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Auto trading is only thing that conquered my darkside
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Auto trading is only thing that conquered my darkside

  #301 (permalink)
Elite Member
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andyb1979 View Post
Hey liquidcci - just to say I agree totally with your position. I'm a software engineer with phd in signal processing and as my bias gets in the way of trading successfully, I'm moving over to full-auto.

I'd appreciate any advice while doing this ; )

I have at present 3 algos that give good returns on the S&P500. Stock indices I know a bit about. However I'd like to move to Forex. FX has a totally different personality and the strategies I use on stock indices plain don't work on FX.

I'd be more than happy to trade a bit of information / collaborate etc on developing winning algos : )

andy welcome to the AT club. As a software engineer you should be well suited to it as a finite set of rules will make sense to you.

As far as FX goes I don't trade FX so I am not qualified to answer. I primarily trade CL Crude which you should look at.

"The day I became a winning trader was the day it became boring. Daily losses no longer bother me and daily wins no longer excited me. Took years of pain and busting a few accounts before finally got my mind right. I survived the darkness within and now just chillax and let my black box do the work."
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  #302 (permalink)
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andyb1979 View Post
Hey liquidcci - just to say I agree totally with your position. I'm a software engineer with phd in signal processing and as my bias gets in the way of trading successfully, I'm moving over to full-auto.

I'd appreciate any advice while doing this ; )

I have at present 3 algos that give good returns on the S&P500. Stock indices I know a bit about. However I'd like to move to Forex. FX has a totally different personality and the strategies I use on stock indices plain don't work on FX.

I'd be more than happy to trade a bit of information / collaborate etc on developing winning algos : )

If you have a strategy that works well on an instrument, there should be no reason (other then account requirements) to move it to another market, that would be a mistake. In doing so, you have to understand that, outside of the code itself, you are starting the proving process all over again from scratch. Every market trades differently, all the work you have done in getting your strategy to work on one instrument/market will not guarantee the same results on any other.

It's perfectly fine to experiment with the strategy with new instruments etc, but if you want to be profitable, then keep you profitable strategies, and work on scaling them with the current instrument, while you experiment with other markets.

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  #303 (permalink)
Trading Apprentice
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Good idea. I used to trade Crude spot (discretionary) and had some success. I found it cycled/trended nicely and was fairly predictable. One thing about FX is its a totally different beast to say stock indices. It's noisy - breakouts come out of no-where then reverse?!

Reading the pages, I got to ~10 then gave up. Save to say agree 100% with discretionary traders often being dead men walking and that its a numbers/probability game after all. A rudimentary understanding of probabillity can really help when understanding why your system has an edge that you can't see when you obey subjective trading rules and why it behaves differently in live than backtest mode (e.g. run monte carlo over its profit/loss probabililty and win:loss ratio to generate 100s of random equity curves that are all different yet use the same inputs).

Edit: yes monpere agree why move? But then I'm at the beginning of this research so now is the tmie to play around. Besides trading is an arms race, once I have one algo on one asset class that I am willing to run live I will need to have another in the pipeline close behind it. Also understanding other asset classes is a key to diversification.

Monpere I notice you mentioned in posts before "if I could program what my eye sees". How have you progressed on this front? You know rules-based algos (ie: using if-else) will likely not help you but there are an array of non-linear software techniques that can (support vector machines, AI, fuzzy logic etc)

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  #304 (permalink)
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My two cents ...

I know I'm late to the discussion here but ...

Although I don't "auto-trade" (in the sense that the computer actually enters the orders for me), I do trade using strict trading rules that are based on sound market principles and have been back-tested. Previously, I traded using a pure discretionary approach and was a middling trader at best. I found that I couldn't hold onto winners very effectively when I traded on a discretionary basis; going to model-based trading, my risk tolerance and my ability to hold onto winners has increased tremendously.

My trading has definitely improved as a result.

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  #305 (permalink)
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furytrader View Post
I know I'm late to the discussion here but ...

Although I don't "auto-trade" (in the sense that the computer actually enters the orders for me), I do trade using strict trading rules that are based on sound market principles and have been back-tested. Previously, I traded using a pure discretionary approach and was a middling trader at best. I found that I couldn't hold onto winners very effectively when I traded on a discretionary basis; going to model-based trading, my risk tolerance and my ability to hold onto winners has increased tremendously.

My trading has definitely improved as a result.

furytrader the key really is the approach you have mentioned. At some point you might look at getting your system coded as that can provide another level of benefits to a systems based trader.

"The day I became a winning trader was the day it became boring. Daily losses no longer bother me and daily wins no longer excited me. Took years of pain and busting a few accounts before finally got my mind right. I survived the darkness within and now just chillax and let my black box do the work."
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  #306 (permalink)
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monpere View Post
If you have a strategy that works well on an instrument, there should be no reason (other then account requirements) to move it to another market, that would be a mistake. In doing so, you have to understand that, outside of the code itself, you are starting the proving process all over again from scratch. Every market trades differently, all the work you have done in getting your strategy to work on one instrument/market will not guarantee the same results on any other.

It's perfectly fine to experiment with the strategy with new instruments etc, but if you want to be profitable, then keep you profitable strategies, and work on scaling them with the current instrument, while you experiment with other markets.

So true. When going from market to market at minimum I usually have to adjust my stops and targets. But often I have to adjust many other parameters to make it work.

"The day I became a winning trader was the day it became boring. Daily losses no longer bother me and daily wins no longer excited me. Took years of pain and busting a few accounts before finally got my mind right. I survived the darkness within and now just chillax and let my black box do the work."
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  #307 (permalink)
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Thanks for the feedback - actually, my system is coded and it generates specific signals on the screen - however, I prefer to enter the order myself. I know, I don't have the courage yet to make the jump to straight auto-trading!

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  #308 (permalink)
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Semi-auto then. Yes another very valid method. I have a colleague who trades privately with a semi-auto system. He devised the rules himself and obeys them strictly. He tells me changing from discretionary to system based (even though he pulls the trigger) made the difference between unprofitable and profitable

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  #309 (permalink)
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Trading by the seat of your pants isn't discretionary trading it's gambling. Discretionary traders have a method that is rules based and they follow their rules to execute their edge. They just happen to push the buy/sell buttons themselves.

Having started off my trading career with the intent to trade fully AT and having moved to trading discretionarily, I can now say that some things cannot adequately be automated. Things like divergences, support/resistence zones based on market profile, and the like are ultimately patterns that a computer is unlikely to be able to replicate the same as an individual. And while possible, programming a system that can factor in longer term biases while remaining adaptive is a massive undertaking.

Lastly, I think most traders vastly underestimate the brain power of their competition and the overall effort required to trade AT. I believe that it is safe to say that unless you possess a far above average understanding of mathmatics and programming (not just a couple undergraduate courses but a MS or PhD level or the equivalent in work experience) you are probably wasting your time trying to create an AT system that trades more than a couple times a month. A good test of this is whether you possess the programming/math knowledge to create your own trading platform, optimization (using some sort of hill climbing/adaptive alg.), and ATI interface with your broker. That's not to say there aren't some very good out of the box tools available but my experience has been that the successful AT traders can and often do customize anything that might affect their systems. Needless to say they fully understand every process that can and often does interact/interfere with their AT trading.

Obviously you may be the exception to the rule, but from my 4 years of experience pursuing AT I was never able to be half as good as my discretionary trading and I of course thought I was above average intelligence.

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  #310 (permalink)
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eudamonia View Post
MS or PhD level or the equivalent in work experience ... A good test of this is whether you possess the programming/math knowledge to create your own trading platform, optimization (using some sort of hill climbing/adaptive alg.), and ATI interface with your broker.

Yes and yes, but even so its not easy by any stretch of the imagination. The part I find hard is not the technology side, its the trading side. Coming up with rules/methods for trading that are not subjective and work is actually very difficult. As an example, a statement "uptrends consist of higher highs and lows" may be subjective. In this case how would you define highs/lows? If you can quantify it then you can auto-trade it. Failing that semi auto where you devise indicators to spot the opportunity in the noise. It's likely you just need a non-linear decision maker. If/else statements won't cut it as the market is more complex than that.

Yes agree the average chap will have a hard time AT. However the average chap will also have a hard time discretionary trading - isn't it 90% lose or something?


eudamonia View Post
Obviously you may be the exception to the rule, but from my 4 years of experience pursuing AT I was never able to be half as good as my discretionary trading and I of course thought I was above average intelligence.

I personally would never be so presumptious as to think I'm the exception to the rule. Financial markets are good at humbling you if you think you're a hotshot. However, I have learned that my discretionary is rubbish so ready to try something else ;0

So far in a month of R&D, backtesting etc... I've learned loads about what is and is not statistically viable. I dare say the computer taught me more about trading in that time than I knew from years previously. Things like what is the effect on long term profits of an x% stoploss, or the effect on drawdown of taking partial profits early. Things like what indicator combinations are useful and which are useless. I've found a very simple combination of 1x trend indicator (to gauge long or short) and 1x cycle indicator (for entry) combined with stop, take profit & trailing stop to be effective. If I didn't test these assumptions I'd easily get discouraged when the first losses came.

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