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OK- this question is for my wife.

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  #1 (permalink)
Palm Harbor, Florida/USA
 
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Perhaps you can help settle this debate. Don't get me wrong- my wife is very supportive. But after trying price action day trading for a couple of years, and NOT losing a lot of money, about a year ago I decided that for my personality it would be better to automate. I began writing strategies a little under a year ago. I have been actively writing strategies, trying to develop profitable trading systems in NT8 since January, and have 3 or 4 potentially profitable strategies which range from the late idea phase to the live sim / small position testing phase. I have tried and archived probably 30 strategies or variations which did not withstand the test.

I keep telling her that 1 year to develop profitable automated strategies is not a particularly long time, but she feels the process is taking too long, and she feels I should be more productive and profitable by now. She is ready to see results.

So for you systems day traders, or those of you who know systems day traders, how long has it taken from starting with an idea to live trading trading a strategy with reasonable expectancy?

And what is the percentage of bad strategies you have thrown out before you got one that offered some positive return, after drawdowns, commissions, and slippage over, say, a 6-month period?

I'm pretty sure of the answers I will get, so please indulge me and help me convince her that I am not NECESSARILY wasting time. Since we know no other traders personally, and I have no mentors, I am pretty much learning this on my own, so there is no other source for providing reasonable expectations. Thanks for your help.


Rick

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  #2 (permalink)
Legendary 4LeafClover
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In my real life I know 2 profitable systems traders, both took more than 3 years to finally have everything sorted out. This involved more than just successful strategy, both developed their own API's and even have 24*7 running server setups to do their job. One even bought direct exchange contract, which is similar to what brokers buy before they facilitate their clients (us).

However, I know lot of unsuccessful system traders, who have been testing for YEARS, and one particular individual who also trades discretionary has been testing since 2012, but has not found anything that he is willing to sail with auto.

I'm not entirely sure if its possible to give clear indication of "how much time" it should take in development. That equation has lot of variables, for example amount of resources you are putting in, amount of prior knowledge of markets and willingness to finally pull the trigger.

Not to mention everyone personal and professional responsibilities are different and that also plays a factor, for example that guy who is testing since 2012, is full time IT job holder and programs everything himself, so he doesn't particularly care about the time going into this project.

As for your second question, number of strategies they have thrown out, I'm not sure even they know that for sure, let alone me who is hearing from horses mouth. Needless to say its not a small number

Just my humble observation and 2c since no one else has yet replied, wait for more high calibre people to chime in.

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  #3 (permalink)
Market Wizard
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kevinkdog View Post
For a part time trader, I think 1 strategy "ready to go live" per month is a reasonable goal. For me, "ready to go live" includes years of out of sample results PLUS 6-9 months of profitable real time results.

99% of strategies I test never make it through my process. It is tough work.

As far as time wasted, if you have a development process that you know will produce good, real time trading results, it absolutely is not a waste of time. BUT, if you are doing things incorrectly (such as curvefitting, overoptimization, etc) then it could all be a waste of time. I spent years wasting time that way before I got on track!

Can you elaborate on the "out of sample" concept. Say you have a data set for years going from 2001-2020. If you test these years when you develop a strategy, where do you take your out of sample data?

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  #4 (permalink)
Legendary 4LeafClover
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kevinkdog View Post
I use walkforward testing, which when you do it correctly, gives you lots of out of sample data.

So, let's say you optimize from 2001 to 2003 (3 years). Then, take the best parameters from optimization, apply them to 2004. Save those results as "2004 out of sample."
Now, "walk" forward one year, and optimize from 2002 to 2004. Then, take the best parameters from optimization, apply them to 2005. Save those results as "2005 out of sample."

Continue on until present day.

Now you have out of sample results from 2004 to present.

Problem is most people mess this up, by running the test multiple times (by making improvements to the strategy, etc). Then, what should be "out of sample" is not quite out of sample - it is tainted by repeated testing.

Hope this helps!

It does, in fact this is first time I'm hearing about this kind of method. Thank you very much

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  #5 (permalink)
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kevinkdog View Post
If you do a YouTube search for "walkforward testing," you'll find some good videos on the subject, with at least one familiar face!

Haha, will do, thanks again for recommendation.

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  #6 (permalink)
tampa florida
 
 
Posts: 63 since Sep 2020

YOU SHOULD STOP TRADING and stop automating or thinking that you can automate.
1. you said I have NOT lost a lot of money. this means you did not make money and that your time is worthless and the frustrations
that your wife has had with you about trading and your personality changes and how simple it all is if you didnt keep making
the same mistakes over and over etc. THIS will not be FIXED due to automation!

2. NO ONE ever talks about the amount of time in hours that people spend sturdying trading and reading about trading trying to get profitable this is all a negative cost!
because unlike any other profession you cannot get a job in trading with a salary based on your experience since you are not making money and have zero track record and even if you have a track record it is still difficult to get hired at a big trading frim including prop firms!

add up total how many hours you spent on trading a week. then multiply that by minimum wage. that is your bare minimum loss!
then again managers of mcdonalds make 45 k a year so maybe minimum wage is still too low for what you have already cost yourself

3. We are profitable traders with consistency and we tried automating and we have 2 programmers part of our team and all we could do at best using our profitable
trading was to break even time and time again and that was it. Automation sounds great but it must be tweaked over and over daily hourly weekly monthly yearly.
the amount of time and energy requried and data crunching is insane to do it properly and then you must worry about
execution risk and the system and redundancy so it gets extremely expensive and again we programmed our system and just broke even.

We did create a wonderful signal generator though that we use lots of times for our trades or to confirm a bias or to take liquidity or wait for price and add liquidity these things we learned by automation but we were highly profitable before any of the automation tactics.

Not trying to tell you to give up on your hobby but automation in NINJA TRADER or easy language will not get you where you need to be because most likely you are
using the same indicators etc that everyone else uses and you are programming those into trade executions which is what you should be doing
anyway manually trading. TAKING OUT EMOTION should be easy if you have a winning strategy to begin with and that is fact.

Hope you find a winnign strategy but no automation will only lead you down another rabbit hole

my guess is you have no definition of what you are trying to do in the mkts. what is success to you in the mkts. is it short term med term swing scalp long term etc. this is what must be defined first. what is your goal and saying being profitable is sophomoric!

if you cannot answer these questions then you should not even be trading.

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  #7 (permalink)
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Bionan View Post
Perhaps you can help settle this debate. Don't get me wrong- my wife is very supportive. But after trying price action day trading for a couple of years, and NOT losing a lot of money, about a year ago I decided that for my personality it would be better to automate. I began writing strategies a little under a year ago. I have been actively writing strategies, trying to develop profitable trading systems in NT8 since January, and have 3 or 4 potentially profitable strategies which range from the late idea phase to the live sim / small position testing phase. I have tried and archived probably 30 strategies or variations which did not withstand the test.

I keep telling her that 1 year to develop profitable automated strategies is not a particularly long time, but she feels the process is taking too long, and she feels I should be more productive and profitable by now. She is ready to see results.

So for you systems day traders, or those of you who know systems day traders, how long has it taken from starting with an idea to live trading trading a strategy with reasonable expectancy?

And what is the percentage of bad strategies you have thrown out before you got one that offered some positive return, after drawdowns, commissions, and slippage over, say, a 6-month period?

I'm pretty sure of the answers I will get, so please indulge me and help me convince her that I am not NECESSARILY wasting time. Since we know no other traders personally, and I have no mentors, I am pretty much learning this on my own, so there is no other source for providing reasonable expectations. Thanks for your help.


Rick

Hi Rick, I have developed about 40 strategies - and the average time to develop and test each one has been around two months. However to develop one that is consistently profitable in live trading over one hundred trades has taken 10 years- so do persevere.

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  #8 (permalink)
Legendary Market Wizard
Upstate NY
 
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I've written a handful of strategies that generate 'good' (subjective) results on the longer-than-intraday timeframe but I have yet to develop even ONE intraday strategy that tested well enough live to warrant scaling up. I've probably tested and thrown away well over 100 intraday strategies over the past year and a half.

In stocks, I feel that it is much easier to find edges on longer timeframes, especially if trading long-only.

-Zimmer

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  #9 (permalink)
Palm Harbor, Florida/USA
 
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jamrock View Post
YOU SHOULD STOP TRADING and stop automating or thinking that you can automate.
1. you said I have NOT lost a lot of money. this means you did not make money and that your time is worthless and the frustrations
that your wife has had with you about trading and your personality changes and how simple it all is if you didnt keep making
the same mistakes over and over etc. THIS will not be FIXED due to automation!

2. NO ONE ever talks about the amount of time in hours that people spend sturdying trading and reading about trading trying to get profitable this is all a negative cost!
because unlike any other profession you cannot get a job in trading with a salary based on your experience since you are not making money and have zero track record and even if you have a track record it is still difficult to get hired at a big trading frim including prop firms!

add up total how many hours you spent on trading a week. then multiply that by minimum wage. that is your bare minimum loss!
then again managers of mcdonalds make 45 k a year so maybe minimum wage is still too low for what you have already cost yourself

3. We are profitable traders with consistency and we tried automating and we have 2 programmers part of our team and all we could do at best using our profitable
trading was to break even time and time again and that was it. Automation sounds great but it must be tweaked over and over daily hourly weekly monthly yearly.
the amount of time and energy requried and data crunching is insane to do it properly and then you must worry about
execution risk and the system and redundancy so it gets extremely expensive and again we programmed our system and just broke even.

We did create a wonderful signal generator though that we use lots of times for our trades or to confirm a bias or to take liquidity or wait for price and add liquidity these things we learned by automation but we were highly profitable before any of the automation tactics.

Not trying to tell you to give up on your hobby but automation in NINJA TRADER or easy language will not get you where you need to be because most likely you are
using the same indicators etc that everyone else uses and you are programming those into trade executions which is what you should be doing
anyway manually trading. TAKING OUT EMOTION should be easy if you have a winning strategy to begin with and that is fact.

Hope you find a winnign strategy but no automation will only lead you down another rabbit hole

my guess is you have no definition of what you are trying to do in the mkts. what is success to you in the mkts. is it short term med term swing scalp long term etc. this is what must be defined first. what is your goal and saying being profitable is sophomoric!

if you cannot answer these questions then you should not even be trading.

Thanks for your post. I knew in posting this type of question I would get this type of answer, so yes, I can answer these questions.

1. You are right. I did not make money in discretionary trading. My experience is that discretionary trading has a huge learning curve. I learned a lot about price action during that time, and I am trying to develop strategies based on that experience. In that regard, that time was not worthless. It is not uncommon for discretionary day traders to require 8 or more years of experience to become successful. The fact that I did not make money in two years does not concern me at all. The fact that I did not blow up an account gives me encouragement that, at least, I employed proper risk management.

2. I humbly disagree that automation does not prevent repeating mistakes. Mistakes are usually made from a host of factors, all of them human. A computer does not make a mistake unless it is programed into the strategy. That is why you create, backtest, optimize, and walk forward on out-of-sample data, as per Kevin's (Kevinkdog) book, which I am using. Many of my mistakes are based on emotional factors around entry and exits. I have successfully automated these aspects in order to prevent mental errors. Even on discretionary trades, I will continue to use this methodology because it works for me. This is the easy part of strategy development.

3. Regarding the time spent learning to trade- although day trading is a fairly recent undertaking for me, I have been studying markets and trying various longer-term trading strategies for almost 40 years. Just as Kevinkdog reports in his book, I have had, and thrown out, a huge library of trading books and articles. Some have gone into my knowledge base for strategy development consciously, some subconsciously, and some not at all. Creativity is defined as taking things learned and combining them into something new.

4. While I have been undergoing this knowledge accumulation I have done quite well in my primary career. I don't disparage or demean anyone who earns minimum wage, but I am a healthcare professional earning a 6-figure income. I just don't like my work anymore, and I desperately want a new career for the latter stages of my life in order to provide for my wife and me, and return to my God anything beyond that. The idea of becoming wealthy has long since passed for me.

5. I did mention that I use NinjaTrader. I never said that I use NinjaScript or limit myself to the indicators provided by NT8. I am using custom configurable indicators such as those available in Harry (Fat Tails) and Kris Lassen's LizardTrader. Harry is a frequent poster on this forum, and he has developed a huge number of indicators which are available on this website. I recently spent 2 hours with Harry on a Zoom call discussing how to configure the Premium indicators I use in my strategies. The only free indicators I use at all are EMA's, ATR, and the Kauffman Efficiency Ratio, and a MACD BB breakout as one of several entry triggers. Everything else is Premium, customizable indicators with customizable parameters and entry points. I then use SharkIndicators BloodHound to generate the entry signals and BlackBird to manage the execution, risk management, position size, and trade management. If you have an issue with this software, perhaps you should take it up with the professional traders who use it.

6. I have developed one strategy which has promise. It is a trend following strategy which incorporates entry triggers based on momentum, trending price action, and with-trend pullbacks to generate entries, and uses the one-day Rolling VWAP, the Ichimoku Kinko Hyo for trend verification, and the Kauffman Efficiency Ratio to avoid chop. Quick on-screen backtesting shows a 1-year net profit of 44.09% with 8% commission and a max drawdown of -14.24% on MNQ contracts, and using stop limit entry orders to reduce slippage. I just can't validly expect that kind of return consistently because this is due to a combination of backtesting and using live sim trading as a walk-forward analysis currently in progress. I have not applied it yet to out-of-sample data, because it is the MNQ, and that contract has only been around a little over a year.

7. Regarding my objectives- I have tried scalping, and I like the quick in and out nature of this style, but I found that I invariably had one loss which wiped out several profitable trades. In order to scalp successfully, you have to have an expectancy approaching 90%, and be willing to scale into unprofitable positions. I have done this with REAL MONEY, and it is not my idea of enjoyable trading. Therefore I am focusing on swing style day-trading. I am currently working with 2500 tick MNQ charts, and 1,000 tick MES charts for a reversal strategy I am developing. My strategic goal is to be able to trade stock index futures in any market type. I have a lifetime multibroker license with NinjaTrader, so I can run multiple strategies concurrently on multiple accounts, something also endorsed in Kevinkdog's book. I know my next statement is debatable, and many will disagree with it, but since I am only trading for myself, my wife, my Creator, and taxes, I don't have to meet any particular monthly or yearly ROR. My goal is to develop profitable short-term swing strategies and execute them flawlessly, and let the ROR take care of itself.

I do thank you for your post, and the time it took for you to write it. I just wanted to clear up some assumptions which were stated, and which may have been incorrect. Hopefully I have answered these questions well enough to help determine whether or not I should be trading.

By the way, I did ask my wife to read your post, as well as my reply, and she is more inclined to agree with you.

Rick

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Palm Harbor, Florida/USA
 
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LastDino View Post

I'm not entirely sure if its possible to give clear indication of "how much time" it should take in development. That equation has lot of variables, for example amount of resources you are putting in, amount of prior knowledge of markets and willingness to finally pull the trigger.

Not to mention everyone personal and professional responsibilities are different and that also plays a factor, for example that guy who is testing since 2012, is full time IT job holder and programs everything himself, so he doesn't particularly care about the time going into this project.

Thanks, LastDino for your reply. I understand the question is vaguely written for the sake of time and simplicity. As for the portion of you reply which I quoted, some of that (and more) is answered in my reply to jamrock.

Happy trading!

Rick

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