Taking a Trading System Live - Trading Journals | futures io social day trading
futures io futures trading


Taking a Trading System Live
Updated: Views / Replies:47,453 / 529
Created: by kevinkdog Attachments:189

Welcome to futures io.

(If you already have an account, login at the top of the page)

futures io is the largest futures trading community on the planet, with over 90,000 members. At futures io, our goal has always been and always will be to create a friendly, positive, forward-thinking community where members can openly share and discuss everything the world of trading has to offer. The community is one of the friendliest you will find on any subject, with members going out of their way to help others. Some of the primary differences between futures io and other trading sites revolve around the standards of our community. Those standards include a code of conduct for our members, as well as extremely high standards that govern which partners we do business with, and which products or services we recommend to our members.

At futures io, our focus is on quality education. No hype, gimmicks, or secret sauce. The truth is: trading is hard. To succeed, you need to surround yourself with the right support system, educational content, and trading mentors Ė all of which you can find on futures io, utilizing our social trading environment.

With futures io, you can find honest trading reviews on brokers, trading rooms, indicator packages, trading strategies, and much more. Our trading review process is highly moderated to ensure that only genuine users are allowed, so you donít need to worry about fake reviews.

We are fundamentally different than most other trading sites:
  • We are here to help. Just let us know what you need.
  • We work extremely hard to keep things positive in our community.
  • We do not tolerate rude behavior, trolling, or vendors advertising in posts.
  • We firmly believe in and encourage sharing. The holy grail is within you, we can help you find it.
  • We expect our members to participate and become a part of the community. Help yourself by helping others.

You'll need to register in order to view the content of the threads and start contributing to our community.  It's free and simple.

-- Big Mike, Site Administrator

Reply
 189  
 
Thread Tools Search this Thread
 

Taking a Trading System Live

  #1 (permalink)
Market Wizard
Cleveland Ohio/United States
 
Futures Experience: Advanced
Platform: Tradestation
Broker/Data: various
Favorite Futures: futures
 
Posts: 2,388 since Jul 2012
Thanks: 1,139 given, 4,387 received
Forum Reputation: Legendary

Taking a Trading System Live

OK, if you'd read my other journal here at Big Mike's, you'll know (as of today) that I have attempted 2 TopStepTrader Combines in the past few months. I did not achieve the profit goal in either of them , but qualified for a rollover ("a do over") each time by finishing slightly profitable, and by meeting all other Combine criteria.

While not passing the Combine has been disappointing and more than a little embarrassing, it did have a silver lining...

When I developed the trading strategies for use in the Combine, I thought that they might be appropriate for my own trading, even if they weren't good enough for the Combine.

That was back in March 2013. Now, 5 months later, I have enough "real time" data to make the decision to go live.

And that is what this thread is about - once you've developed a strategy, and watched it in real time or sim traded it for a while, then what?


- When do you decide to go live, and what criteria should you use?

- How do you actually trade it? Automated, manual, etc.? Do you need a new account, or a new broker?

- How do you determine how much to fund the account with?

- How do you position size? Do you start small, or big? Do you have a position sizing scheme?

- If things go bad, when do you quit trading the system?

- How do you monitor it on an ongoing basis?

- How do you track mistakes?


In due time, I'll address all these questions and more in this thread, along with showing the ongoing performance. I'll also answer any questions you may have.

If you are looking for details of the trades my system takes, or a discussion of why I took certain trades, you have come to the wrong place - this thread is about the trading process, not the trades themselves.

I truly have no idea how this system will do over the next few months. My hope, as always, is that is will do great, but as with any strategy, I am always prepared to cut my losses and stop trading it if need be.

Comments and questions are appreciated!

If you have any questions please send me a Private Message or use the futures.io "Ask Me Anything" thread
Reply With Quote
 
  #2 (permalink)
Quick Summary
Quick Summary Post

Kevin's Standardized Algo System Development
Kevin (@kevinkdog) uses a standardized algo system development approach that allows him to create consistent and repeatable non-biased results. It is important to note that the approach works well for him and that it may or may not work well for you. At a minimum, if you are interested in algo trading, it would be worthwhile for you to invest some time learning how he develops his systems.

Kevin has done two other webinars, and if you end up going down this rabbit hole, I would strongly suggest you consider watching them and reading the accompanying threads. You can learn more about those here.

There are 7 main steps:
1. Develop the trading idea
2. Conduct limited feasibility testing
3. Conduct more in depth testing and optimization
4. Conduct walkforward test
5. Conduct Monte Carlo simulation
6. Place the system in an incubation and then initial real money testing period
7. Place the system in full size, real money operation

He states that it typically takes him ~100-200 trading ideas to yield one tradable system, and he goes over these 7 steps in detail in his webinars.

Some Key Posts in this Thread
Quick overview of the example system (although no specifics) here

How he determines if incubation and walk forward data "match" here

How he determines when to quit a system is here

How he determines what the minimum funding size should be is here

How he determines position sizing is split into two posts here and here

A quick discussion about expected results is here

A quick discussion of the Durbin-Watson statistic that he uses to determine if the data is autocorrelated and can or cannot be simulated with Monte Carlo simulation is here

How he trades the system (accounting and brokers) is here

A discussion about back-up plans, to automate or not to automate, attended or unattended automation, VPS and where are the orders kept is here

How he monitors a strategy is here

A great response to the question "Do you still need to research 100-200 ideas to come up with a good system, or does that number go down when you get better in your craft?" is here

How to build an equity curve is here and he includes an attached excel file with a sample equity curve

A quick discussion about how Monte Carlo simulation is not a perfect science and the importance of using "tolerance bands" around the expected results is here

Another discussion about how he monitors a strategy via "How we doin'?" is here and here, which is an excellent board level system summary idea

A discussion about how an incubation period yielded "too good to be true" results that were way above the expected results, which meant to Kevin that the system should remain in incubation until the expected system results are in line with expectations is here

A more detailed exploration of how Monte Carlo simulation can help answer the question "Will a system provide a steady return stream each week, month, quarter and year?" is here

A discussion about how the elimination of "big days" materially impacts his system results is here

A more detailed examination of how many "big wins" he can expect from his system is here, which helped him to see the importance of taking each trade (because the missed trade might be the big one), understand that the system will likely operate in a flat to slightly down orientation punctuated by a large winner every once in a while and have proper expectations about what his system can and cannot do.

A discussion about how emotions can wreak havoc if you do not properly understand the system expectations is around here

After 7 weeks, the system is flat and down. A discussion about is the system performing as designed is here

A discussion about what happens when the system performance isn't bad enough to hit your pre-established quitting point, but the performance is operating under your expectations is here

A discussion about how Kevin avoids optimization by running walkforward analysis for different combinations of In/Out periods to select the best In/Out pair (i.e., 2000-2008) and then running the walkforward analysis in the remaining data years (i.e., 2009-present) using the best In/Out pair, which will either yield good (keep going) or bad (abandon) results is here

A discussion of Kevin's personal experience with why he typically swing trades (instead of day trades, as he would like to) is here

A great back and forth on portfolio diversification is around here

Kevin asks his "board level" system performance questions at Week 8 here

A discussion of what Kevin perceives to be as the perils to automated trading, which includes an incorrect fill and how Kevin took responsibility for the error instead of trying to place blame on someone or something else, is here and here

A discussion about using a t-test to see how system start-to-date results are performing against expectations is here

Kevin asks his "board level" system performance questions at Week 16 here

A discussion about why Kevin selected a 34 tick stop level for his system is here

A high level discussion of how Kevin position sizes on the downside is here, which outlines how he increases contract size at a set point but then holds off on reducing contract size until a point underneath his "increase contract size" point


Last edited by aventeren; February 3rd, 2014 at 02:26 PM.
 
  #3 (permalink)
Market Wizard
Cleveland Ohio/United States
 
Futures Experience: Advanced
Platform: Tradestation
Broker/Data: various
Favorite Futures: futures
 
Posts: 2,388 since Jul 2012
Thanks: 1,139 given, 4,387 received
Forum Reputation: Legendary

The Beginning


Let's Start at The Beginning...

To avoid confusion later on, here are some basics you need to know:

Trading System Name: NGEC - this stands for "Not Good Enough for the Combine." Why such an odd name? Well, I had to call it something, and I always like to remind myself of my trading shortcomings. As much as I like this system, and as well as it may or may not do, it still wasn't good enough to pass the Combine. That to me is important to remember, as it helps keep me humble. I know quite a few very good traders, and also quite a few arrogant traders. Interestingly enough, though, I don;t know any arrogant AND very good traders.



2 Trading Strategies in NGEC:

Strategy #1 - Trades Overnight session, has high winning percentage, lots of little wins and an occasional big loser
Strategy #2 - Trades Day session, lower win percentage, primary profit generator

All strategies are out by 3 PM ET each trading day. Both strategies are independent, and I'll only be in one at any given time.



Market:

Euro Currency Futures (6E)




With the basics out of the way, my next post will be the "decision point" post. Do I go live, or not?

If you have any questions please send me a Private Message or use the futures.io "Ask Me Anything" thread
Reply With Quote
The following 5 users say Thank You to kevinkdog for this post:
 
  #4 (permalink)
Elite Member
Dallas, TX
 
Futures Experience: Beginner
Platform: Ninjatrader
Broker/Data: Zen-Fire
Favorite Futures: ZN, 6E
 
gulabv's Avatar
 
Posts: 284 since May 2010
Thanks: 159 given, 155 received


kevinkdog View Post
Strategy #1 - Trades Overnight session, has high winning percentage, lots of little wins and an occasional big loser
Strategy #2 - Trades Day session, lower win percentage, primary profit generator

All strategies are out by 3 PM ET each trading day. Both strategies are independent, and I'll only be in one at any given time.



Market:

Euro Currency Futures (6E)




Hi @kevinkdog,

Thanks for starting this thread. Would you mind sharing the R:R ratio for the 2 strategies?

Reply With Quote
The following user says Thank You to gulabv for this post:
 
  #5 (permalink)
Market Wizard
Cleveland Ohio/United States
 
Futures Experience: Advanced
Platform: Tradestation
Broker/Data: various
Favorite Futures: futures
 
Posts: 2,388 since Jul 2012
Thanks: 1,139 given, 4,387 received
Forum Reputation: Legendary


gulabv View Post
Hi @kevinkdog,

Thanks for starting this thread. Would you mind sharing the R:R ratio for the 2 strategies?


Here are the summary performance reports for each strategy. The Overnight Strategy #1 is the 74.86% winning strat.


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




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

If you have any questions please send me a Private Message or use the futures.io "Ask Me Anything" thread
Reply With Quote
The following 7 users say Thank You to kevinkdog for this post:
 
  #6 (permalink)
Market Wizard
Cleveland Ohio/United States
 
Futures Experience: Advanced
Platform: Tradestation
Broker/Data: various
Favorite Futures: futures
 
Posts: 2,388 since Jul 2012
Thanks: 1,139 given, 4,387 received
Forum Reputation: Legendary

Decision Time

At this point, I have 3.5 or so years out walkforward backtest history (the key word being walkforward, if you don't understand the importance of this compared to a standard optimized backtest, please take some time to learn about walkforward testing). On top of that, I have about 5 months of "incubation" results - watching the NGEC system perform real time, with no changes to the original code (other than regularly scheduled re-optimizations).

Walkforward Results: July 2009 - Mar 2013
Incubation Results: March 2013 - August 2013


If the incubation results of the last 5 months "look" similar to the walkforward results, I should feel comfortable going live with the strategy.

Does it?


Here is how I determine if incubation and walkforward data "match." Keep in mind that I am not a statistician, so I tend to keep things simple, at the risk of not being 100% mathematically and scientifically rigorous. What I do passes a common sense test, though. I use 3 methods to check for a match:

1. Student's T Distribution test. This statistical test will tell you if 2 data groups (the walkforward results and the incubation results) are significantly different from each other.


You can pretty easily do this in Excel (with the TTest function), or you can use this handy calculator (Data Entry: Student's t-test).

When I run this test, it tells me that there is a 56% chance of these distributions are not different.

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




2. Data Distribution Comparison. I create 2 histograms of the data. The first one is the actual data, and I lay the walkforward and the incubation results on top of each other. Do they look like they overlap? The second chart plots a theoretical normal curve histogram, based on the mean and standard deviation. Again, do these curves overlap?

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



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



3. Equity Curve Comparison. This is my favorite method, but is not very scientific or mathematical. I simply plot all the data and create an equity curve. When I do that, can I see where the walkforward ends, and incubation begins? If I can, that suggests something happened when incubation started, and that is usually a bad thing. If you wonder about this method, just create a strategy with optimized parameters, and then let it run live for a while. Most times, you'll notice a change in the curve.


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



In case you were wondering, here is the equity curve with the incubation period clearly marked.



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






CONCLUSION: Based on this analysis, I'd say the system is performing in Incubation the same as it performed in its walkforward test. In fact, Incubation is better than walkforward, which does concern me a bit (usually it is the other way around). But, it is close enough to give me confidence that I did not screw up during testing in development. It does not guarantee that when I go live, the system will be profitable - that is important to remember.


Next: I am ready to go live. This will start on Monday. Lots of questions still to address. My next post will address my "quitting point," since that helps me determine initial account size, initial position sizing, etc. I may not post this before Monday, but rest assured I have already completed the work (which is why I can trade on Monday).

If you have any questions please send me a Private Message or use the futures.io "Ask Me Anything" thread
Reply With Quote
The following 10 users say Thank You to kevinkdog for this post:
 
  #7 (permalink)
Elite Member
Prince George BC Canada
 
Futures Experience: Advanced
Platform: IBs TWS
Broker/Data: IB
Favorite Futures: Stocks
 
deaddog's Avatar
 
Posts: 591 since May 2013
Thanks: 97 given, 643 received

Looking at your stats, specifically annual returns, (2.62% & 6.67%) and question if the strategies are worth the time and effort?

Reply With Quote
 
  #8 (permalink)
Market Wizard
Cleveland Ohio/United States
 
Futures Experience: Advanced
Platform: Tradestation
Broker/Data: various
Favorite Futures: futures
 
Posts: 2,388 since Jul 2012
Thanks: 1,139 given, 4,387 received
Forum Reputation: Legendary


deaddog View Post
Looking at your stats, specifically annual returns, (2.62% & 6.67%) and question if the strategies are worth the time and effort?

I agree, those percentages are very low. They are based on $100,000 account size, which is the Tradestation default for strategy Performance reports.

IMO, there are a lot of numbers in strategy reports that are useless, meaningless, or in this case, very misleading. "Account Size Required" is another misleading one.

You'll see, later on, that when the account is properly sized, and position sizing is added in the mix, the returns are more enticing.

If you have any questions please send me a Private Message or use the futures.io "Ask Me Anything" thread
Reply With Quote
The following 2 users say Thank You to kevinkdog for this post:
 
  #9 (permalink)
Elite Member
Prince George BC Canada
 
Futures Experience: Advanced
Platform: IBs TWS
Broker/Data: IB
Favorite Futures: Stocks
 
deaddog's Avatar
 
Posts: 591 since May 2013
Thanks: 97 given, 643 received


kevinkdog View Post
I agree, those percentages are very low. They are based on $100,000 account size, which is the Tradestation default for strategy Performance reports.

IMO, there are a lot of numbers in strategy reports that are useless, meaningless, or in this case, very misleading. "Account Size Required" is another misleading one.

You'll see, later on, that when the account is properly sized, and position sizing is added in the mix, the returns are more enticing.

OK I think I see. The return calculated is for one contract with a 100K account.

By trading more contracts or a smaller account the returns would increase.

Reply With Quote
The following 2 users say Thank You to deaddog for this post:
 
  #10 (permalink)
Market Wizard
Cleveland Ohio/United States
 
Futures Experience: Advanced
Platform: Tradestation
Broker/Data: various
Favorite Futures: futures
 
Posts: 2,388 since Jul 2012
Thanks: 1,139 given, 4,387 received
Forum Reputation: Legendary

When To Quit


Now that I have decided to start trading my NGEC ("Not Good Enough for the Combine") strategy live starting on Monday, I have to address the question that everyone likes to avoid when starting to trade a new strategy: If things go bad, when do I quit trading the strategy?

There are probably a million different conditions you could use as a basis for quitting a trading system. You could set a dollar amount, or possibly wait until you get a margin call, or wait until you run out of money. You could stop after X losers in a row, or X losing months. There is no "one" right or wrong answer.

But, there are 3 keys to setting a quitting point:

1. It should be based on the system you are trading. It makes no sense, for example, to quit after a 10% drawdown, if historically the system had 25% drawdowns before. This seems obvious, but you'd be amazed at how many people make arbitrary decisions like this, without taking the characteristics of the actual system into account.

2. Write it down. Refer to it often. Remember it. This may save you from disaster one day.

3. Follow it. If/when the written criteria is (unfortunately) met, STOP TRADING. This is a simple, but VERY difficult, step to follow.


I don't always use the same criteria for finding my quitting point, but here is how I am doing it for the NGEC system:

A. Look at walkforward history, and find the worst drawdown that occurred (daily basis). Multiply it by 1.5, since the worst drawdown is always in the future. For my system, that worst drawdown comes out to be $3,265. Multiply this by 1.5 to get $4,898.

B. Use Monte Carlo simulation to find the 95% level max drawdown. That means, in a years worth of trading, 95% of the time my maximum drawdown will be less than this amount. This turns out to be $5,082. (If I wanted to be more conservative, I could use the 99% level. That drawdown is $6,512.)

I should point out those drawdown figures assume 1 contract being traded the whole time. Yet, I will hopefully be trading more than 1 contract as time goes on. This could get confusing - my actual drawdown (with multiple contracts) could be a lot bigger than my drawdown limit (based on one contract). I just have to remember to calculate the 1 contract drawdown, and compare than to the $5K limit. This will be clearer later, when I set up my monitoring system.


Using results from points A and B above, I will take the average, and stop trading when the single contract drawdown reaches $5,000 (slightly rounded).

So, I have followed points 1 and 2 above. Time will tell if I follow point 3 -- I better if I need to!!!!!


Next post: How much money should I have to fund this trading system?

If you have any questions please send me a Private Message or use the futures.io "Ask Me Anything" thread
Reply With Quote
The following 15 users say Thank You to kevinkdog for this post:

Reply



futures io > > > Taking a Trading System Live

Thread Tools Search this Thread
Search this Thread:

Advanced Search



Upcoming Webinars and Events (4:30PM ET unless noted)

Jigsaw Trading: TBA

Elite only

FuturesTrader71: TBA

Elite only

NinjaTrader: TBA

Jan 18

RandBots: TBA

Jan 23

GFF Brokers & CME Group: Futures & Bitcoin

Elite only

Adam Grimes: TBA

Elite only

Ran Aroussi: TBA

Elite only
     

Similar Threads
Thread Thread Starter Forum Replies Last Post
Comparing accuracy of sim trading on different platforms vs live trading Titian Traders Hideout 4 February 11th, 2017 02:50 PM
Taking the leap towards self-employment (Trading CL) Indians00c Elite Trading Journals 462 February 6th, 2015 11:08 AM
Questions concerning risk taking and speculative trading for a Bsc dissertation Shichao Psychology and Money Management 24 March 14th, 2012 07:33 PM
Webinar Trading Video: Live Trading and Technical Analysis of EuroStoxx 50 max-td Trading Reviews and Vendors 1 March 13th, 2010 07:35 AM


All times are GMT -4. The time now is 08:25 AM.

Copyright © 2017 by futures io, s.a., Av Ricardo J. Alfaro, Century Tower, Panama, +507 833-9432, info@futures.io
All information is for educational use only and is not investment advice.
There is a substantial risk of loss in trading commodity futures, stocks, options and foreign exchange products. Past performance is not indicative of future results.
no new posts
Page generated 2017-12-15 in 0.25 seconds with 20 queries on phoenix via your IP 54.234.247.118