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Taking a Trading System Live


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Taking a Trading System Live

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  #51 (permalink)
Legendary Market Wizard
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ahwii View Post
Thanks for the response!
So the drawdown number is for one strategy, which makes the overall max drawdown smaller because the strategies are uncorrelated. Seems i have misunderstood your posts as i thought it was for the whole portfolio. Makes sense now, thanks for clearing that up.

Thanks for addressing the other points as well, now i better understand what you are doing. Looking forward to you posting here!

Have a nice weekend

Sorry, I think I have confused you. The NGEC System contains 2 uncorrelated strategies. The $5000 drawdown is a System stop (both strategies combined, trading 1 contract).

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  #52 (permalink)
Legendary Market Wizard
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deaddog View Post
Is that the summary for the week or for today.

It would be nice if you could present it in the same format s the daily combine report or at least on a trade by trade basis. It makes it easier for us novices to follow.


That is the summary for the week.

I'll see what I can do. Thanks

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  #53 (permalink)
Legendary Market Wizard
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deaddog View Post
Is that the summary for the week or for today.

It would be nice if you could present it in the same format s the daily combine report or at least on a trade by trade basis. It makes it easier for us novices to follow.


Here is the day by day accounting of P/L.


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  #54 (permalink)
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I few posts ago @deaddog asked a question that got me thinking. I am using the same position sizing for the 2 strategies in my NGEC system - even though strategy #1 and strategy #2 are for the most part different. The only thing they have in common is the stop loss point, around $425 (34 ticks) per contract.

Deaddog got me thinking - maybe the position sizing should be different for the 2 strategies. Maybe that would improve overal performance metrics.

As with any trading idea or thought that pops up, I reserve judgment on it until I test and analyze it. The numbers will tell me if this is a good thing things to do or not. No emotion is the point, I suppose.

I won't bore you with the minutiae of my analysis, but I primarily looked at "trade 2 contracts of strategy #1 for every 1 contract of strategy #2."


Results

Current method
Acct Size: $8,500
Max DD: 38.1%
Annual Return: 362%


2/1 Sizing Method
Acct Size: $12,500
Max DD: 38.3% (same as current method)
Annual Return: 255%



Conclusion: I would need more money in the account to trade a 2 to 1 ratio, and my annual return would go down. So, it does not make sense.


Note: I performed a pretty simple analysis to conclude this. Really, what I should do is let the fixed fractional sizing for each strategy float, and find the optimum for each. I may do this in the future, but for right now I'm content to let it be.

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  #55 (permalink)
Legendary Market Wizard
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At this point, I think I've described most of the details for trading my "Not Good Enough for the Combine" (NGEC) system. I know my starting account balance, my initial position size, my position sizing scheme, my quitting point and various other monetary details.

But what about accounting, and the trading broker?

I trade multiple systems live right now, and I use various accounts at various brokers. I do this for a few reasons. First, doing all the bookkeeping and accounting gets confusing when multiple systems are all lumped into the same account. More than once, "orphan" positions that I forget to close pop up. Having one system per trading account makes things a lot easier from a management standpoint.

The second reason I use multiple brokers is that sometimes brokers go belly up, or walk away with your money. I lost some money when PFG Best went out of business in 2012, when its founder revealed he had been forging bank statements for years. I still have only gotten back about 1/3 of my money, and I doubt I'll ever see it all. I'm no longer mad about it, but when I go back and look at the interview I did on Fox Business Channel right when the scandal broke, it is clear to me I was in a pissed off state of mind. I do not need that aggravation again. So, to me, spreading my risk around will keep me trading even if one broker fails.

The drawbacks to my approach are obvious. If I am worried about brokers failing, having more accounts with more brokers just increases the chances of me running into a bad broker, right? So, my approach may not be better than finding the best broker, and just putting all my eggs in that basket.

The second drawback is that using mulitple brokers leads to a less than optimal use of capital (margin) situation. This leads to less return, since more of my money is not put to use. That, to me, is an acceptable tradeoff.

So, for my NGEC system, I will open a new trading account. In addition to the reasons above, it will also help silence any naysayers (I can easily post redacted statements if need be).

After looking at my automation requirements, and the fact that all my code is written in Tradestation Easy Language, it makes the most sense to either use Tradestation as the broker, or a NinjaTrader broker. For the Ninja option, there is a neat little feature in Ninja that will take Tradestation generated signals, run them thru NinjaTrader and then send the signals onto a Ninja Broker. I've used it before with success, so it is a good option. The Tradestation option is the cleanest and easiest, of course.

When I looked into it, I found Tradestation had a new account promotion (even for existing customers like me), where basically I could get 2 months of commissions rebated back to me. That was a deal clincher for me. Down the road, I may look at a Ninja option, but for now Tradestation will be the way I go.


In the next post, I'll talk about automation and other issues.

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  #56 (permalink)
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Kevin:
Really enjoy your posts, please keep it up. During the last Combine, you had three strategies. What happen to Strategy 3?
Thanks

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  #57 (permalink)
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Pinot13 View Post
Kevin:
Really enjoy your posts, please keep it up. During the last Combine, you had three strategies. What happen to Strategy 3?
Thanks

Thanks for the kind words. I hope I am giving info that someone could easily follow with their own strategy. I know a lot of these things I had to figure out by myself, and usually I learned them by making mistakes (which always seemed to cost me money!).

In Combine #1, I had 3 strategies. In Combine #2, I added a 4th strategy to the first 3 strategies (I trade #4 currently in another account).

Strategy #3 was really a "filler" strategy. I was worried about meeting the 20 trading days in 2 months rule, and I needed a strategy that gave me a handful (3-5) more trading days. I felt I needed it for the Combine, and it served its purpose.

Even though it was net positive over 105 trades in the past 4 years or so, it only averaged $28 per trade after commissions and slippage, and has actually lost more for the last 20 months (only about $1,500 loss over that time, but still...).

So, with all that in mind, I decided to ditch it. I really could have ditched strat #1 also, since strat #2 provides the bulk of the profits, but I decided to keep #1.

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  #58 (permalink)
Legendary Market Wizard
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Here are some other topics I had to consider when taking my NGEC strategy live:


Backup Plans

In an ideal world, computers never crash, internet connections never go down, your broker always is up, etc. In the real world, lots of things can go wrong. Some things to consider - do you need any of these?:
  • Backup PC
  • Backup Data Storage (Offsite and Onsite)
  • Backup Internet Provider
  • Backup Power Supply
  • Backup Phone Line
  • Backup Broker
  • Backup Trading Desk

There is more, I know, but having backups (and possibly even backups for the backups) for everything on this list will get you a long way.


To Automated, or not to automate?

When I traded this system in the Combine, I had to have Tradestation alert me, after which I would manually places orders in the T4 platform. Over time, I missed a few trades, made a few mistakes, forgot to cancel open orders, etc. Overall, I don;t think these mistakes cost me any sim "money." In fact, they may have saved me a few bucks. But, that isn't the point. The point is I want to trade the system as I developed it. So, automation makes the most sense for me. Therefore, I will trade it automated.


Attended, Unattended?

Tradestation always warns its clients that "automated trading does not mean unattended trading." This is pretty sound advice, since issues pop up from time to time, Internet connections go down, orders get missed, etc. I plan on usually being around the PC when this strategy is running, so I'd say it qualifies as "semi attended." If my account grows, and my contract size gets significant, I'll revisit this approach.


VPS?

Many people use virtual private servers for their trading, to keep the downtime to a minimum, and their reliability high. I have never used one, but I'll keep the option open. In the last year, I've lost Internet connection only twice, and once was on a weekend. If my systems traded more than a few times a day, I'd probably do a VPS.


Where Orders Are Kept

I bring this up because many people don't know where their orders are. When your automated strategy fires an order, is it kept on your machine? On the broker's servers? At the exchange? Plus, different types of orders (limit, stop) may have different routing. For example, limit orders might be sent directly to the exchange, but stop orders may be held at the broker.

My point in bringing this up is that you should know where your orders are, and have plans in place in case something goes wrong. You might think you have an order at the exchange, but after your internet goes down and a fill was missed, you might realize it was really held on your PC. Not a good way to find out.




Next Post - how I am monitoring performance

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  #59 (permalink)
danville ca usa
 
 
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Kevindog...


Your posts are fantastic... thanks for sharing your progress... a couple of questions:

when you say that you trade multiple systems live right now... do you mean that you already have multiple "automated" systems... or that you manually trade multiple systems.

I see that you too are using tradestation and programming in easy language. Are you developing systems using tradestation strategies or tradestation indicators. The reason that I ask, is that automated strategies can be hard to keep in sync with "live" orders. Writing similar code using an indicator and generating orders using something like OOEL or the older "placeorder" function will end up on the tradestation server or the exchange and you reduce sync problems.

I started out using strategies many years ago and switched to indicators when tradestation first came out with order functions like "placeorder". This way, i know when I send an order in, it will either reside on the tradestation computer or the exchange itself. This eliminates problems with failures of your computer or the internet. I manually choose when to turn on/off the automation during the day, then my code has entry logic and trade management/exits/stops are completely automated.

cheers and good luck with your strategy development.

toucan

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  #60 (permalink)
Market Wizard
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Edit: I think you can go a very long way if you spent some time working with other tools besides Tradestation/Excel.

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