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Is there a hill-o-beans chance this day trading system could work?
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Is there a hill-o-beans chance this day trading system could work?

  #1 (permalink)
Elite Member
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Is there a hill-o-beans chance this day trading system could work?

I have written a simple ES day trading system on 1 minute bars. It relies on limit orders being filled, which is probably the failure point of the strategy. But... with encouraging results, I'm not ready to ditch it yet.

I am using TradeStation. Of course it is profitable backtesting as long as I configure TS to assume the limit order was filled on touch. It loses profitability if I configure the backtest engine to assume a fill only if price goes through the limit order price. At that point the equity curve looks more like a seismograph rather than something you would want to put into your bank account.

Changing the fill assumption to "pass through" changes this:

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to this:

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A new limit order is placed every 60 seconds. Wouldn't this present a problem with always being last in the order queue, making my order "low man on the totem poll?"

Then... there are latency issues. What type of server connection would I need in order to make this possible? Would an AWS server close to TradeStation's server suffice? Or would I need something closer to the exchange?

What else am I not missing, or perhaps I should say, is it even possible to trade a strategy based on 1 minute bar limit orders?

Any feedback is greatly appreciated!

Dave

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  #2 (permalink)
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  #3 (permalink)
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risingfire View Post
I have written a simple ES day trading system on 1 minute bars. It relies on limit orders being filled, which is probably the failure point of the strategy. But... with encouraging results, I'm not ready to ditch it yet.

I am using TradeStation. Of course it is profitable backtesting as long as I configure TS to assume the limit order was filled on touch. It loses profitability if I configure the backtest engine to assume a fill only if price goes through the limit order price. At that point the equity curve looks more like a seismograph rather than something you would want to put into your bank account.

Changing the fill assumption to "pass through" changes this:

Please register on futures.io to view futures trading content such as post attachment(s), image(s), and screenshot(s).


to this:

Please register on futures.io to view futures trading content such as post attachment(s), image(s), and screenshot(s).


A new limit order is placed every 60 seconds. Wouldn't this present a problem with always being last in the order queue, making my order "low man on the totem poll?"

Then... there are latency issues. What type of server connection would I need in order to make this possible? Would an AWS server close to TradeStation's server suffice? Or would I need something closer to the exchange?

What else am I not missing, or perhaps I should say, is it even possible to trade a strategy based on 1 minute bar limit orders?

Any feedback is greatly appreciated!

Dave

1.

Let's say you pay $5 round trip for commissions...

75 trades (bottom graph) x $5 = $375

All the profits are gone.

2.


Quoting 
A new limit order is placed every 60 seconds. Wouldn't this present a problem with always being last in the order queue, making my order "low man on the totem poll?"

Yes.

3.


Quoting 
Then... there are latency issues. What type of server connection would I need in order to make this possible? Would an AWS server close to TradeStation's server suffice? Or would I need something closer to the exchange?

Latency is the least of your worries with this system.

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  #4 (permalink)
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risingfire View Post
Of course it is profitable backtesting as long as I configure TS to assume the limit order was filled on touch. It loses profitability if I configure the backtest engine to assume a fill only if price goes through the limit order price.


I think you've already answered your own question. What's your equity curve look like after 4000 trades assuming a fill on a pass through?

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  #5 (permalink)
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TheTradeSlinger View Post
1.

Let's say you pay $5 round trip for commissions...

75 trades (bottom graph) x $5 = $375

All the profits are gone.

Sorry, I should have mentioned that the $5 round trip commission was already factored in. So the graph is after-commission profit.

Quoting 
Latency is the least of your worries with this system.

Fills and order queue being the primary concerns, then? Or are there other factors to consider?

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  #6 (permalink)
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TheShrike View Post
I think you've already answered your own question. What's your equity curve look like after 4000 trades assuming a fill on a pass through?

It's absolutely dismal when assuming a fill on price pass through:
Please register on futures.io to view futures trading content such as post attachment(s), image(s), and screenshot(s).

It's amazing how something that looks good 'on paper' is simply not mechanically viable. I was hoping that I was missing something.

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  #7 (permalink)
Hi Mom!
Bridgeport, Ct
 
Futures Experience: Intermediate
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risingfire View Post
It's amazing how something that looks good 'on paper' is simply not mechanically viable. I was hoping that I was missing something.

Well, look at the bright side too. You can move on immediately to your next strategy and not waste any further time with this one.

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  #8 (permalink)
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TheShrike View Post
Well, look at the bright side too. You can move on immediately to your next strategy and not waste any further time with this one.


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  #9 (permalink)
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risingfire View Post
It's absolutely dismal when assuming a fill on price pass through:
Please register on futures.io to view futures trading content such as post attachment(s), image(s), and screenshot(s).

It's amazing how something that looks good 'on paper' is simply not mechanically viable. I was hoping that I was missing something.

This answers the question.

But keep at it @risingfire, each system you design, create, and test can teach you the things you need to know about successful system design.


Quoting 
“Failure is only the opportunity to begin again, only this time more wisely.” - Henry Ford


Quoting 
“I have not failed. I’ve just found 10,000 ways that won’t work.” - Thomas Edison


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  #10 (permalink)
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TheTradeSlinger View Post
This answers the question.

But keep at it @risingfire, each system you design, create, and test can teach you the things you need to know about successful system design.

Thanks so much, TradeSlinger! I am certainly having great opportunity to do that again... and again!

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