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Attack of the Robots - An Algo Journal


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Attack of the Robots - An Algo Journal

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  #61 (permalink)
Legendary Market Wizard
Somewhere, Delawhere, USA
 
Experience: Intermediate
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Trading: My kids, VX, Eurodollar
 
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Today's post is something completely different. I have been very busy with non trading stuff, i.e. client work. June is traditionally my busiest work month of the year and I'm usually swamped until the end of June. I have really just been an 'alternate' for my partner, when she needs me to watch a market while she is away. Since I am working anyhow, it works for us.

We are in Portugal for two months this summer. I bring my work and family with me (or they bring me with them), we setup shop and work and play. This is a normal summer for us. We have no car, travel very light (no checked bags), and assimilate ourselves into the local culture. We have a 5 hour time difference, so the US markets are waking up in our afternoon.

What does this have to do with trading? Everything. My partner (a/k/a my wife) can setup her trading strategy at the beginning of the day, then go do other stuff. Theoretically, her work day could be just 15 minutes of work per day. The algo part of it is that once her parameters are set for the day, she doesn't have to do much at all. She likes to do analysis and strategy development, so she works more. But she doesn't have to.

The same goes for me. Once June is over, then I can get back to trading. I can trade an existing strategy or a new one. I can do some coding, or not.

The reason we trade is so that we can travel to inexpensive, but beautiful places and stay the summer. With proper advanced planning, we can create a working vacation that is 2 months long, for about the same cost as a 1-2 week US domestic vacation, if you count summer camps for the kids, etc. The kids, 8 and 10 years old, understand that to get this cool vacation, mom and dad have a little work to do. We go grocery shopping, eat a lot of meals at home, and basically live here. I really don't even consider it vacation, per se.

We can trade anywhere. Three years ago, we were in rural area of Brazil, 35 clicks from the nearest town, 30 meters from a secluded beach, with just DSL for our Internet service. 1.5 Mbps upload and download speeds, no more, no less. My partner could trade and I could work, too.

There are a ton of benefits: physical health (we walk nearly everywhere), mental health, lowered levels of stress, better feelings of well-being, family bonding, learning new languages, meeting interesting people. Plus, the wine is usually cheap, good and plentiful.

I know we aren't the only people around here who have been liberated by trading. It is not about building wealth, it is about living. It is about family. It is about getting out there and seeing what is possible, what we can do. It is about doing the work to build sound, profitable trading strategies and then executing. I do not post this to brag, but to show what is possible. We don't stay in resorts or luxury accommodations, by any stretch of the imagination. Heck, our place in Brazil did not have hot water in the kitchen. If we can do it (we started when our kids were 5 and 7), then just about anyone can do it.

I will probably give another update next week. I know it is a holiday week and we usually don't trade before or after the 4th, so it will be a quiet one. But I plan to revisit my VX strategy and perhaps spend a little bit of time doing some discretionary trading, even if it is just sim.

Best of luck in your trading this week.

~vmodus ... out (of country)

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  #62 (permalink)
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vmodus View Post
Today's post is something completely different. I have been very busy with non trading stuff, i.e. client work. June is traditionally my busiest work month of the year and I'm usually swamped until the end of June. I have really just been an 'alternate' for my partner, when she needs me to watch a market while she is away. Since I am working anyhow, it works for us.

We are in Portugal for two months this summer. I bring my work and family with me (or they bring me with them), we setup shop and work and play. This is a normal summer for us. We have no car, travel very light (no checked bags), and assimilate ourselves into the local culture. We have a 5 hour time difference, so the US markets are waking up in our afternoon.

What does this have to do with trading? Everything. My partner (a/k/a my wife) can setup her trading strategy at the beginning of the day, then go do other stuff. Theoretically, her work day could be just 15 minutes of work per day. The algo part of it is that once her parameters are set for the day, she doesn't have to do much at all. She likes to do analysis and strategy development, so she works more. But she doesn't have to.

The same goes for me. Once June is over, then I can get back to trading. I can trade an existing strategy or a new one. I can do some coding, or not.

The reason we trade is so that we can travel to inexpensive, but beautiful places and stay the summer. With proper advanced planning, we can create a working vacation that is 2 months long, for about the same cost as a 1-2 week US domestic vacation, if you count summer camps for the kids, etc. The kids, 8 and 10 years old, understand that to get this cool vacation, mom and dad have a little work to do. We go grocery shopping, eat a lot of meals at home, and basically live here. I really don't even consider it vacation, per se.

We can trade anywhere. Three years ago, we were in rural area of Brazil, 35 clicks from the nearest town, 30 meters from a secluded beach, with just DSL for our Internet service. 1.5 Mbps upload and download speeds, no more, no less. My partner could trade and I could work, too.

There are a ton of benefits: physical health (we walk nearly everywhere), mental health, lowered levels of stress, better feelings of well-being, family bonding, learning new languages, meeting interesting people. Plus, the wine is usually cheap, good and plentiful.

I know we aren't the only people around here who have been liberated by trading. It is not about building wealth, it is about living. It is about family. It is about getting out there and seeing what is possible, what we can do. It is about doing the work to build sound, profitable trading strategies and then executing. I do not post this to brag, but to show what is possible. We don't stay in resorts or luxury accommodations, by any stretch of the imagination. Heck, our place in Brazil did not have hot water in the kitchen. If we can do it (we started when our kids were 5 and 7), then just about anyone can do it.

I will probably give another update next week. I know it is a holiday week and we usually don't trade before or after the 4th, so it will be a quiet one. But I plan to revisit my VX strategy and perhaps spend a little bit of time doing some discretionary trading, even if it is just sim.

Best of luck in your trading this week.

~vmodus ... out (of country)

Thanks for the update, @vmodus! I'd been wondering where you'd been, glad to hear you and your family are enjoying Portugal, Sounds wonderful!

Cheers

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  #63 (permalink)
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This is just a quick entry to say that I'm not doing anything trading related. Boring, right?

I just changed cities on our two month working vacation. I still have catch-up work with clients, plus family time (as I can). I will be helping my partner code her latest strategy, which is working well on CL manually. I might be able to do some trading work next week (coding and analysis), but right now I am not in a comfortable spot to trade with confidence. There are just too many distractions (beach, pool, sun, kids....) to trade at the moment. I know, tough, right?


I will be back at it very soon though, probably mid-August. It depends upon my schedule and other workloads.

Everyone stay cool (if you're in a hot place).

~vmodus

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  #64 (permalink)
Legendary Market Wizard
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Just a quick update..... I am back in the States after our family's two month adventure in Portugal. If you ever have a chance to go, do it. The difficult part is getting there. Language (for English speakers) is not much of an issue, as there are a mass of British tourists who visit every year.

I will ramp up my trading activities slowly over the next couple of weeks and hope to be back to normal after Labor Day. I am adjusting my daily schedule to get up earlier and workout, before starting my workday. I hope this give me a boost to start my day right. My son enters middle school and has an earlier start time, so it will be he and I waking up the house every day.

I don't have any plans for automated trading right now. I had so much other work thrown my way over the summer that I've been terribly busy. My wife/trading partner has a strategy that she is testing and refining. We hope to get this automated once she confirms that it works. I will probably do some discretionary trading to bulk up my reserves and prepare for the next system we implement.

For now, tchau!

~vmodus

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  #65 (permalink)
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Well, I haven't posted since August, for pretty good reasons (and some lame reasons, too). I've been juggling family responsibilities, two clients, and my internal client (my wife and trading partner). I have not had a chance to do much in the way of trading system development, etc. I have also been kind of stuck.... as in... what do I do now?

Back in the Spring, my VX strategy failed in a live environment, mainly due to market orders not being taken. I am sure that maybe I could use the strategy, but not automated. However, having it fail was somewhat deflating. From there, I was kind of lost and not sure where to go with my next set.

In late May and early June I was working a lot with some of the tools and methods suggested by John Ehlers. I did some trading in simulation, purely for practice and totally discretionary, using the Instantaneous Trend indicator. It was pretty successful, but discretionary trading is not my favorite method of trading. Which leads into the present.

I came back to my automated strategy development, as my partner needed her strategy automated. She has had to spend an inordinate amount of time testing her strategies manually. So I have spent the last couple weeks writing her strategy in EasyLanguage, testing, and validating the code. I was happy that the code performs flawlessly, in terms of the logic involved. Hopefully she can use it profitably.

Proud of my work on that, I decided that it was a good time to find a new strategy of my own. I have at least six distinct strategies (my old VX included), with a bunch of derivatives. I wanted to try to replicate the above mentioned discretionary trading, using one of my automated strategies. Earlier iterations worked okay, but not great. So rewrote the strategy from scratch.

I will describe my strategy by way of analogy:
Imagine two moving averages. I trade when one line crosses over the other line. It is as simple as that.
The problem with such a strategy lies in consolidation, that terrible time when cross overs happen as the market decides on it's next direction. That is the period of time when the strategy will give a lot back to the market. I want to avoid that.

Last Friday, I worked out a method to avoid that problem. When the two lines get too close to each other, then we should avoid entering the market. I came up with a simple algorithm that give a Confidence Score. If the score is less that 50%, then don't get in. 50% is a number I pulled out of the air, but it works well. My Confidence Score answers the question: How confident am I that this cross-over is a legitimate change in trend?

So I was able to program the cross-over portion, but I had to calculate the Confidence Score in Excel. The Confidence Score does the following:
  • Brings my win/loss ratio trading EC (Euro FX) to 1:1 (or 50% if you prefer)
  • Avoids a ton of bad trades
  • Average win: $1997; average loss: -$863
  • This is with estimated slippage and commissions
  • No stop loss was utilized
  • No optimization of any kind, because I cannot optimize or do walk-forward optimization right now (I get errors). This is okay for now, because I know for a fact that I'm not data-fitting.
Here is an example of what I'm trying to do with the algorithm:


In addition to EC, I have tested on Crude (continuous chart and current CLZ19 contract, 60 minute timeframe) and was similarly profitable. EC has been my white whale, in that I've been looking for a strategy that works on it. It has the right balance of margin, volatility, and volume.

Next steps for this strategy:
  • Try to bring the Instantaneous Trend calculation into the strategy (it currently resides in my indicator and I have to pull the values in using the ADE tool)
  • Determine how to calculate my Confidence Score in the strategy
  • Determine if I can optimize the Confidence Score and stop loss
Anyhow, I'm incredibly busy as mentioned at the beginning of this entry. I'm not sure if I can update this journal daily, but I will if I have anything new to report. The most important thing for me is that I got myself working again and back in the game. If I can get the above items figured out, then I will start testing this strategy in sim.

Peace out!

~vmodus

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  #66 (permalink)
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As a side note, I just had another idea about the Confidence Score. I could use this score to determine position sizing (low score, lower number of contracts to take) and also use it for pyramiding. I'll have to put that on the back burner to simmer.

~vmodus

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  #67 (permalink)
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So I worked on my strategy yesterday and had some success and also got stuck. So I achieved one of my goals:
Try to bring the Instantaneous Trend calculation into the strategy. Calculations are all accurate.

The next goal got stuck: Determine how to calculate my Confidence Score in the strategy. I need to take an average of a set of values I calculate each bar within the strategy. So tried a few things and settled on using an array, which seems to be the best solution. For those who do not understand arrays, just think of an array as a column of data in Excel (or columns, for a multi-dimensional array).

So my problem is that I create this array and populate it. For simplicity, let's say I populate these 4 values:
  • .01
  • .22
  • .07
  • .11
If I retrieve those values from the array, they are coming out like this:
  • 55.93
  • 53.81
  • 56.40
  • 55.01
I know, it is whack. It makes no sense to me. Anyhow, I'm stuck there, but hope to have this figured out today. These values are critical for calculating my Confidence Score. If I can figure this out, then I can then optimize the Confidence Score.

That's all for now. Best of luck in your trading!

~vmodus

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  #68 (permalink)
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So I spent a little time debugging my code. Apparently I was passing another value to the array (doh!). I think it was a misplaced bracket. Anyhow, this is the first time that I've used an array in EasyLanguage, so it was a good learning experience and not too painful.

The strategy appears to work better with the Confidence Score. However, overall the strategy is not performing as well as I expect. I did one walk-forward optimization and the results were pretty ugly. I'll run the full set (cluster) just to say I've done it, but I don't expect much. Monte Carlo simulation wasn't any better. I call it a spectacular failure. I am guessing my strategy worked in a given period of time (Dec 2017 to Nov 2018), but doesn't work now in the current market conditions.

I'm not discouraged, only a little disappointed. Just learning new things that I can apply to strategies is useful to me. I'm very proud that I've learned how to build an array, and manage and manipulate the data within that array. This opens a new world of opportunities for me. I'm also happy that I've achieved all the goals I set yesterday.

My next steps are to apply this to other time-frames and other markets. I've noted that the Instantaneous Trend indicator is useful in exceptionally short time frames (1-5 minute), so maybe I will apply this strategy to a 5 minute chart (YM?) to see what happens.

~vmodus

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  #69 (permalink)
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So I used my brand spankin' new strategy on the British Pound, 60 minute and it performed spectacularly.

However, I'm not convinced. I am running the WFO now to see if this is likely to perform well in the future, and run a Monte Carlo simulation. I see that I already have a passing WFO test, which is a great sign. It will take a while to run, so I shall see how it shakes out. The Monte Carlo simulations are really the most useful in distinguishing a golden egg from a rotten apple.

~vmodus

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  #70 (permalink)
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I was just reviewing my strategy on the Japanese Yen (JY) against the chart and realized.... Imma dork. I left out an entire entry criteria, which explains why a bunch of trades have not been happening.

The crux of it is this: if the Confidence Score is not good, then wait a bar and recheck. I'm never going back to recheck. So I'm never entering the market in the right direction.

Back to my coding room.....

~vmodus

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July 30, 2020


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