing the ActiveX/COM technology of Visual Basic and the result was similar slow as VB. But pure C++ is impressive, I believe you can't get more out of your processor. However it's not easy to program, there are many pitfalls, so nothing for programming beginners.

Using VB you can come much quicker to your result and it can't be called slow (I believe it's still much faster than pure interpreting languages like Easylanguage) but for brute force optimizing you need pure speed of course.

But even speed does not make a winning system, it's only a tool :-)

[Tams 20]

Yes but one thing must be said: I first used C++ implementing the ActiveX/COM technology of Visual Basic and the result was similar slow as VB. But pure C++ is impressive, I believe you can't get more out of your processor. However it's not easy to program, there are many pitfalls, so nothing for programming beginners.

Using VB you can come much quicker to your result and it can't be called slow (I believe it's still much faster than pure interpreting languages like Easylanguage) but for brute force optimizing you need pure speed of course.

But even speed does not make a winning system, it's only a tool :-)

 

 

EasyLanguage left the interpreter in version 4. (~1997?)

 

Today's TradeStation uses p-code.

 

MultiCharts' indicators are compiled.

[natedredd10 10]

The hardest part about trying to go purely algorithmic is it quickly shows you how nonsensical what you think you know about markets are...Before deciding to go automated i would have said im a tape reader and trade price levels...ok...define what that means...... Its an easy cop out to pretend my brain is doing something that can't be put in code there but the reality is my strategies are simply too fraught with noise to put to code..muddled thinking and out right nonsense.

You can't find excuses with "trader psychology", "knowing yourself", ect as to why your trades have negative expectation...

There is also the aspect that I think you can make an arguement that algorithmic trading your own money is about the hardest problem to tackle there is...The skill set needed is so vast. A software engineer will tend to come at the problem wrong and try to paint the canvas with a hammer...while the "artist" will try to pound nails into the wall with a paint brush.

It strikes me though as a logical step as a trader as far as progression that you have to ask yourself eventually why you don't go algorithmic and take head on the elephant in the room of muddled thinking with discretionary setups...

[Kiwi 16]

There is definitely some truth in that perspective.

 

But often it is because its very hard to code 'beauty' and 'looks really good' or 'well proportioned.' I know

[cunparis 10]

Smells like spam.

The advantage I find in algo trading is the lack of pressure and stress that goes along with discretionary trading.

Bottom line is - discretionary trading is a hell of a lot of work on an intraday basis. Once you are in a trade it is incredibly easy to make a mistake, especially when the market is moving.

I like the idea of discretionary trading, but it sure is relaxing doing the automated thing.

 

Depends on how discretionary and complicated you make it. I'm trading a semi-mechanical method and it's really simple. I get 0-5 setups per session (I only trade mornings). I surf, read, watch webinars, chat on skype, etc. while patiently waiting for a setup. When I get it I click the DOM to enter and that's it. either stop or target is hit. trading doesn't have to be complicated. I'd love to automate this but I trade off chart patterns including divergences which are not easy to automate, and I was a professional software developer. Maybe some day I'll try to automate it but I fear that I'll spend more time automating it than I would just trading it. Plus the markets constantly change so if I do it manually I'll gradually change with them.

 

My take on automation is that it's possible but you sacrifice your performance. I haven't been able to get higher than 1.5 profit factor on automated systems. The drawdowns are too high. I've wrote hundreds of strategies and none of them work as well as my discretionary trading. So I gave up on it.

 

The edge is in our brains. If it were possible to just program an automated strategy.. well goldman and the big companies have lots of programmers working on that sort of thing. if it were possible they'd be doing it. you have to use your brain and focus on what cannot be automated and that's reading price action, volume, order flow, etc.

[maxima 10]

trading doesn't have to be complicated.

 

Plus the markets constantly change

 

The edge is in our brains.

Bravo. Thats exactly what I found myself.

[symmetrics 10]

yes it is possible and yes you can make profitable trades, no system is perfect, for instance some systems fail on sideways market moves , others are built around capturing reversals . hence why one system wont be ideal ... you need a package or 2 or 3 systems running to capture every move that can appreciate profit.

 

Or combine 3 into 1 not easy ... but YEs there rules and mechnaical systems which nail the majority of moves. it sounds a bit like you Wont something that gives you forecasts

"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. '

You can have something that gives a entry signal and does what it suppose to according to rules, profit is based on the markets movement and direction your system goes with , you have to trust something, where the discretiaonary trade comes in is where you see soemthing change visually or market shows you something based on exp. or rules you use for allocation etc... e..g weekly indicator changes on a wednesday and thursday confirms ,then your position is agianst the change you may lighten your position in expectation of a sudden reversal ... or market news is so different that it becomes indecisive .. BUT ive never had a an occasion where news comes out and i havnt been facing the wrong way !

 

anyway hope this helps

[StevenSJC 10]

I have a few thoughts on this.

 

First, everyday in my inbox I'm pounded by sellers of EA's to autotrader the forex. To this day I've never met, talked or seen anyone actually be successful with any length of time with these. They just turn out to be overoptimized, curve-fitted marketing gimmicks.

 

However, there's no denying that the sales pitch is awfully compelling. It really makes you want to yearn for a time where you could have the computer do your trading for you.

 

I know in my "manual" trading I do use discretion, and I also make mistakes. It would be nice to have something where those mistakes are eliminated.

 

Of late, I've been using a strategy inside of Tradestation, then using the email interface, it sends the trade into NinjaTrader and onto my Interactive Brokers accounts. Sounds slow in theory but it actually sends the order in a split second - certainly as fast as I could every manually enter it.

 

There are issues though - keeping it all in synch. As much as I'd love to feel 100% comfortable going to sleep, or playing golf (I don't but that's how EA's are always advertised) I've had things happen that make that a little uneasy. I still do it, walk away that is but at times I comeback to a surprise. The strategy itself is fine, I trade it on Crude Futures and Dax Futures now and will look to expand into forex next. But, sometimes the strategy is "exectued" but no fill was received at the broker. Yet the strategy places exit orders -- and as you can imagine if you don't fill on the original order, you can end up out there hanging totally in the wrong way when it exits you -- but turns out that becomes an entry order when the initial order wasn't triggered.

 

I've also seen times where Tradesation shows a price was hit, but for some reason it didn't trigger on IB -- and again exit orders get placed since it is trying to keep you in synch with the charts. Issues.

 

Or, just yesterday I must have lost internet connection overnight -- TS will try to reconnect for a while but it must have been down longer than a few minutes and I came to the office and saw it was asking for logins again -- totally offline.

 

So, while I feel automated trading at 100% accuracy (not trade success, I just mean following the trade strategy) is possible, I do think there are a lot of issues that makes it difficult at times to truly believe in 'set it and forget it'

 

At the same time, I'm committed to making it work because after years of manual trading it takes a toll and I'm a big believer in my strategy -- and really want this darn computer to do what it is told

[BlowFish 10]

StevenSJC you might want to take a look at Multicharts. It can run strategies written for Tradestation and place orders directly with Interactive Brokers. It would likely be more robust than your current setup with much better control and feedback. I should say that whilst I am a MC user I don't use strategies let alone automated strategies.

[StevenSJC 10]

Really?

 

I didn't know that Multicharts could do that. Learned something there.

 

How is the datafeed for Multicharts? I know a few years ago I tried it and there were some issues with a stable feed - but it has really been a while.

 

It might potentially be really cool to be able to use my same strategy that works in TS on Multicharts if it interfaces directly with IB.

[BlowFish 10]

I don't want to sound like a commercial for MC (I can be a harsh critic too:)) but it supports a whole variety of data feeds including TS's own it has most of the popular ones.

 

MultiCharts / Supported Data Feeds

 

Actually one of the feeds I use is IB's. It is fine for a lot of the stuff I do. (IB aggregate ticks you can read about that elsewhere). I also use Zenfire for some research stuff that requires more precision. That is fine but it does not always re-connect properly after an internet outage. As I currently only use it for research I have not tried too hard to get to the bottom of it.

[StevenSJC 10]

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?