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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

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  #1 (permalink)
 liquidcci 
Austin, TX
 
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I tried just about every mind trick I could to get my trading right. But found I was fatally flawed. Trading seemed to bring out my worst characteristics. I would read my trading plan and my rules out loud every day before market opened. I would type up contracts with myself that I had to sign but none of it worked.

One time I did over 100 emini trades in a day 1 contract at a time only ending when I blew up my account. I was not scalping but just out of control. I was in a cold sweat and I could not stop pushing that entry button. The trading ladder jumping up and down could just not be resisted. Like a carnival game that could not be won I went until all my money was gone. I ended that day in a fetal position in the corner with my thumb in my mouth. It was bad. Trading reduced me to a slot machine gambler with no discipline.

But then I decided to build my signals into an auto trade strategy. It was the best time and money I ever spent. It 100% solved my discipline issues. I have not entered a rogue trade outside of my plan for 2 years and am profitable. This may not work for everyone but was only way I could overcome the darkness that lurks in every 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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  #4 (permalink)
 forrestang 
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I can totally relate to the idea of the OP.

Subjectivity kills me. I haven't figured out how to remove subjectivity from my trading.

I don't care if I could never code an effective ATS, even if my trading required me to actually see what I was doing and required discretion, as long as that discretion was completely objective as I saw it.

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  #5 (permalink)
sidney7g
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Lmao Yeah I've done this with the demo. I guess if automation works use it all the time. I just had to force myself to only take trades where I thought there was 90-100% conviction that it would go in my direction. Sometimes I'll just stop trading all together if the market doesn't look right to me.

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 monpere 
Bala, PA, USA
 
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sidney7g View Post
Lmao Yeah I've done this with the demo. I guess if automation works use it all the time. I just had to force myself to only take trades where I thought there was 90-100% conviction that it would go in my direction. Sometimes I'll just stop trading all together if the market doesn't look right to me.

Thinking the market has 90-100% conviction is still subjective. Markets don't care what we think, they are gonna do what they are gonna do. A pattern you think has 5% conviction might make gobs of money, and the one you think has 95% conviction might not give you 1 tick. Trading is a game of probabilities. If you have to 'think' about a signal before taking it, it's gonna be subjective. You have to identify 1 or 2 patterns that have historically proven themselves to work most of the time, and take those patterns every time they show up. If those patterns indeed win most of the time as suggested by your historical backtesting, then you will have yourself a winning system.

The moment you start cherry picking those patterns outside of what your backtesting revealed, then your results will only be as good as your emotional state/discretion is for that particular day, or even that particular trade. I guarantee you that if you cherry pick 2 of those 90% conviction trades in a row and they both lose, the 3rd time that pattern shows up, it will be a different decision process for you, why? because as a human being your emotional state will be compromised by those losses, and so your discretion will be compromised. Psychologically, a failed event that you thought had 95% success probability will affect you more then one you only thought had 5% success probability. String 2 or 3 of these together, you will start to question your ownn judgement. But if you are taking every trade, and your backtesting tells you, you will get 10 winners for every 3 losers, then you will have no problem taking that next trade.

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 forrestang 
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monpere View Post
If you have to 'think' about a signal before taking it, it's gonna be subjective. You have to identify 1 or 2 patterns that have historically proven themselves to work most of the time, and take those patterns every time they show up.

The moment you start cherry picking those patterns outside of what your backtesting revealed, then your results will only be as good as your emotional state/discretion is for that particular day, or even that particular trade. I guarantee you that if you cherry pick 2 of those 90% conviction trades in a row and they both lose, the 3rd time that pattern shows up, it will be a different decision process for you, why?

.......String 2 or 3 of these together, you will start to question your ownn judgement. But if you are taking every trade, and your backtesting tells you, you will get 10 winners for every 3 losers, then you will have no problem taking that next trade.

Well said, I've been saying this for a while.

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 diverdan 
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I am facing a similar situation with the same solution / conclusion. I haven't blown up any accounts but I certainly haven't been profitable for similar reasons good systems but not following them, seeing trades which weren't there, anticipating trades hoping for a better entry or taking random trades.

Since I have switched to MC, I have been able to develop strategies and then trade them automatically. I have only been doing this for a couple of months, but already and seeing some positiveness in the account . I feel especially good today as I came home from work with three winning trades today, but it doesn't always happen like that.

It is really encouraging to hear your story, especially as many people on futures.io (formerly BMT) claim that auto trading doesn't work.

Thanks

Daniel

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 liquidcci 
Austin, TX
 
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diverdan View Post
I am facing a similar situation with the same solution / conclusion. I haven't blown up any accounts but I certainly haven't been profitable for similar reasons good systems but not following them, seeing trades which weren't there, anticipating trades hoping for a better entry or taking random trades.

Since I have switched to MC, I have been able to develop strategies and then trade them automatically. I have only been doing this for a couple of months, but already and seeing some positiveness in the account . I feel especially good today as I came home from work with three winning trades today, but it doesn't always happen like that.

It is really encouraging to hear your story, especially as many people on futures.io (formerly BMT) claim that auto trading doesn't work.

Thanks

Daniel

Glad to hear you have something that is starting to work. Auto trading works if you have the right strategy and use good money management skills. I have found trading is profitable if you can manage the risks. When I backtest I look at risk first before I evaluate any profit potential.

"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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 liquidcci 
Austin, TX
 
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Trading based on feeling or how the market looks will eventually drain your account. You will have some great highs and exhilaration followed by the lowest lows of your life. It is amazing watching my bot take trades. It often gets in a trade and I am convinced that trade will be stopped based on feeling or what I perceive the market to wants to do and it will end up being a winner. Likewise what I often think looks like a sure winner often ends up losing. So I just learned let the bot follow my rules.

Auto trading is only as good as the rules you set up. I could trade my system manually and profit if I followed my rules perfectly. Problem is I am imperfect and can't consistently follow my rules. So the bot removes me a few degrees from the market so my emotions are left out and probabilities are allowed to 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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 monpere 
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liquidcci View Post
Trading based on feeling or how the market looks will eventually drain your account. You will have some great highs and exhilaration followed by the lowest lows of your life. It is amazing watching my bot take trades. It often gets in a trade and I am convinced that trade will be stopped based on feeling or what I perceive the market to wants to do and it will end up being a winner. Likewise what I often think looks like a sure winner often ends up losing. So I just learned let the bot follow my rules.

Auto trading is only as good as the rules you set up. I could trade my system manually and profit if I followed my rules perfectly. Problem is I am imperfect and can't consistently follow my rules. So the bot removes me a few degrees from the market so my emotions are left out and probabilities are allowed to work.

I think there is a psychological advantage as well with system trading. And, the system does not necessarily have to be automated, it can be a strict mechanical set of rules that you follow an execute manually. The psychological advantage is the degree of separation of the person to the system. That makes it easier for you to take losses, because when a losing trade occurs, then the system failed, not the trader. When you are a discretionary trader, every losing trade is directly attributed to your bad discretion, your bad decision. Subconsciously, that loser accumulates in your psychological bank. Like it or not that takes a toll on any human being.

Discretionary traders need to get to the point where a trade, is a trade, is a trade, win or lose. That is contrary to normal human behavior, and it is not easy to get to that stage because we have been naturally programmed to think losing is bad, since down to our most basic instincts, our natural survival is based on winning. If a winning trade makes you feel good, a losing trade makes you feel bad, and 2 losing trades makes you feel worst, then you are not psychologically ready to trade live.

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 liquidcci 
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monpere View Post
I think there is a psychological advantage as well with system trading. And, the system does not necessarily have to be automated, it can be a strict mechanical set of rules that you follow an execute manually. The psychological advantage is the degree of separation of the person to the system. That makes it easier for you to take losses, because when a losing trade occurs, then the system failed, not the trader. When you are a discretionary trader, every losing trade is directly attributed to your bad discretion, your bad decision. Subconsciously, that loser accumulates in your psychological bank. Like it or not that takes a toll on any human being.

Discretionary traders need to get to the point where a trade, is a trade, is a trade, win or lose. That is contrary to normal human behavior, and it is not easy to get to that stage. If a winning trade makes you feel good, and a losing trade makes you feel bad, then you are not psychologically ready to trade live.

monpere I agree 100%. I think the key is system trading. If someone can execute rules of system perfectly a bot is not a necessity. I know a few guys who system trade without a bot and can follow rules perfectly. I was not able to emotionally do so thus I went to bot trading. If system has a losing trade does not bother me like if I was trying to trade with my own discretion. The system has a certain number of losing trades that I expect. So when it takes a loss it is the system taking a loss and does not pull me down emotionally. Same for wins when following system win does not give me sense of exhilaration.

"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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 rpm123 
Green Bay WI
 
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liquidcci View Post
Trading based on feeling or how the market looks will eventually drain your account. You will have some great highs and exhilaration followed by the lowest lows of your life. It is amazing watching my bot take trades. It often gets in a trade and I am convinced that trade will be stopped based on feeling or what I perceive the market to wants to do and it will end up being a winner. Likewise what I often think looks like a sure winner often ends up losing. So I just learned let the bot follow my rules.

Auto trading is only as good as the rules you set up. I could trade my system manually and profit if I followed my rules perfectly. Problem is I am imperfect and can't consistently follow my rules. So the bot removes me a few degrees from the market so my emotions are left out and probabilities are allowed to work.

I know what you mean about the dark side and discretionary. The easier my rules now, the easier to follow. But I am following @NJAMC 's thread to see how he builds a bot. And maybe start watchful bot trading after refining the strategy.

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  #14 (permalink)
 liquidcci 
Austin, TX
 
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Big Mike View Post
Consider crafting and posting some of your strategies here:

Battle of the Bots

Mike


Mike I will take a look. By the way great forum you run here. I have run a few forums for individual stocks in my lifetime and it is not an easy task. You have built a very useful respectful place which I highly appreciate compared to many other trading forums that I have seen.

"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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 Ducman 
The Netherlands
 
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liquidcci,

Another autotrader fan here. Developing my system 'Myst' over the last couple of months and just started running it live. I have encountered some differences between forward sim account trading and live account trading. Maybe you can share some of your experience with us. I'm running the FDAX with a 6 BetterRenko and what I notice is that there are quite some difference between what I see in NT and what I get on my account. I know about market dynamic and slippage but I would like to visualize.

Q1. Is there a possibility to see the real trades that have been executed at my broker next to what has been submitted by NinjaTrader? I can only find info the latter (trades, log file, etc.). In the help I find things about position sync but that's another subject.

Q2. Are you prepared to share your system with us for learning purposes?

Thanks,

Ducman

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  #16 (permalink)
 liquidcci 
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Ducman View Post
liquidcci,

Another autotrader fan here. Developing my system 'Myst' over the last couple of months and just started running it live. I have encountered some differences between forward sim account trading and live account trading. Maybe you can share some of your experience with us. I'm running the FDAX with a 6 BetterRenko and what I notice is that there are quite some difference between what I see in NT and what I get on my account. I know about market dynamic and slippage but I would like to visualize.

Q1. Is there a possibility to see the real trades that have been executed at my broker next to what has been submitted by NinjaTrader? I can only find info the latter (trades, log file, etc.). In the help I find things about position sync but that's another subject.


Q2. Are you prepared to share your system with us for learning purposes?


Thanks,

Ducman


Q1. Is there a possibility to see the real trades that have been executed at my broker next to what has been submitted by NinjaTrader? I can only find info the latter (trades, log file, etc.). In the help I find things about position sync but that's another subject.

In NT you can pull all your trades out in account performance and setup spreadsheets to compare with your sim stuff.

Q2. Are you prepared to share your system with us for learning purposes?

I like to help out other traders where I can but my system took 2 years to develop and test as well as alot of money spent on having it coded so it's not something I share. I also am ramping up my contracts via fixed ratio method so I don't want my entries to get to crowded. Sorry can't help more in this area.

"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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 Ducman 
The Netherlands
 
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liquidcci View Post
In NT you can pull all your trades out in account performance and setup spreadsheets to compare with your sim stuff.

I know how to export but these trades seem not the ones that really happened. At least the Account P&L does not align with the points won or lost.


liquidcci View Post
I like to help out other traders where I can but my system took 2 years to develop and test as well as alot of money spent on having it coded so it's not something I share. I also am ramping up my contracts via fixed ratio method so I don't want my entries to get to crowded. Sorry can't help more in this area.

Understand

Ducman

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 Massive l 
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Can you post a screen shot of the weekly P/L your bot is producing?

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  #19 (permalink)
 liquidcci 
Austin, TX
 
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Massive l View Post
Can you post a screen shot of the weekly P/L your bot is producing?


Massive why would it be helpful? I am not here to sell my system there are probably better on this board. I started this thread just to say I was an idiot for years but finally figured out what I needed to do a few years back.

My system averages around 900 to 1100 ticks per contract a year on CL and has a very low draw down. This has been for last 2 years and could change as all traders know to well. I use defined stops and defined targets with no break even. My system only takes around 100 to 150 trades per year. Before I developed a system I lost almost every year.

I will say a little profit can produce alot of gain if you have low draw downs and use good money management to ramp your contracts up. I use fixed ratio to do this but you need a good understanding of your draw downs. I always focus on draw downs before focusing on profits. You have to learn to stay alive before you can prosper.

"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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 Massive l 
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It would be helpful because then we can hear and see the difference in your trading.
A picture speaks a thousand words.

If you have a successful bot, then let's see what its got Please.

One of my favorite online traders had no problem starting a thread on another board
to put his skill on display when asked the same question.

He posted screenshots for a year with amazing consistency. He is a directional, discretionary /CL trader.

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  #21 (permalink)
 liquidcci 
Austin, TX
 
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Massive l View Post
It would be helpful because then we can hear and see the difference in your trading.
A picture speaks a thousand words.

If you have a successful bot, then let's see what its got Please.

One of my favorite online traders had no problem starting a thread on another board
to put his skill on display when asked the same question.

He posted screenshots for a year with amazing consistency. He is a directional, discretionary /CL trader.

Massive I won't post screen shots. Even with account numbers blacked out just a little to personal to post. A statement could be faked easily in any case. Plus I am not really here to prove my numbers just enjoy hanging out with people interested in same thing. In my last post I did put my averages for last 2 years. I would not have even posted that except for the fact you asked. That is probably the most you will get out of me.

I could start a journal here with my daily entry and exits but most would find it very boring as I am only in around 100 to 150 trades per year. Although I am in process of coding a couple of more signals that may yield more. I have never considered a journal but might because I do like this site.

"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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 monpere 
Bala, PA, USA
 
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liquidcci View Post
Massive I won't post screen shots. Even with account numbers blacked out just a little to personal to post. A statement could be faked easily in any case. Plus I am not really here to prove my numbers just enjoy hanging out with people interested in same thing. In my last post I did put my averages for last 2 years. I would not have even posted that except for the fact you asked. That is probably the most you will get out of me.

I could start a journal here with my daily entry and exits but most would find it very boring as I am only in around 100 to 150 trades per year. Although I am in process of coding a couple of more signals that may yield more. I have never considered a journal but might because I do like this site.

No one needs to know how much money you are making, or how successful your bot is. Now, if you were selling it as a black box, then you would need to be prepared to put up the numbers, otherwise, it's none of our business.

I have coded many bots, and none were successful. But they were all day trading systems. Your statement about the number of trades per year is interesting, and I may look into more longer term strategies. Can you tell us anything else generically about the system, like is it trend following, counter trend, scalp, holds overnight, stocks, futures, options, the market concept you are exploit, etc.? Anything that you may comfortable with.

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  #23 (permalink)
 Massive l 
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No worries. Here's how I look at it:

I wouldn't tell you I climbed Mt. Everest (which is what you have literally done in the bot trading world) without showing you a picture.

You are a Futures God.


liquidcci View Post
One time I did over 100 emini trades in a day 1 contract at a time only ending when I blew up my account. I was not scalping but just out of control. I was in a cold sweat and I could not stop pushing that entry button. The trading ladder jumping up and down could just not be resisted. Like a carnival game that could not be won I went until all my money was gone. I ended that day in a fetal position in the corner with my thumb in my mouth. It was bad. Trading reduced me to a slot machine gambler with no discipline.

I think a large majority of day traders with decent starting capital have done that same thing when they first started. I know I did!


liquidcci View Post
But then I decided to build my signals into an auto trade strategy. It was the best time and money I ever spent. It 100% solved my discipline issues. I have not entered a rogue trade outside of my plan for 2 years and am profitable. This may not work for everyone but was only way I could overcome the darkness that lurks in every trader.

It's strange how it's so hard for individuals to follow a simple set of instructions. In school, our teacher gave us instructions and we specifically followed them or we received a bad grade. Once we graduated, most of us got a job. We were given instructions and we followed them exactly or we would get reprimanded and potentially fired.

For some of us, once money is on the line, we go bonkers.

The problem is that too many traders focus on the money and not the process they are/should be working on to get the money. New traders skip risk/reward, money management, identifying targets, proper stops, price + volume, etc. and instead focus on the money and the indicator(s) that they think can get them the money. The problem isn't that their system is not automated, it's that they are not focusing on the basic keys to successful trading.

I does not sound like you were using any of the basics mentioned above when you were making tons of trades a day, losing left and right and ending up in the corner at the end of the day.

Of course, even with the basics and an edge, psychology plays an extremely important role.
I still don't find it too hard to follow a strict set of rules. I play black jack with a set of rules.
Trading is very similar. Everyone is different though.

You found a way to conquer your emotions and are extremely profitable. Congrats!

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 cbritton 
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liquidCCI,

Thanks for starting this thread. I've been pondering an auto trade strategy, and, like you, find that my dark side is getting in the way far too often when I try to abide by my trading rules.

How did you go about designing and testing your strategy? Did you just run some back tests on historical data or were you more interested in real time sim trading? I'm assuming you went through many cycles of tweaking and retesting and maybe starting from scratch a few times. Did you ever think that you were curve fitting? That has been a stopping point for me. I get a nagging feeling that I'm curve fitting when I back test a strategy.

Thanks for your time,
-C

“Strategy without tactics is the slowest route to victory. Tactics without strategy is the noise before defeat.” - Sun Tzu
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 liquidcci 
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monpere View Post
No one needs to know how much money you are making, or how successful your bot is. Now, if you were selling it as a black box, then you would need to be prepared to put up the numbers, otherwise, it's none of our business.

I have coded many bots, and none were successful. But they were all day trading systems. Your statement about the number of trades per year is interesting, and I may look into more longer term strategies. Can you tell us anything else generically about the system, like is it trend following, counter trend, scalp, holds overnight, stocks, futures, options, the market concept you are exploit, etc.? Anything that you may comfortable with.

My system now is all trend trades although I am not opposed to counter. I trade CL crude futures. I traded TF at one time but when it went to ICE I never could get profitable with it. No holds overnight this is a day trading system even though relatively small number of yearly trades. My targets are above 40 ticks. I exploit a move away from trend followed by hard momentum back to trend.

"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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 monpere 
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liquidcci View Post
My system now is all trend trades although I am not opposed to counter. I trade CL crude futures. I traded TF at one time but when it went to ICE I never could get profitable with it. No holds overnight this is a day trading system even though relatively small number of yearly trades. My targets are above 40 ticks. I exploit a move away from trend followed by hard momentum back to trend.

What kind of money management do you use? initial stop, breakeven, scaleout, multiple contacts, scaleouts, max daily loss, etc. Many times the money managment aspect is what can make or break a system.

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 liquidcci 
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Massive l View Post
No worries. Here's how I look at it:

I wouldn't tell you I climbed Mt. Everest (which is what you have literally done in the bot trading world) without showing you a picture.

You are a Futures God.

Hey this statement not totally fair. I did not come in here saying I climbed Everest. In fact I only posted my averages after you asked me to post my statements which I refused. I could put any numbers on this board and then photo shop a statement pretending I climbed Everest if I wanted to.

My original post I put out there how I had been a complete trading moron for years but changed my ways a few years back. So I am not really sure you think I am claiming to climb Everest. This thread was never about that. Really I hoped to encourage others who are struggling that you can change and find a way to become profitable if work at it. Honestly these kinds of conversations are why I avoid many other forums.

"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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 liquidcci 
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monpere View Post
What kind of money management do you use? initial stop, breakeven, scaleout, multiple contacts, scaleouts, etc. Many times the money managment aspect is what can make or break a system.

We think alike I think money management is a huge part of a winning or losing system. I don't scale out, at one time I used a breakeven but found over time did not help me so just have a target and a stop that do not move.

My settings change depending what instrument right now all I trade is CL where I use a stop over 30 ticks and a target over 40 ticks. I get around 65% to 70% winners with those parameters. The target and stop is much wider than I used on TF back when the Russell worked. These settings are very crude specific. Other markets I may use breakevens, scale in and out tighter stops etc. Crude is a beast and I found need a wide swath between my stop and target to win. I also found a breakeven just did not give it room it needed to get to target so it really brings my system results down. I think the nature of crude to get very directional and run hard on the trend makes that wide combo possible.

I use fixed ratio to scale up my contracts which is very key to my trading and where the profit really rolls.

"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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 Massive l 
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liquidcci View Post
Hey this statement not totally fair. I did not come in here saying I climbed Everest. In fact I only posted my averages after you asked me to post my statements which I refused. I could put any numbers on this board and then photo shop a statement pretending I climbed Everest if I wanted to.

My original post I put out there how I had been a complete trading moron for years but changed my ways a few years back. So I am not really sure you think I am claiming to climb Everest. This thread was never about that. Really I hoped to encourage others who are struggling that you can change and find a way to become profitable if work at it. Honestly these kinds of conversations are why I avoid many other forums.

I understand. I know you didn't say that or have that intention to begin with.
I'm saying you are, even without any of the numbers.
Successful traders are far and few between. I suppose you didn't read past the first paragraph.

Don't take it too seriously. It's all good. I meant no harm and I understand your direction.

Also, you could post a photo of you on Mt. Everest but you would get called out quickly. Photo/screenshot hoaxes are pretty easy to smoke out with photoshop plug ins.
That's why you rarely see people putting up fake screenshots. They would get called out
by geeks like us in a heartbeat lol

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 liquidcci 
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Massive l View Post
I understand. I know you didn't say that or have that intention to begin with.
I'm saying you are, even without any of the numbers.
Successful traders are far and few between. I suppose you didn't read past the first paragraph.

Don't take it too seriously. It's all good. I meant no harm and I understand your direction.

Also, you could post a photo of you on Mt. Everest but you would get called out quickly. Photo/screenshot hoaxes are pretty easy to smoke out with photoshop plug ins.
That's why you rarely see people putting up fake screenshots. They would get called out
by geeks like us in a heartbeat lol

Okay Massive thanks for clarification. Hand shake.

"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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 liquidcci 
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liquidcci View Post
We think alike I think money management is a huge part of a winning or losing system. I don't scale out, at one time I used a breakeven but found over time did not help me so just have a target and a stop that do not move.

My settings change depending what instrument right now all I trade is CL where I use a stop over 30 ticks and a target over 40 ticks. I get around 65% to 70% winners with those parameters. The target and stop is much wider than I used on TF back when the Russell worked. These settings are very crude specific. Other markets I may use breakevens, scale in and out tighter stops etc. Crude is a beast and I found need a wide swath between my stop and target to win. I also found a breakeven just did not give it room it needed to get to target so it really brings my system results down. I think the nature of crude to get very directional and run hard on the trend makes that wide combo possible.

I use fixed ratio to scale up my contracts which is very key to my trading and where the profit really rolls.

I will also say one other thing about using a wide range between stop and target on crude at least for a daytrade. I designed my system to specifically weed out alot of signals that would work fine with tighter stops and closer targets. Having such a wide stop daytrading could ruin me if my system took alot of trades. It is hard for my system to have a melt down day because it takes so few trades. It does have losing days of course but has not melted down so far at least. I think if going to use a wider stop on any market have to really balance number of trades your system takes or you get wiped out.

"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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 diverdan 
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Hi LiquidCCI

When you were testing your system, what parameters did you consider? e.g. Sharpe, max drawdown,etc.

Thanks

Daniel

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My experience was the opposite.

I started out attempting to code a solution to the trading 'problem'. I tried indicators. I tried all sorts of things but the one thing I didn't try was being 100% personally accountable for my own decisions.

At one point, I took a step back and told myself that I had to make the decisions myself and that no system would absolve me of that responsibility. I had to accept that this was going to be subjective.

To be honest, such a decision doesn't make things harder necessarily. Its probably just as much effort coding/writing indicators as it is watching the market/tape. You have to be able to embrace that uncertainty because that is where the edge is. The edge is not in finite repeatable patterns in my opinion.

The downside of automated trading is that no-one can teach it. This is because almost no-one is making money at it. Of course, there are lots of people on the internet with lofty claims but if you talk to brokers and platform providers, they will tell you that across the board, they just don't see people making money this way.

The upside of subjective analysis (e.g. market profile) is that it gives you a chance to build prospective scenarios and play them. From the profitable traders I know, they all do something different but they all have a method of defining the action at a higher level (an expectation of what they want to see) and then a way to play it when it happens. These people are also 100% confident in their methods.

I've never met anyone that's made money on automated trading. I think it's a pipe dream for people that don't want to make a trading decision.

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 monpere 
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DionysusToast View Post
My experience was the opposite.

I started out attempting to code a solution to the trading 'problem'. I tried indicators. I tried all sorts of things but the one thing I didn't try was being 100% personally accountable for my own decisions.

At one point, I took a step back and told myself that I had to make the decisions myself and that no system would absolve me of that responsibility. I had to accept that this was going to be subjective.

To be honest, such a decision doesn't make things harder necessarily. Its probably just as much effort coding/writing indicators as it is watching the market/tape. You have to be able to embrace that uncertainty because that is where the edge is. The edge is not in finite repeatable patterns in my opinion.

The downside of automated trading is that no-one can teach it. This is because almost no-one is making money at it. Of course, there are lots of people on the internet with lofty claims but if you talk to brokers and platform providers, they will tell you that across the board, they just don't see people making money this way.

The upside of subjective analysis (e.g. market profile) is that it gives you a chance to build prospective scenarios and play them. From the profitable traders I know, they all do something different but they all have a method of defining the action at a higher level (an expectation of what they want to see) and then a way to play it when it happens. These people are also 100% confident in their methods.

I've never met anyone that's made money on automated trading. I think it's a pipe dream for people that don't want to make a trading decision.

If auto trading is a pipe dream then all the big banks with their HFT's are pipe dreamers. Most retail traders fail at auto trading because they have bad algo's or they just can't code it properly. I think I am a pretty good programmer, I use to make a living out of it. Now, I have a profitable mechanical system that I trade manually, but I just have not been able to code it so that the computer sees the trades as I see them, no matter how hard I tried. So, I have to say I fall in the latter category, I just don't have the programming resources required to code my strategy.

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sidney7g
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DionysusToast View Post

I've never met anyone that's made money on automated trading. I think it's a pipe dream for people that don't want to make a trading decision.

I agree

I've never used automated systems but I know for sure that if one small variable like for instance not checking the news for a budget report before 2pm can be very devastating. There are a lot of factors to trading like spotting previous highs or lows people are trying to push. I don't know of any indicator that will spot out previous highs and lows because sometimes they will be camouflaged in trends or are very far away.

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 liquidcci 
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DionysusToast View Post
I've never met anyone that's made money on automated trading. I think it's a pipe dream for people that don't want to make a trading decision.

lol please tell me you are kidding with this statement. When you setup auto trade system you make decisions. The bot only does what you tell it to and follows your rules. Auto traders make decisions on proven probabilities not pie in the sky feelings.

"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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 liquidcci 
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diverdan View Post
Hi LiquidCCI

When you were testing your system, what parameters did you consider? e.g. Sharpe, max drawdown,etc.

Thanks

Daniel


Max draw down, profit factor and sharpe ratio. Also run through Monte Carlo simulations just for kicks. Don't get me wrong profit is very important and is the goal but I try to filter everything through draw down. If there is not enough profit draw down does not matter as there is no money to be made. But if can right combination that produces then I really take a hard look at draw down. Keeping draw down low can obviously keep you alive but it also allows you to ramp up your size much faster which is where the real money is made.

"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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 liquidcci 
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sidney7g View Post
I agree

I've never used automated systems but I know for sure that if one small variable like for instance not checking the news for a budget report before 2pm can be very devastating. There are a lot of factors to trading like spotting previous highs or lows people are trying to push. I don't know of any indicator that will spot out previous highs and lows because sometimes they will be camouflaged in trends or are very far away.


I turn my system off when major reports are coming out. If the human eye can spot a previous high or low a computer can be programmed to do the same. It's all numbers. Only thing computer can't do is feel the market which will cause you to go broke eventually. I know guys personally who made a few million feeling the market but went broke. When you try to feel the market you are betting against the house and the house will eventually take it all back. If you program the right auto system with good probabilities or have the discipline to manually trade a mechanical system you become the house.

"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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monpere View Post
If auto trading is a pipe dream then all the big banks with their HFT's are pipe dreamers. Most retail traders fail at auto trading because they have bad algo's or they just can't code it properly. I think I am a pretty good programmer, I use to make a living out of it. Now, I have a profitable mechanical system that I trade manually, but I just have not been able to code it so that the computer sees the trades as I see them, no matter how hard I tried. So, I have to say I fall in the latter category, I just don't have the programming resources required to code my strategy.

In my opinion, there is little relationship between HFT algos and your typical man at home trading directional outright positions with Tradestation/NinjaTrader.

Look at "C" before the change - 300,000,000 shares a day traded and a 5 cent daily range. That's the HFT world. Co-location, rebate trading, capturing spreads. Huge investments and millions of transactions a day for pennies at a time.

It has nothing to do with 'not coding it properly' in my opinion. The retailer with his copy of Ninja doesn't have the latency, capital or fee structure to make money on the way that HFTs do. It's expecting automation to be something it isn't.

What we should learn from HFT is this: With all of the resources that these people have, why are THEY not coding directional systems that trade outright positions like the man at home? Why do they bother with HFT? The cost/use of capital is huge. If it were possible to predict future market action based on a few indicators, why would they even bother with HFT?

The answer is that they can't write the kind of systems people on internet forums are trying to write.

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liquidcci View Post
lol please tell me you are kidding with this statement. When you setup auto trade system you make decisions. The bot only does what you tell it to and follows your rules. Auto traders make decisions on proven probabilities not pie in the sky feelings.

Nope - not kidding at all.

All of the profitable traders I know, including one that trades a $30M fund, do not use any automation to make trading decisions. One group is using automation to help find opportunities. They also have a VWAP engine to build up positions over days in thinner stocks but all decisions to get in and out are made by seasoned traders.

I know it's not comfortable making decisions but the markets are not a problem with a mathematical solution.

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sidney7g
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monpere View Post
Thinking the market has 90-100% conviction is still subjective. .


Monpere there are trades with certain specifications in the right market conditions and with a certain account size that will have a 90% to 100% chance. You should know this. I wasn't referring to conviction from emotion, I was referring to conviction from experience and back-testing. If you have the eye, technicals, and confidence to string contracts on an exhausted trend and have upwards to 50 contracts at your disposal you can with experience always make a profitable trade on the tail end. This isn't a holy grail proposition, this is the truth. I don't doubt auto-trading entirely from a very advanced algorithm with some human intervention, I just don't know of anyone personally who has made significant money long term from a singular auto system trading everyday. If you have made money from automated trading I'd like to know - If your account is growing geometrically or exponentially or if its unstable growth, how many ticks or money you've made, and how long you've been using this system for.

thanks for the input.

can your automated systems distinguish a time frame for patterns being fresh or used up from 'trader effects' (a pattern losing its form from people expecting the same result and thus entering or exiting early to lock in profits)?

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 Silver Dragon 
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sidney7g View Post
If you have made money from automated trading I'd like to know - If your account is growing geometrically or exponentially or if its unstable growth, how many ticks or money you've made, and how long you've been using this system for.

I have a automated system I have been working on for about a year. Yes it is profitable, however, with NT having issues with my broker MBT, specifically rollover of the Euro nightly I don't use it all the time. I get frustrated with it closing out my trades... so I am just sitting on it evaluating my options for a new broker and possible trading platform.

For the record I have posted live trades of my automated system in my journal first Break Even Trader.

The attached graph is backtesting for the past 6 months.
I trade 10,000 lot of forex euro. That equals out to a dollar a tick.
profit target is set for 83 ticks.


SD

nosce te ipsum

You make your own opportunities in life.
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 monpere 
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sidney7g View Post
Monpere there are trades with certain specifications in the right market conditions and with a certain account size that will have a 90% to 100% chance. You should know this. I wasn't referring to conviction from emotion, I was referring to conviction from experience and back-testing. If you have the eye, technicals, and confidence to string contracts on an exhausted trend and have upwards to 50 contracts at your disposal you can with experience always make a profitable trade on the tail end. This isn't a holy grail proposition, this is the truth. I don't doubt auto-trading entirely from a very advanced algorithm with some human intervention, I just don't know of anyone personally who has made significant money long term from a singular auto system trading everyday. If you have made money from automated trading I'd like to know - If your account is growing geometrically or exponentially or if its unstable growth, how many ticks or money you've made, and how long you've been using this system for.

thanks for the input.

can your automated systems distinguish a time frame for patterns being fresh or used up from 'trader effects' (a pattern losing its form from people expecting the same result and thus entering or exiting early to lock in profits)?

No, I don't know of any trades in any market that have 100% win rate. If you do, I will pay you good money for it... oh wait, it that is the case I think you would not need my money, I think you would be hanging out on your private island, laughing at us saps writing posts on futures.io (formerly BMT)

As I said in my post, I don't have an auto trader, I have not been able to fully automate my method. I have automated most aspects support the method, but not the actual entries themselves because I've never been able to get the machine to pinpoint the entries exactly where they should be, and because I am a scalper, I cannot afford the computer entering a bar early or a bar late.

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monpere View Post
I don't know of any trades in any market that have 100% win rate. Apparently you do, and if that is the case, I will pay you good money for it... oh wait, it that is the case I think you would not need my money, I think you would be hanging out on your private island, laughing at us saps writing posts on futures.io (formerly BMT)

As I said in my post, I don't have an auto trader, I have not been able to fully automate my method. I have automated most aspects support the method, but not the actual entries themselves because I've never been able to get the machine to pinpoint the entries exactly where they should be, and because I am a scalper, I cannot afford the computer entering a bar early or a bar late.

Cloning may be the only answer.

Can we call you Dolly?

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sidney7g
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monpere View Post
No, I don't know of any trades in any market that have 100% win rate. If you do, I will pay you good money for it... oh wait, it that is the case I think you would not need my money, I think you would be hanging out on your private island, laughing at us saps writing posts on futures.io (formerly BMT)


I do not have a large enough account size at the moment to ensure a 100% trade and they do not come often. If I had something close to 500000- 1000000 it is definitely possible. If a very promising trade goes against you, you can exponentially add contracts at equidistant intervals in length and or at signs of reversals to make up for the loss. I have even tried this system with out technicals and have become profitable. However this system takes into consideration you do not trade during news or crashes.

If you have a simulator I could use, I will show you.

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 monpere 
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DionysusToast View Post
In my opinion, there is little relationship between HFT algos and your typical man at home trading directional outright positions with Tradestation/NinjaTrader.

There are various ways to autotrade. Most retail traders do not have HFT algo's. If a retail trader wants to trade an HFT algo, then he would have to lease a co-located machine. To most retail traders, autotrading means taking a system that can be manually traded, and have the computer execute it based on the rules they would use to manually trade it.


DionysusToast View Post
Look at "C" before the change - 300,000,000 shares a day traded and a 5 cent daily range. That's the HFT world. Co-location, rebate trading, capturing spreads. Huge investments and millions of transactions a day for pennies at a time.

I know guys who trade "C" every day from the internet using X-Trader to trade for rebates, no co-location, no HFT's, just a mouse, a fast index finger, and low commissions.


DionysusToast View Post
It has nothing to do with 'not coding it properly' in my opinion. The retailer with his copy of Ninja doesn't have the latency, capital or fee structure to make money on the way that HFTs do. It's expecting automation to be something it isn't.

Sure, It has everything to do with having a proper trading concept, and coding it properly. My manual mechanical method is very profitable, but is almost impossible to code, because the concept is based on recognizing indicator patterns, and it is almost impossible to teach a computer to recognize pictures of squiggly lines.


DionysusToast View Post
What we should learn from HFT is this: With all of the resources that these people have, why are THEY not coding directional systems that trade outright positions like the man at home? Why do they bother with HFT? The cost/use of capital is huge. If it were possible to predict future market action based on a few indicators, why would they even bother with HFT?

They are not trying to predict future market movements, they are taking advantages of micro market imbalances that last fractions of seconds. They do it because they can make barrels of money doing that. Why would they want to do something else?

Successful trading whether auto or manual is not about predicting the market. It is about playing the odds. None of us have a crystal ball. Winning the game is getting the probabilities in your favor and be right more often then you are wrong, or make more when you are right then you loose when you are wrong. If you think trading is about predicting the market, you will not only loose all your money, you will also have very low self esteem, because the market will prove to you over and over that it is always right, not you.

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sidney7g
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monpere View Post
Successful trading whether auto or manual is not about predicting the market. It is about playing the odds.

Predicting by definition is an "estimate that (a specified thing) will happen in the future or will be a consequence of something". In essence 'playing the odds' is predicting if you use specifications(technical/fundamental specifications) based on back-tested odds. sorry to digress and use semantics, but I think Successful trading can be about predicting the market if you use technicals/fundamentals.

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 David 
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DionysusToast View Post
In my opinion, there is little relationship between HFT algos and your typical man at home trading directional outright positions with Tradestation/NinjaTrader.

Look at "C" before the change - 300,000,000 shares a day traded and a 5 cent daily range. That's the HFT world. Co-location, rebate trading, capturing spreads. Huge investments and millions of transactions a day for pennies at a time.

It has nothing to do with 'not coding it properly' in my opinion. The retailer with his copy of Ninja doesn't have the latency, capital or fee structure to make money on the way that HFTs do. It's expecting automation to be something it isn't.

What we should learn from HFT is this: With all of the resources that these people have, why are THEY not coding directional systems that trade outright positions like the man at home? Why do they bother with HFT? The cost/use of capital is huge. If it were possible to predict future market action based on a few indicators, why would they even bother with HFT?

The answer is that they can't write the kind of systems people on internet forums are trying to write.

I have an automated trading system that is profitable long term, even in these highly volatile market conditions. I trade my capital and a few others capital, with it using an IB financial advisor account.

It is coded with SierraChart, uses IQFeed, and runs on a dedicated windows server in a good data centre. No big investment in technology - monthly costs are less than $300 per month.

I also consult for a few hedge funds that run automated systems which are profitable

Your view that "retail level" automated systems cannot make money is clearly incorrect, as the OP has also demonstrated.

The view of many on this forum that automated trading systems do not work and can not be profitable is laughable and short sighted.

In my experience, the main problem is that retail traders think that automated trading systems have to be complex so they add layer upon layer of complexity that then will not work.

The systems I'm involved with are amazingly simple, including the hedge fund systems. In fact if it isn't based on simple concepts with a minimal number of indicators, I'm not interested.

David

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Actually - no-on has demonstrated anything on here. I have seen claims of profitability alongside the usual reasons for not posting statements to show profitability.

This is going on, on every trading forum, every day of the week, every week of the year.

Of course, everyone and his dog has a profitable automated system on the internet. Just like I have a moon lander in my back yard. Still - I can't show you a photo of my moon lander because someone could easily photoshop a picture of a moonlander onto a pic of their back yard - so it'd be pointless, see?

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 baruchs 
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Quoting 
Of course, everyone and his dog has a profitable automated system on the internet. Just like I have a moon lander in my back yard. Still - I can't show you a photo of my moon lander because someone could easily photoshop a picture of a moonlander onto a pic of their back yard - so it'd be pointless, see?

Please do everyone a favor and leave this thread. Its not for you and its OK.
There are people who don't believe (and its a belief) in automatic trading, as there are people who don't believe in technical analysis. There are people who say that markets are random and they may be correct.
For those who do believe in technical analysis the only way to go is automatic trading.
This is because technical analysis says that some patterns that exist on a chart have X percent chance to evolve in an up/down move. Why? because that what happened X % in the past. How can you have this information? From backtesting.
I read many journals from this forum. They all start with presenting a set of rules. After few losing trades the author changes the rules and gives a very detailed and sophisticated explanation why new rules are much better.
My opinion is that any move in the market can be explained in some way after a fact. Is this the correct explanation or not no one can tell, but an explanation is always very convincing.
Thats why I don't care much about reasons why a move occurred, but only if it has a statistical meaning.

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 monpere 
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DionysusToast View Post
Actually - no-on has demonstrated anything on here. I have seen claims of profitability alongside the usual reasons for not posting statements to show profitability.

This is going on, on every trading forum, every day of the week, every week of the year.

Of course, everyone and his dog has a profitable automated system on the internet. Just like I have a moon lander in my back yard. Still - I can't show you a photo of my moon lander because someone could easily photoshop a picture of a moonlander onto a pic of their back yard - so it'd be pointless, see?

Show me 1 person on this site, discretionary or automated, who has shown their live account profitability statements. Out of hundreds of traders here, if you find 1 you will not find 2, because their account equity is none of our business. No one has to prove anything to me.

If it's pointless to ask for photos of your moon lander, why is there a point in asking for profitability statements? If I tell you I have successful discretionary system you will believe me, but if I tell you I have profitable automated system, you will automatically not believe me? Do you think that maybe, just maybe you might have a bias there? Out of all those discretionary traders who you believe to be profitable, how many have shown you their account statements?

The purpose of this site is to share ideas, some of them will resonate with you some will not.

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 SPTrading 
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The title of this thread resonates with me, because, day in and day out my auto trading system does better than I can, even though I defined the rules it uses.

All I can bring to the equation in real time is a lack of discipline, patience, decisiveness, and every other bit of emotional baggage.

(Also: I'm only interested in the process by which the defined set of rules can be improved or evolve. This can only be objectively studied if I don't intervene with the trades that the system takes.)

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 monpere 
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baruchs View Post
Please do everyone a favor and leave this thread. Its not for you and its OK.
There are people who don't believe (and its a belief) in automatic trading, as there are people who don't believe in technical analysis. There are people who say that markets are random and they may be correct.
For those who do believe in technical analysis the only way to go is automatic trading.
This is because technical analysis says that some patterns that exist on a chart have X percent chance to evolve in an up/down move. Why? because that what happened X % in the past. How can you have this information? From backtesting.
I read many journals from this forum. They all start with presenting a set of rules. After few losing trades the author changes the rules and gives a very detailed and sophisticated explanation why new rules are much better.
My opinion is that any move in the market can be explained in some way after a fact. Is this the correct explanation or not no one can tell, but an explanation is always very convincing.
Thats why I don't care much about reasons why a move occurred, but only if it has a statistical meaning.

I love to see discretionary traders with sophisticated market analysis, the market should stop here because of responsive buying there, and point of control here, and 1250 traders are trapped here, etc., etc. Then the market blows right through the resistance level they so eloquently explained. Then, they will come up with a different explanation why the level did not hold. Well, I'll tell you why the level did not hold, it's because you don't know. You don't know, I don't know, nobody knows what the market is going to do, no one can predict it. So no explanation you give will hold water. If you happen to be right, don't feel great about it, even the clock on the wall that doesn't work is right twice a day. All you can say is I've seen this pattern 25 times before, and out of those 25 occurrences, the level held 17 times, so I'll take my chances there.

On a side note, I don't believe anyone should leave the thread, just provide constructive comments for or against and logical arguments for or against, don't just say I don't believe you cause you don't show me your statement.

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 monpere 
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sidney7g View Post
I do not have a large enough account size at the moment to ensure a 100% trade and they do not come often. If I had something close to 500000- 1000000 it is definitely possible. If a very promising trade goes against you, you can exponentially add contracts at equidistant intervals in length and or at signs of reversals to make up for the loss. I have even tried this system with out technicals and have become profitable. However this system takes into consideration you do not trade during news or crashes.

If you have a simulator I could use, I will show you.

Mathematically, given enough capital any system can be 100%. Martingale money management can be 100% if you have and infinite account size. If I buy the ES at 1275 put my target 1276 and put my stop at 0, then I stand pretty much 100% chance of hitting my target before my stop is hit at 0. In the last flash crash, I could have gone against the trend starting from the top, and randomly buying every 3 points the market went down, reducing my average cost each time, at some point the market would turn around and I would make a huge amount of money, because I knew the market would probably not go down to 0. But how much capital would I need to do that?

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 Ducman 
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Ducman View Post

Another autotrader fan here. Developing my system 'Myst' over the last couple of months and just started running it live. I have encountered some differences between forward sim account trading and live account trading. Maybe you can share some of your experience with us. I'm running the FDAX with a 6 BetterRenko and what I notice is that there are quite some difference between what I see in NT and what I get on my account. I know about market dynamic and slippage but I would like to visualize.

Just for the record, it was a currency translation issue. I trade DAX (euro) but NT7 seems only to be able to show the dollar sign in combination with the euro values. The live account shows dollars with the dollar sign, what's made me confused.

It's bad that NT7 isn't able to show the euro sign, I remember NT65 showing it one time. Is this a true statement for NT7 or do I overlook a global currency setting hidden somewhere?

Ducman

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monpere View Post
I love to see discretionary traders with sophisticated market analysis, the market should stop here because of responsive buying there, and point of control here, and 1250 traders are trapped here, etc., etc. Then the market blows right through the resistance level they so eloquently explained. Then, they will come up with a different explanation why the level did not hold. Well, I'll tell you why the level did not hold, it's because you don't know. You don't know, I don't know, nobody knows what the market is going to do, no one can predict it. So no explanation you give will hold water. If you happen to be right, don't feel great about it, even the clock on the wall that doesn't work is right twice a day. All you can say is I've seen this pattern 25 times before, and out of those 25 occurrences, the level held 17 times, so I'll take my chances there.

On a side note, I don't believe anyone should leave the thread, just provide constructive comments for or against and logical arguments for or against, don't just say I don't believe you cause you don't show me your statement.

As you say, the markets are uncertain places. Any trader of any kind will have an expectation and sometimes will be wrong and sometimes be right. So - losing trades/action against expectation is a fact with any method of trading and is not a good argument AGAINST any method of analysis.

I find it amusing request for me to leave this thread. The OP has quite clearly stated that discretionary traders will all lose over time and that only system traders will survive. This is pretty much the inverse argument I am putting forward.

There is a reason for the mechanical mentality. Mostly on the web we are discussing what we WANT to work and not what really works because most people are here searching for a solution. Mechanical solutions have a certain allure in that they absolve us of a lot of the decision making. So, you would expect a higher percentage of seekers to be seeking this type of solution.

Also (and this is a push, I'll admit). As most people are losing money, we can expect most people to be pushing losing systems. So, the fact that more people say that mechanical systems makes them money is proof that they don't...

Did I get away with that?????

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 baruchs 
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Quoting 
Also (and this is a push, I'll admit). As most people are losing money, we can expect most people to be pushing losing systems. So, the fact that more people say that mechanical systems makes them money is proof that they don't...

I'm sorry to disappoint you. Your statement that most people are losing money is correct, but I know for a fact that most of them are discretionary traders.
Just take a poll on this forum and you'll see.

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 monpere 
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I wish I could code my startegy to see exactly what my brain sees. I cannot get it to identify the entries on the correct bars with a high enough degree of accuracy. With the CL on Friday the method, produced 69 winners, 23 losers with a 2:1 reward/risk ratio, fixed 4 tick stop, fixed 9 tick target. It's humanly impossible to trade that many signals in one day. By some definitions, this would be considered and HFT system over the internet. Trading it manually from 8:00am, most days I am done trading before the market opens, and generally by noon, my brain is fried. On Friday I manually traded 10 winners/4 losers using the method from 8:00am to 10:00am and was done for the day, and I missed a couple of signals because they were just too fast, even though my entries are semi automated.

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 liquidcci 
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DionysusToast View Post
Nope - not kidding at all.

All of the profitable traders I know, including one that trades a $30M fund, do not use any automation to make trading decisions. One group is using automation to help find opportunities. They also have a VWAP engine to build up positions over days in thinner stocks but all decisions to get in and out are made by seasoned traders.

I know it's not comfortable making decisions but the markets are not a problem with a mathematical solution.

Automation does not make trading decisions. Automation only executes rules that you setup. Do they have rules for getting for in and out? If they do they have a system whether it is put in a bot or not is irrelevant in some ways.

What we are really talking about here is not just auto trading but having a system in place for entering and exiting trades. Automating that system does not mean there are no decisions. Just means those decisions have been made ahead of time based on probabilities and the computer executes those decisions. It can be done without a bot if have discipline to follow the rules.

But if the group you speak of has rules for getting in and out they have a system and are no different than a bot to a large degree if they follow the rules.

"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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 liquidcci 
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DionysusToast View Post
As you say, the markets are uncertain places. Any trader of any kind will have an expectation and sometimes will be wrong and sometimes be right. So - losing trades/action against expectation is a fact with any method of trading and is not a good argument AGAINST any method of analysis.

I find it amusing request for me to leave this thread. The OP has quite clearly stated that discretionary traders will all lose over time and that only system traders will survive. This is pretty much the inverse argument I am putting forward.

There is a reason for the mechanical mentality. Mostly on the web we are discussing what we WANT to work and not what really works because most people are here searching for a solution. Mechanical solutions have a certain allure in that they absolve us of a lot of the decision making. So, you would expect a higher percentage of seekers to be seeking this type of solution.

Also (and this is a push, I'll admit). As most people are losing money, we can expect most people to be pushing losing systems. So, the fact that more people say that mechanical systems makes them money is proof that they don't...

Did I get away with that?????

Lets get deep here I think most traders are initially attracted to a discretionary because until you develop a system which takes time you can jump in and start trading immediately. Going even deeper I think most like discretionary in the beginning because it provides a sense on control and a thrill that is until the market hands your backside to you in a handbag. I know some guys who will not go automated or system because they like to feel like they are a trader and doing something. They want to be powerful and make decisions on the fly conquering the market. Boooooyaaahhhh. The emotional high and feeling of importance they get from pushing the button themselves and making random decisions is tied to their worth. But problem is when it all collapses it is still tied to their self esteem which then becomes devastating emotionally .

I think anyone who is discretionary and lasts long term is most likely not really discretionary because they have setup rules which is essentially a system. I really do think anyone who is discretionary is a Dead Man Walking and eventually will be ruined unless they get a big gain quick and get out of the market for good or they develop a system.

"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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 RM99 
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sidney7g View Post
I agree

I've never used automated systems but I know for sure that if one small variable like for instance not checking the news for a budget report before 2pm can be very devastating. There are a lot of factors to trading like spotting previous highs or lows people are trying to push. I don't know of any indicator that will spot out previous highs and lows because sometimes they will be camouflaged in trends or are very far away.

Any strategy that can be developed (discretionary) can be coded. The sophistication and detail of the code can be complex, but it can be done.

The problem with most guys is that they base their strategies off metrics or inputs that are impacted by fundamental changes.

I will admit, developing an automated strategy that yields HIGH profits is very difficult. However, developing an ATS that's profitable really isn't that difficult at all. (assuming you're willing to suffer some drawdown).

I will tell you that it's possible to craft a trading strategy that not only is resiliant to fundamental changes, but actually fairs better during fundamental changes.

There's a reason guys are proclaiming they don't use indies anymore and now trade solely off price action or volume. When do you see the most price action and volume?.....during fundamental changes.

There's an entire process to developing a successful ATS, but it usually starts with gaining an edge and then optimizing by trying to eliminate "losers" while retaining most of your winners.

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 mainstream 
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I want to commend the author for have the balls to start this post.

My two cents on the subject is that, individuals who are "problem solvers" with a million problems solved a day, or people who need to be in motion non stop are going to have the same issue of the original poster. Because when it comes down to it, trading is sitting in front of the computer in a state of mild anxiety waiting for a make or break moment.

There are no problems to be solved and other then refocusing your mind, what else can you do? Auto trading certainly allows you to get on with your day or on to other problems.

I auto trade core positions with indexes and equities through options... or stock... or mutual fund with great yields. I find that auto trading directionally intra day is best scalped..

One solution I'm working on now which has been great so far in Beta is semi auto for intraday.... because I do think some guys like the action of trading, and there is nothing wrong with that as long as their winning right??

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 monpere 
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mainstream View Post
I want to commend the author for have the balls to start this post.

My two cents on the subject is that, individuals who are "problem solvers" with a million problems solved a day, or people who need to be in motion non stop are going to have the same issue of the original poster. Because when it comes down to it, trading is sitting in front of the computer in a state of mild anxiety waiting for a make or break moment.

There are no problems to be solved and other then refocusing your mind, what else can you do? Auto trading certainly allows you to get on with your day or on to other problems.

I auto trade core positions with indexes and equities through options... or stock... or mutual fund with great yields. I find that auto trading directionally intra day is best scalped.

One solution I'm working on now which has been great so far in Beta is semi auto for intraday.... because I do think some guys like the action of trading, and there is nothing wrong with that as long as their winning right??

What do you mean by semi-auto?

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 David 
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monpere View Post
I wish I could code my startegy to see exactly what my brain sees. I cannot get it to identify the entries on the correct bars with a high enough degree of accuracy. With the CL on Friday the method, produced 69 winners, 23 losers with a 2:1 reward/risk ratio, fixed 4 tick stop, fixed 9 tick target. It's humanly impossible to trade that many signals in one day. By some definitions, this would be considered and HFT system over the internet. Trading it manually from 8:00am, most days I am done trading before the market opens, and generally by noon, my brain is fried. On Friday I manually traded 10 winners/4 losers using the method from 8:00am to 10:00am and was done for the day, and I missed a couple of signals because they were just too fast, even though my entries are semi automated.

Awesome. I'd sure like to help you out, but as you say you are a good programmer there is probably little I can add.

Have you tried developing your system with SierraChart?

I only made progress and actually got my first system into the live market once I dumped Ninjatrader and moved to SC.

For some reason, I kept bumping into road blocks with NT, however things just seem to work well with SC. Its fabulous for an ATS.

David

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sidney7g
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This is only my assumption, but I've noticed a particular occurrence trading the ES. In some range bound small movements I'll see a pattern emerge which looks promising. It looks like a high probability Japanese candle formation on the minute chart (lets say movement A). I can tell it would probably trigger some automated systems, but the over all long term price data from hours ago suggest to negate this move (lets say movement B). I can tell on the short term It looks like you could make a tick or two, but anyone manually trading looking at the chart would be hesitant to trade movement A based on variables outside of the 1 min chart. Then as the movement B goes against this formation of movement A I see a volume increase in large chunks till finally the trader or automated system move the market till they get just one or two ticks. Immediately after they 'seem' to pull out and it continues to go in Movement B direction.

Now, if you can program an automated system to use volume, which I assume a lot of trading firms or hedgefunds have the capitol to do so, that automation could work even better. It's shame in a way that they can't crunch multi chart patterns and discern against a trade that looks promising short term based on a dozens of longer term and or fundamental variables. But then again why would the automated trading system care? I'd assume It certainly doesn't need a high win to loss or reward to risk ratio because even a small win to loss ratio with a large amount of trades would still result in a substantial return.

What do you guys think about including volume into Automation? Or, do you think this occurrence is just regular traders working off the same inclinations and thus pulling out at the same time?

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 liquidcci 
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I am going to throw another important hat into the ring here. I am enjoying this discussion pro and con so hope no one leaves the thread. I don't mind be challenged as long as it is respectful and not personal.

If you have a system does not have to be automated but at least a system based on probabilities it allows you to scale up your contracts in a much more orderly systematic way. If you trade discretionary this is much harder to do. If you are trying to read the flow and emotion of the market and you have to make those decisions on the spot on a per trade basis it gets very hard to quantify when you should and when you should not scale. I can scale because I know the probabilities of my system. Scaling is where I make most of my profit.

"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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 RM99 
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The real heart of the issue is "rules based trading." That's what most people are trying to achieve.

As an avid firearm guy, I get a lot of questions about different guns, calibers, brands, etc.

My answer to start is always purchase/carry/use whatever you can shoot best. The biggest, baddest, deadliest, most expensive weapon is useless if you can't hit what you're aiming at. Shooting a .22 caliber and hitting your target is always more effective (and safer) than shooting a .50 cal and missing.

The same is true with most things.

For some guys, rules based trading is easier achieved manually or at the discretion of the trader. For others, it's automation that helps to provide the discipline necessary. Some guys see coding and all the issues with automation as more of a challenge than being disciplined and emotionless. Some guys observe the opposite.

This is very similar to the investor who wants to dump his money off with an advisor and say "don't call me." They don't want to know the day to day swings. Same with the guy that invests in his 401k and looks at it 2 times a year. As compared to the guy that invests, and constantly obsesses over the day to day swings.

For some guys, that concept is true on a tick by tick basis. All the advice in the world can be heard on how to be more stone cold, how to remove emotion, etc, but for some, it's just too difficult.

For a discretionary guy, the ones I've seen that are successful, literally get to where they don't care. They don't get excited about gains. They don't get bummed about losses.

As I said in another thread, undercapitalization has a LOT to do with this aspect. It's much easier to be apathetic about trading when your positionsizes are a small fraction of your bankroll. (or you're trading money that you really don't care about). The same is true for gambling. How many of you have walked through a casino and your jaw dropped when you see a guy playing a $500 pull slot machine? Or saw a guy playing $1000/hand in blackjack? That's because you're point of reference is completely different. To some people....betting a grand/hand is like others betting $1/hand.

So, if you can't magically increase your capital to the point that your almost trading "funny money" and you're not some zen master that can totally remove your greed/fear/excitement/anger/euphoria/depression, etc, etc.....then rules based trading through automation may help.

I think people gravitate toward what they're comfortable with. So if discretionary is more comfortable for you and that's what works for you....stick with it. If automation is more comfortable for you....

The point is to make more money than you lose.

I will admit that automation presents a set of challenges that seem daunting to some, but when you really dig into it, coding isn't all that difficult. But it does take some personal growth and investment in learning and research. But it can and is done.

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 trendisyourfriend 
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monpere View Post
...
Discretionary traders need to get to the point where a trade, is a trade, is a trade, win or lose. That is contrary to normal human behavior, and it is not easy to get to that stage because we have been naturally programmed to think losing is bad, since down to our most basic instincts, our natural survival is based on winning. If a winning trade makes you feel good, a losing trade makes you feel bad, and 2 losing trades makes you feel worst, then you are not psychologically ready to trade live.

I'd like to ask you at what point does a decision becomes discretionary ? What about if i develop a system that uses fuzzy logic, would the system be considered a subjective system or a discretionary bot ? If yes it would then what difference is there between a discretionary trader and an automated bot ?

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 monpere 
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trendisyourfriend View Post
I'd like to ask you at what point does a decision becomes discretionary ? What about if i develop a system that uses fuzzy logic, would the system be considered a subjective system or a discretionary bot ? If yes it would then what difference is there between a discretionary trader and an automated bot ?

Not sure what fuzzy logic means. But, if I present the same chart setup to that system 100 times on a 100 different days, and that system makes the exact same decision every single time, then it is a rule based mechanical system. If that system does not have a human being pulling the trigger, it is a bot.

If that system makes a different decision just once out of the 100 times, because it had a funny 'feeling' about the market, or if that system ever said, I 'should' have held that trade longer, or I 'should' have gotten out here, or I 'should' have entered there instead, or I 'think' there are 100 traders trapped here, or it 'looks' like the market is going down, or I didn't see the stochastic was below 20, or this setup 'looks' really good, I'm going in with 10 contracts instead of 2. Or if that system made a different decision on that 1 trade because it was tired, bored, distracted, sick. moody, hungry, didn't get enough of sleep, upset, felt weird, had a fight with his girlfriend, was cut off in traffic by a bozo earlier, was upset about his kids failing grade at school, or was worried about a test result from the doctor, or because that system had 3 losers in a row, or wanted to prove it could beat the market, if that system ever looked at a trade on the chart at the end of the day and said 'what was I thinking', etc., etc., then that system would be a discretionary system, that system would be a subjective system.

Not to be flippant, but those are all things that affected my trading when I was a pure discretionary trader. If none of these affect you, then my hat is off to you my good sir

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 mainstream 
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monpere View Post
What do you mean by semi-auto?


I turn on the system when I think a set up I trade is manifesting, and let the computer manage the entire trade, from entry to exit. This is only Intraday with deep book futures like the Indexes (to overcome Limit Order Issues), I also like that the broker I use will only allow for a certain number of losses a day... double fail safe from my perspective.

Of course the trick is coding a system that trades chart patterns you like effectively.... or finding one that does.

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 diverdan 
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DionysusToast View Post
In my opinion, there is little relationship between HFT algos and your typical man at home trading directional outright positions with Tradestation/NinjaTrader.

What we should learn from HFT is this: With all of the resources that these people have, why are THEY not coding directional systems that trade outright positions like the man at home? Why do they bother with HFT? The cost/use of capital is huge. If it were possible to predict future market action based on a few indicators, why would they even bother with HFT?

The answer is that they can't write the kind of systems people on internet forums are trying to write.

I don't agree with your conclusion. The biggest problem large fund managers face is the volume they have to trade in order to create profitable opportunities. For sure they know everything and more that we are discussing here, but they have had to discard it because it doesn't scale.

A strategy that is profitable when you are trading $1M won't work when you are trading $100M. So consequently you have to look for other strategies. If you successfully trade for long enough to grow your trading capital, you will find the strategies that made successfull will stop working.

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sidney7g
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diverdan View Post
I don't agree with your conclusion. The biggest problem large fund managers face is the volume they have to trade in order to create profitable opportunities. For sure they know everything and more that we are discussing here, but they have had to discard it because it doesn't scale.

A strategy that is profitable when you are trading $1M won't work when you are trading $100M. So consequently you have to look for other strategies. If you successfully trade for long enough to grow your trading capital, you will find the strategies that made successfull will stop working.

This is pretty interesting. From your experience, What do you think the limit is for being able to profit from directional discretionary trading In lets say the ES or CL? Wouldn't something like the Euro be hard to move even with 100m?

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 RM99 
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It's noteworthy that HFT is a subset of ATS.

HFT is ATS, but ATS isn't automatically HFT.

There are actually some very effective ATS that are "LFT" because the strategy acts like a "watchdog" keeping a constant eye on the market for very discerning strategies that have only a few entry opportunities. Thus, you don't have to sit there like a zombie for hours or days on end, waiting for a confluence of factors to signal an entry (or end up missing it).

Too many people are automatically assuming that the algo guys are trading high frequency or scalping.

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 monpere 
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mainstream View Post
I turn on the system when I think a set up I trade is manifesting, and let the computer manage the entire trade, from entry to exit. This is only Intraday with deep book futures like the Indexes (to overcome Limit Order Issues), I also like that the broker I use will only allow for a certain number of losses a day... double fail safe from my perspective.

Of course the trick is coding a system that trades chart patterns you like effectively.... or finding one that does.

I do the exact same thing. I know when I am about to get a setup several bars in advance, and because I use range bars, I know exactly where the next bar will open, so I hit a button, any my strategy puts an ATM managed stop order where the next bar will open. If the bar does open where I want then I am in the trade, and the ATM manages the trade. If the bar opens in the opposite direction, then the strategy cancels the order.

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 RM99 
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In all fairness, virtually every trader who isn't on the exchange floor using some degree of automation.

A simple bracket order (order cancels order or order supplemental order) is automation. Trailing stops, are automation.

I think a lot of die hard discretionary guys think that ATS won't work because they're strategy is "too complicated" to code. Which is usually rubbish.

There are certainly guys who've become successful just by "gut feel" or some sort of intangible metric by which they use to enter and exit trades, but I'd venture they're few and far between. All the other successful guys trade based on rules. And as such, those rules can be codified, and put into motion in an ATS.

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 supermht 
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let's stop arguing this useless topic, there is no right or wrong, as long as you find a method to make money in the long run, you win.

the argument of " ONLY..." is not suitable for trading, period.

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 monpere 
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supermht View Post
let's stop arguing this useless topic, there is no right or wrong, as long as you find a method to make money in the long run, you win.

the argument of " ONLY..." is not suitable for trading, period.

I don't believe it is useless. We are talking about fundamental beliefs, there are going to be different opinions. I think it is beneficial to understand the pros and cons of each side. To the well entrenched, no argument will convince them away from their fundamental belief, and they will defend it, that is a good thing because that defense will reveal the pros and the cons of each side. For the open minded, it might sway them to one approach or the other. To someone who genuinely is considering which approach to take, conversations like these are very helpful in identifying which camp will ultimately define their fundamental trading approach.

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 liquidcci 
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supermht View Post
let's stop arguing this useless topic, there is no right or wrong, as long as you find a method to make money in the long run, you win.

the argument of " ONLY..." is not suitable for trading, period.

I like the conversation pros and cons even though I am clearly on one side of it. I have some good friends who swear by discretionary methods. I think they are "dead men walking" they just don't know it yet. They will eventually come away from the darkside if they survive. We can still be friends and have a a good debate on the topic.

So debate on.

"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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 monpere 
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liquidcci View Post
I like the conversation pros and cons even though I am clearly on one side of it. I have some good friends who swear by discretionary methods. I think they are "dead men walking" they just don't know it yet. They will eventually come away from the darkside if they survive. We can still be friends and have a a good debate on the topic.

So debate on.

I am on the side of mechanical rule based trading as well. But, I will admit that one of the biggest con's of automated systems is market environment. Typical rigid auto systems generally have certain market environments they do well in. the problem is most people don't realize it, and they back test that system over 10 years, and get poor results. One of the reasons is that market environments change drastically during that large time period, and your strategy will have been backtested through several iterations of market environment that it was not designed for.

So, I think a good strategy should take into account the type of market it is trading in, or the owner should know which market the system does best in, and only turn on that system during those market environments.

I suppose, the same holds true for discretionary trading as well. During the raging bull market of the dot com years, traders were making money hand over fist, they could throw a dart at the market and make money. But once the bubble burst those traders lost everything, because their raging bull market strategies tanked in a transitioning and/or down market.

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 liquidcci 
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monpere View Post
I am on the side of mechanical rule based trading as well. But, I will admit that one of the biggest con's of automated systems is market environment. Typical rigid auto systems generally have certain market environments they do well in. the problem is most people don't realize it, and they back test that system over 10 years, and get poor results. One of the reasons is that market environments change drastically during that large time period, and your strategy will have been backtested through several iterations of market environment that it was not designed for.

So, I think a good strategy should take into account the type of market it is trading in, or the owner should know which market the system does best in, and only turn on that system during those market environments.

I suppose, the same holds true for discretionary trading as well. During the raging bull market of the dot com years, traders were making money hand over fist, they could throw a dart at the market and make money. But once the bubble burst those traders lost everything, because their raging bull market strategies tanked in a transitioning and/or down market.

Totally agree. My system by it's nature will not take to many trades when things get choppy, no range, or low volatility in market. If no range or not enough volatility it will sit still which is a good thing. In those conditions I will not make much but will not lose much either. I find crude typically has good range and volatility most of the time. it also tends to run hard and far in a direction.


I think what you are saying is paramount and should try as much as possible to keep these things in mind when building a system. Systems need to sit on sidelines when conditions are not right for your parameters.

"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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 Silver Dragon 
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monpere View Post
I am on the side of mechanical rule based trading as well. But, I will admit that one of the biggest con's of automated systems is market environment. Typical rigid auto systems generally have certain market environments they do well in. the problem is most people don't realize it, and they back test that system over 10 years, and get poor results. One of the reasons is that market environments change drastically during that large time period, and your strategy will have been backtested through several iterations of market environment that it was not designed for.

So, I think a good strategy should take into account the type of market it is trading in, or the owner should know which market the system does best in, and only turn on that system during those market environments.

.

I would have to repectfully disagree. A automated system should be a reflection of price action and heard mentality not market environment. Price action should be the core of your automated system. For example, for the history of the Euro you will always find breakouts regardless of market environment. This should be the focus of the system.

To further this point; I have found that breakouts pretty much look the same now as they did 50 years ago. Take a look at the book Technical Analysis of Stock Trends by Edwards and McGee. The first edition came out in 1948. The chart patterns in this book look nearly identical as the chart patterns in Technical Analysis of the Futures Markets written by Murphey 42 years later. As humans we do not like change therefore price action is slow to change if at all. The biggest difference in price action over the past 50 years is the speed at which it happens, its now milliseconds or minutes instead of hours or days.

Now, the hard part is coding the price action. The easy part is setting stops and targets. To do this you would simply follow the heard mentality. After all, the instrument you are trading is reflection of the traders who trade it. So trade like them! If the the average trend going up after a breakout is a 100 ticks over the past six months there is a high probability it will be close to that going forward. Set your targets and stops accordingly.

This is not to say that market environment wont cause you to have a bad month or a bad week. It will, but it will be the exception rather than the rule.

SD

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 trendisyourfriend 
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monpere View Post
Not sure what fuzzy logic means. But, if I present the same chart setup to that system 100 times on a 100 different days, and that system makes the exact same decision every single time, then it is a rule based mechanical system. If that system does not have a human being pulling the trigger, it is a bot. ...r

A system may uses rules and discretionary elements. Do you consider this system in the most viewed thread as being a discretionary or rule based system ?

What about if one of the rule states: if x is 'Low' then whatever but 'Low' is not exactly defined. What about if 'Low' can only be defined within a given context ? Context that can take thousands of different shapes impossible to put into a list or limited Ninja lingo statement.

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 monpere 
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trendisyourfriend View Post
A system may uses rules and discretionary elements. Do you consider this system in the most viewed thread as being a discretionary or rule based system ?

What about if one of the rule states: if x is 'Low' then whatever but 'Low' is not exactly defined. What about if 'Low' can only be defined within a given context ? Context that can take thousands of different shapes impossible to put into a list or limited Ninja lingo statement.

If "low" cannot be defined in a readable statement that means the same thing to 10 people who read it,. then 'low' is subjective. If I say 'low' is the low of a 5 minute candle which is at least 10 ticks lower then the 20EMA, then that statement is not subjective, it means the same always in all markets, and to every person who reads it. But, If I say "low" is a price in the area of previous support, than that statement is subjective, it can mean 10 different things to 10 different people, so it is discretionary and subjective. However discretionary does not necessarily have to be subjective, if the discretionary decision is based on an objective rule. 'Buy' 1 tick above the high of the previous bar, if the low of the previous bar is lower then 10 ticks below the 20EMA, is an objective rule, that can be used in a discretionary method. In this case the rule is actually a mechanical rule, because it is un-ambiguous, and the discretionary decision based on that rule will be the same every time. I think cjbooth's method that you mentioned is good example of a well defined rule based objective discretionary system. Most of the decisions he makes, are well identified, written out, un-ambiguous, and repeatable. With every signal that presents itself, the decision to take or skip that signal will generally be very consistent. I think Perry's system is another good example, that's why mwinfrey was able to write a strategy for it.

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 monpere 
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Silver Dragon View Post
...A automated system should be a reflection of price action and heard mentality not market environment...

An automated system should not have to be a reflection of anything. What it should do is identify exactly the market principle the programmer is trying to exploit. Most HFT's have nothing to do with price action as we know it, and have nothing to do with heard mentality, because within the fractions of seconds they get in and out of positions, price action and heard mentality does not come into play.


Silver Dragon View Post
If the the average trend going up after a breakout is a 100 ticks over the past six months there is a high probability it will be close to that going forward.

That is Market Environment. If you wrote your strategy 3 years ago when the market was having 900 tick breakouts, and now it is only having 100 tick breakouts, your strategy will fail miserably. The way you mitigate that is through Walk Forward backtesting optimization. So in your scenario, you would use 6 month walk forward optimization periods.

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 liquidcci 
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Silver Dragon View Post
I would have to repectfully disagree. A automated system should be a reflection of price action and heard mentality not market environment. Price action should be the core of your automated system. For example, for the history of the Euro you will always find breakouts regardless of market environment. This should be the focus of the system.

To further this point; I have found that breakouts pretty much look the same now as they did 50 years ago. Take a look at the book Technical Analysis of Stock Trends by Edwards and McGee. The first edition came out in 1948. The chart patterns in this book look nearly identical as the chart patterns in Technical Analysis of the Futures Markets written by Murphey 42 years later. As humans we do not like change therefore price action is slow to change if at all. The biggest difference in price action over the past 50 years is the speed at which it happens, its now milliseconds or minutes instead of hours or days.

Now, the hard part is coding the price action. The easy part is setting stops and targets. To do this you would simply follow the heard mentality. After all, the instrument you are trading is reflection of the traders who trade it. So trade like them! If the the average trend going up after a breakout is a 100 ticks over the past six months there is a high probability it will be close to that going forward. Set your targets and stops accordingly.

This is not to say that market environment wont cause you to have a bad month or a bad week. It will, but it will be the exception rather than the rule.

SD

You can build into a system a way for trades signals never to signal because of market conditions. Market conditions can change daily and my system will not take trades when range and volatility are not present for the most part. In fact there will be very few signals in my system when conditions are not conducive to my objective. If I am playing the probabilities why would I want to enter trades when probabilities are low? The risk is real and I want to maximize my chances of a win. I don't have to plod through bad months in bad conditions. I also don't have to recognize when those conditions exists as my system will. Sometimes the best way to make money in the market is simply not to lose your profits.

"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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 Anagami 
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The joke is that both system and discretionary traders are doomed, if they remain static. Systems and setups go stale, because the markets keep evolving, participants change, and fundamentals subtly shift.

If you think you found the 'holy grail' with your system, you are delusional. Your system will die sooner or later, and it won't be pretty. One day, your normal drawdown will become an "unusual" drawdown, and then a disaster one. Your only hope is making enough $ and retiring before it hits the fan. Good luck.

PS This is from a guy who did system trading for years. I had systems that worked for a decade in backtesting, only to die within a couple of years once traded live.

"The mind is its own place, and in itself can make a heaven of hell, a hell of heaven." - Milton
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 diverdan 
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sidney7g View Post
This is pretty interesting. From your experience, What do you think the limit is for being able to profit from directional discretionary trading In lets say the ES or CL? Wouldn't something like the Euro be hard to move even with 100m?

I don't trade the ES or CL so cannot comment.

Hard experience was with the Australian ASX, where systems which worked well with accounts of less than $1M stopped above $1M. Consequently I had to split the capital between different and new strategies.

With the EUR/USD, I don't have anywhere near sufficient capital to move this market, but people regularly complain of "stop hunting" and there are specific strategies which utilise the early morning movements of London or US opens i.e. someone is able to deliberately move the market to their benefit.

So I conclude that given enough capital, even with the EUR/USD it is possible for working strategies be killed with too much success. Further the bigger the position you have to exit, the more important to do this when momentum is moving in your desired direction to avoid too much slippage...

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 diverdan 
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Another factor that I think is often overlooked with trading is that of mistakes.

Whether we trade on a descretionary or systems basis with a profitably system / method we are all open to making mistakes or not executing according to plan. This can range from missing a trade (away from screen), incorrect order management, not exiting when we should, etc. The backtesting always assumes zero mistakes. Very often it is these mistakes which happen during our day to day trading which kill our performance.

From my perspective, having a computer execute trades on mybehalf is a great way to minimise my errors and enable a more consistent track record.

Cheers,

Daniel

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  #89 (permalink)
sidney7g
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It would be best if a computer program could create its own system based on back-testing price data(trading millions of times with different indicators in every possible combination on all times given) and come up with the most precise set of requirements that result in profit based on the most recent frequency. This would enable a system to evolve or change over time.

Maybe this already exists on a retail level but I'm not sure because I don't use automation personally. I wouldn't mind giving it a shot eventually, I just don't find it necessary Atm to spend the time programming when I can profit with 'discretion'.

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 Xeno 
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Silver Dragon View Post
I would have to repectfully disagree. A automated system should be a reflection of price action and heard mentality not market environment.

And I would respectfully disagree. It doesn't have to be anything. The whole reason for me writing automated systems is that I don't have to hand hold them all the time. There aren't as many real truisms in trading as people would like to generalise, but one of them is that a static automated strategy will behave differently in different market environments. So rather than me continually monitor every sort of market environment and switch strategies on and off accordingly, I like to have all of them know what sort of market they're in, so they can either take advantage of the different conditions, or send me an email saying "hey, I'm not going to trade today".

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 Xeno 
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By the way, is there any support for asking Big Mike to create a forum called something like

"Automated systems and testing"

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  #92 (permalink)
 liquidcci 
Austin, TX
 
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Xeno View Post
By the way, is there any support for asking Big Mike to create a forum called something like

"Automated systems and testing"

I would support that.

"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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sidney7g
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Yeah good idea, i doubt anyone would be opposed to it. I think it would prevent many people from debating the legitimacy of automated systems. For one it would eliminate automated systems from entering other forums so discretionary traders aren't annoyed by it and it would eliminate automated system traders from being annoyed by pure discretionary systems in the discretionary section.

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 monpere 
Bala, PA, USA
 
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sidney7g View Post
Yeah good idea, i doubt anyone would be opposed to it. I think it would prevent many people from debating the legitimacy of automated systems. For one it would eliminate automated systems from entering other forums so discretionary traders aren't annoyed by it and it would eliminate automated system traders from being annoyed by pure discretionary systems in the discretionary section.

In the Elite Circle, there is the following group:

Elite Group Trading Methods: This forum is for Elite members only to collaborate openly on discretionary, mechanical and automated systems trading methods

Right now in the Elie Circle there is a thread: "Battle of the Bots, do you have what it takes to win?" where about 10 user submitted bots which have been running for the past couple of months to see which ones will perform best.

You should send a PM to Big Mike about adding a forum in the free section.

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In my experience of the forums over the years. Most of the people that try to write trading systems do so because they cannot trade.

I've been a programmer since I was 13 years old, that's 28 years. In all that time, I can't recall ever trying to code something I didn't actually know how to do. In the retail trading arena, this is exactly what most programmers try to so - automate something they don't know how to do manually.

This is often a cycle of coding an indicator based systemm then adding filters, exceptions and backtesting to a final 'solution'.

During this period, much is learnt about indicators, backtesting, programming languages etc. but still there is nothing of value learnt about actually trading.

On the other hand, the 'doomed' guy that understands market structure, understands traps, understands how their chosen markets work in REAL TIME on the right edge - well - these guys are learning every day and improving every day if they have what it takes.

Your programmer of EAs is actually looking for a way to shortcut the learning curve. I don't believe there is one. Furthermore, a lot of what programmers code is based on the presumption that there is any real relevance in technical analysis as preached in the thousands of trading books out there. So - not only do we have people trying to code something they can't do in real life, they are also making leaps of faith that there is relevance in the nonsense in most trading literature.

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 liquidcci 
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I disagree most people do not try to "write trading systems because they cannot trade". Most people write trading systems after they have found something that works manually and either want to automate it because a bot will follow rules exactly and/or they don’t want to be tied to a chart all day looking for patterns. Writing a trading system takes an investment and very few will make that investment unless they have something that is proven. I think most traders who arrive at programming a bot have been around the market for some time and have had some success and some failures. They have also come to realization through experience there is a better way.

My system will work manually if its rules are followed exactly. But I would rather a bot follow my rules because as I stated in my OP I am flawed and overtime I will not follow my system exactly. Boredom, guessing the market, fear , greed will all cause me to make mistakes that my bot does not. I have seen guys follow rules exactly then have one day they go crazy busting an account in a day. Thus is the human condition and all it takes is one bad day and your wiped out.

Another real advantage of automating is I don't have to stare at a screen all day. I can be productive in other areas of my life. I am twice as productive because I can essentially do two things at once. Time is valuable and by letting a machine follow my rules I gain 8 hours to invest in other things. So even if I could follow my rules precisely with no mistakes I would still want a bot because it gives me one of the most valuable commodities in this world. Time.

Making a judgement that those who use automation don't know how to trade is preposterous at best. They know how but have found a better way free from the psychological traps of trading and a trading screen.




DionysusToast View Post
In my experience of the forums over the years. Most of the people that try to write trading systems do so because they cannot trade.

I've been a programmer since I was 13 years old, that's 28 years. In all that time, I can't recall ever trying to code something I didn't actually know how to do. In the retail trading arena, this is exactly what most programmers try to so - automate something they don't know how to do manually.

This is often a cycle of coding an indicator based systemm then adding filters, exceptions and backtesting to a final 'solution'.

During this period, much is learnt about indicators, backtesting, programming languages etc. but still there is nothing of value learnt about actually trading.

On the other hand, the 'doomed' guy that understands market structure, understands traps, understands how their chosen markets work in REAL TIME on the right edge - well - these guys are learning every day and improving every day if they have what it takes.

Your programmer of EAs is actually looking for a way to shortcut the learning curve. I don't believe there is one. Furthermore, a lot of what programmers code is based on the presumption that there is any real relevance in technical analysis as preached in the thousands of trading books out there. So - not only do we have people trying to code something they can't do in real life, they are also making leaps of faith that there is relevance in the nonsense in most trading literature.


"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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"Making a judgement that those who use automation don't know how to trade is preposterous at best. They know how but have found a better way free from the psychological traps of trading and a trading screen."

I am not making a judgement. It's an observation of a number of trading forums where people with some coding skills try to approach the markets as a finite problem with a finite solution. There's thousands of people on forums trying to get their PCs to trade because they can't.

Look around - it's out there.

Anyway - what you call a 'psychological trap' is simply an issue that you have personally. If you seriously have a finite ruleset that can be applied objectively and make money BUT you still can't follow those rules - well, that's a self-destructive trait YOU have. This does not mean everyone else has these issues.

As it is - you see trading as a problem that can be resolved and I see trading as a skill that can be developed.

You can put labels on me, say I have all sorts of issues, tell me I'll blow up one day but here's the thing. I'm engaged with the market and I'll develop with it. Your program, if it indeed exists, will not.

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 monpere 
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liquidcci View Post
Another real advantage of automating is I don't have to stare at a screen all day. I can be productive in other areas of my life. I am twice as productive because I can essentially do two things at once. Time is valuable and by letting a machine follow my rules I gain 8 hours to invest in other things. So even if I could follow my rules precisely with no mistakes I would still want a bot because it gives me one of the most valuable commodities in this world. Time.

I totally DISAGREE!!! I don't want an autotrading system because I want to be twice as productive. I want an autotrader because I want to be half as productive lying down on the beach all day!

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 liquidcci 
Austin, TX
 
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DionysusToast View Post
"Making a judgement that those who use automation don't know how to trade is preposterous at best. They know how but have found a better way free from the psychological traps of trading and a trading screen."

I am not making a judgement. It's an observation of a number of trading forums where people with some coding skills try to approach the markets as a finite problem with a finite solution. There's thousands of people on forums trying to get their PCs to trade because they can't.

I will partly agree that coding skills are not enough. You must be a student of the markets to then understand how to code a system.



DionysusToast View Post
Anyway - what you call a 'psychological trap' is simply an issue that you have personally. If you seriously have a finite ruleset that can be applied objectively and make money BUT you still can't follow those rules - well, that's a self-destructive trait YOU have. This does not mean everyone else has these issues.

As it is - you see trading as a problem that can be resolved and I see trading as a skill that can be developed.

You can put labels on me, say I have all sorts of issues, tell me I'll blow up one day but here's the thing. I'm engaged with the market and I'll develop with it. Your program, if it indeed exists, will not.

I would say not all but most have same self destructive tendencies. Reality is even if you leave your rules for one day you can blow up an account. If someone does not think they have these tendencies they have not traded long enough. I am not saying they can't be controlled but is not easy.

Don't think because I have a system I am not engaged in the market and never make adjustments. I make adjustments to my system but based on hard stats over time. I also track patterns that could be profitable and if over time they prove themselves I add them to my system.

If you think you have the skill to beat the market by trying to read it from the hip yes you probably will blow up eventually. You are beat already you just don't know it yet. If you think it takes no skill to understand the market in such a way that you can build a system from that understanding then you do not understand what system/autotraders do.

"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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 RM99 
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DionysusToast View Post
"Making a judgement that those who use automation don't know how to trade is preposterous at best. They know how but have found a better way free from the psychological traps of trading and a trading screen."

I am not making a judgement. It's an observation of a number of trading forums where people with some coding skills try to approach the markets as a finite problem with a finite solution. There's thousands of people on forums trying to get their PCs to trade because they can't.

Look around - it's out there.

Anyway - what you call a 'psychological trap' is simply an issue that you have personally. If you seriously have a finite ruleset that can be applied objectively and make money BUT you still can't follow those rules - well, that's a self-destructive trait YOU have. This does not mean everyone else has these issues.

As it is - you see trading as a problem that can be resolved and I see trading as a skill that can be developed.

You can put labels on me, say I have all sorts of issues, tell me I'll blow up one day but here's the thing. I'm engaged with the market and I'll develop with it. Your program, if it indeed exists, will not.

Again, you have a totally distorted view of what effective auto trading entails.

I'm not programming to solve any problem other than the "human factor" or psychological issues.

I can develop a trading edge, just the same as you.

Like stated above, auto trading allows you to employ strategies that you could NEVER employ manually.

Tell me this. Do you think you could calculate a 3 term, parabolic trailing stop such that as your position profit grows, your trail shrinks exponentially. Additionally, do you think you could take that trailing stop and make it double tiered, such that it shrinks to a certain point then remains constant thereafter (all based on market action and ranges involved)? The answer is...no. Not on instruments as volitile and rapidly changing as CL.

Do you think your infalliable? Or would you rather sit and look at a screen for hours on end, just waiting for the right setup, only to miss it because you were fatigued or distracted etc. Even having an "alarm" that alerts you so you can manually execute your strategy is automation. It's employing your computer as a watchdog.

You COULD argue that if you can't employ a strategy manually, then you should change your strategy. And that's YOUR stance. To others, we use the tools available to solve problems (as you put it) and it opens up strategies that were otherwise unavailable.

You see computing as a crutch. I see it as a gateway to capabilities that's impossible to humans. Can you scale in and scale out on an instrument like CL or GC? And do it perfectly?

Anyone who's ever experienced "mouse lag" on a highly volitile instrument can attest that having a computer execute your strategy has huge benefits. No more having the market pass your stop because you couldn't click and move it fast enough. No more losing profit because the market spiked in your favor and you could replace your stop quick enough.

OR I guess you could just be ultra old school and claim those types of issues should remain out of reach.

I'll agree with you on one point however, I am using computing to solve the "problems" associated with manual trading.

I've been in your shoes. I've argued for days that someone shouldn't use a GPS until they've learned how to use a map. What if the GPS satellites are suddenly no longer available? What if your GPS takes a dump? It's a valid stance. However, I know how to use a map. No need to punch myself in the crotch every day and continue to bang my head against the wall when I can use a GPS and save time.

Your assumption that those of us who automate don't know how to trade is foolish. I know how to trade manually, I just choose to make it easier on myself.

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