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Taking a Trading System Live


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Updated January 6th 2016 by tturner86
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Taking a Trading System Live

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  #261 (permalink)
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  #262 (permalink)
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ehlaban View Post
Isn't it about that you can have a winning system with random entries but with non random exits.
The exit counts so it shouldn't be random.

I'd have to dig up my old work, but if I recall correctly, random entries with real exits did work better than real entries with random exits.

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  #263 (permalink)
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kevinkdog View Post
I'd have to dig up my old work, but if I recall correctly, random entries with real exits did work better than real entries with random exits.

I did some work on this a few years ago, check here:





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  #264 (permalink)
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Week 8

Week 8 of trading the NGEC system with actual money is now complete.





Summary: First, let's look at the big picture. I like to do this every month or so, because at a glance I can tell if things are going as planned or not. From look at this first chart, a couple of things are clear:


1. Over the whole course of the system history (walkforward, incubation, live), the system performance hasn't changed much. I could draw a line from the start of walkforward to the start on incubation, and then another line from the start of incubation until the present time, and the slopes of those two lines would be about the same. This gives me some reassurance that the system is behaving, subject to point 2 below.

2. It is easy to see that the live trading (green line) has not been up to par at all. The performance these past 2 months has been down, and while it has not crashed and burned, it certainly has been a disappointment.


So, after 8 weeks of trading this system live, I am down about 5% from the start.

Am I surprised at this result? Absolutely not. It is well within expectations.

Am I disappointed in the results so far? Yes. After 8 weeks, I had hoped to be making some money. The performance these past 8 weeks is way behind the long term average, so it is very disappointing.

Are results in line with expectations? Yes. The current profit is below the average I expect, and it is right around lower 10% line. So, it is underperforming currently, and I will be concerned if equity drops below that 10% line. Also, I have had 4 winning weeks, and 4 losing weeks. Over time, I expect about 60% of my weeks to be profitable, so the performance is a bit behind in that regard. Plus, one week was really, really bad.

Are fills and trades live comparable to Tradestation strategy report? Yes, in fact in most cases my fills are better than what I had anticipated. Slippage is usually less than I had expected.

Do I see any reason to stop trading this system? No.

Do I see any reason to change my position sizing plan, i.e. reduce or increase my risk? No.


So, after 8 weeks, I will keep on trading per the plan, but storm clouds are forming on the horizon. I need some sunshine instead!








Note that there is some difference in performance numbers, as I did not include commission rebates yet.

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  #265 (permalink)
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The Perils of Automated Trading

You've probably heard the phrase "automated trading does not mean unattended trading." You've also probably read all the disclaimers that the brokerage throws at you before they allow you to turn automation on. With Tradestation, for example, there are a tom of disclaimers you have to sign when you open an account, and then if you want to automate a strategy, there are two more disclaimers you have to click and accept. The first disclaimer is 397 words, and the second is a whopping 593 words. That is a lot of legalese to wade through, just to automate your trading.

But, all those warnings are there for a reason. Ignore them at your own risk. That's what happened to me today. Let me explain...

My NGEC strategies enter on limit orders, which are supposed to be active for the current bar only. After the bar closes, any open orders get cancelled by the software. Depending on the strategy logic, another limit order may be placed for the current bar.

So, Monday night, my night strategy placed a limit order to buy, well below the market. It did not get filled during the bar, so it should have been cancelled. For whatever reason, it was not cancelled. This is the first time I have EVER seen this occur. The success rate of the software auto-cancelling orders, from my experience, has to be well over 99%. That is excellent, but errors can and do occur. Just look at the airline industry, for example. There are roughly 28,000 commercial flights per day, and it 99.99% had successful takeoffs and landings, 2 or 3 planes would crash per day. So, anything less that perfection runs the risk of costing you money.

The order rested at the exchange until 5 AM Tuesday morning, when it was filled. I noticed this rouge position Wednesday morning. Of course, with Murphy's Law in effect here, I noticed it not when the position was profitable, but after it had gone negative. Then, to add insult to injury, while I investigated the issue - before I exited the position - I watched it drop another $125 or so. Once I confirmed the position was wrong, I exited with about a $550 loss.

Who's to blame here? Well, the software did not do its job, since it should have cancelled the order. But, ultimately, I can blame no one, and no thing (software, internet connection, etc.), except myself for the error. I'll repeat that: I am to blame! I am the caretaker, and if things go wrong, as they occasionally will, it is up to me to be aware of it and fix it. I take full responsibility for this screw up, and I am taking some steps to make sure it is not repeated:

1. Check statements every day. If I would have checked it this morning, I'd probably exited with a $300 profit, instead of a $550 loss.

2. Check platform every few hours for uncancelled orders.

3. Improve checking of positions. I normally check my positions every few hours, but somehow this one slipped by me.

4. Make sure filled orders show up on the chart. For some reason, this fill did not - they usually do.



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  #266 (permalink)
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kevinkdog View Post
You've probably heard the phrase "automated trading does not mean unattended trading." You've also probably read all the disclaimers that the brokerage throws at you before they allow you to turn automation on. With Tradestation, for example, there are a tom of disclaimers you have to sign when you open an account, and then if you want to automate a strategy, there are two more disclaimers you have to click and accept. The first disclaimer is 397 words, and the second is a whopping 593 words. That is a lot of legalese to wade through, just to automate your trading.

But, all those warnings are there for a reason. Ignore them at your own risk. That's what happened to me today. Let me explain...

My NGEC strategies enter on limit orders, which are supposed to be active for the current bar only. After the bar closes, any open orders get cancelled by the software. Depending on the strategy logic, another limit order may be placed for the current bar.

So, Monday night, my night strategy placed a limit order to buy, well below the market. It did not get filled during the bar, so it should have been cancelled. For whatever reason, it was not cancelled. This is the first time I have EVER seen this occur. The success rate of the software auto-cancelling orders, from my experience, has to be well over 99%. That is excellent, but errors can and do occur. Just look at the airline industry, for example. There are roughly 28,000 commercial flights per day, and it 99.99% had successful takeoffs and landings, 2 or 3 planes would crash per day. So, anything less that perfection runs the risk of costing you money.

The order rested at the exchange until 5 AM Tuesday morning, when it was filled. I noticed this rouge position Wednesday morning. Of course, with Murphy's Law in effect here, I noticed it not when the position was profitable, but after it had gone negative. Then, to add insult to injury, while I investigated the issue - before I exited the position - I watched it drop another $125 or so. Once I confirmed the position was wrong, I exited with about a $550 loss.

Who's to blame here? Well, the software did not do its job, since it should have cancelled the order. But, ultimately, I can blame no one, and no thing (software, internet connection, etc.), except myself for the error. I'll repeat that: I am to blame! I am the caretaker, and if things go wrong, as they occasionally will, it is up to me to be aware of it and fix it. I take full responsibility for this screw up, and I am taking some steps to make sure it is not repeated:

1. Check statements every day. If I would have checked it this morning, I'd probably exited with a $300 profit, instead of a $550 loss.

2. Check platform every few hours for uncancelled orders.

3. Improve checking of positions. I normally check my positions every few hours, but somehow this one slipped by me.

4. Make sure filled orders show up on the chart. For some reason, this fill did not - they usually do.



Ouch, important message, but tougher to live. Fortunately your losses were not that great.

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  #267 (permalink)
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NJAMC View Post
Ouch, important message, but tougher to live. Fortunately your losses were not that great.

Not a killer loss, but enough for me to getting pretty pissed! Percentage wise, for this account, the losses were 7%, so that is pretty bad. Eventually, I want this strategy to get to 10 contracts, and at that point it would be some serious money.

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  #268 (permalink)
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Murphy's Law Part 2

It just figures...

I noticed the bad trade about an hour ago, 30+ hours after I entered it. Then, I exited at almost the worst time, with a $550 loss. Now, less than 1 hour later, I could have exited with less than $100 loss.

Is it just me, or does this kind of stuff happen to you too? If I did not know better, I'd swear that someone was controlling prices, and watching my positions, and deliberately doing things to maximize my losses!

I can definitely see why people feel this way - at times, it surely feels like the market is out to get personally get me!


I know why some of this occurs:

I tend to discount - not really notice or dwell on - every good thing that happens to me (mistakes in my favor, excellent news reports right after I enter a position, etc). Money making anomalies become just a blip in the equity curve. They are nice, but I don't really remember them too well.

BUT, for losses due to mistakes, I tend to remember them and keep them filed in my memory bank. Some of these "losing lessons" might be good to remember - today's automated issue is a good example - but most should be forgotten just as easily as the money making mistakes. That doesn't happen for me, at least not usually.

Last year I actually did a study of this. I added up all my winning mistakes with all my losing mistakes. The net impact, from a monetary basis, was just about zero. But, from a psychological standpoint, it definitely was not breakeven.

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kevinkdog View Post
It just figures...

I noticed the bad trade about an hour ago, 30+ hours after I entered it. Then, I exited at almost the worst time, with a $550 loss. Now, less than 1 hour later, I could have exited with less than $100 loss.

Is it just me, or does this kind of stuff happen to you too? If I did not know better, I'd swear that someone was controlling prices, and watching my positions, and deliberately doing things to maximize my losses!

I can definitely see why people feel this way - at times, it surely feels like the market is out to get personally get me!

@kevinkdog,

Happens to me as well, always out to maximize my losses. Welcome to the club!

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  #270 (permalink)
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NJAMC View Post
@kevinkdog,

Happens to me as well, always out to maximize my losses. Welcome to the club!


One would think this feeling ("the market is out to get me") would have disappeared after 20+ years of trading. But it hasn't, and I suspect it never will!

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