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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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  #1 (permalink)
Legendary Systematic Algo Trader
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Hello all! I am starting a new journal and shutting down my old journal. My old journal was focused on the Dow e-mini, which was really too narrow as I will trade anything that is profitable (magic beans, anyone?)

I decided to theme this journal around my adventures with algorithmic trading. I hate manually trading for two reasons:
  • I'm lazy
  • I'm human and prone to errors of emotion, decision making, and general impulsiveness
I also decided to keep this journal in the general section, rather than put it in the Elite Journals, as I know not everyone who reads my old journal is an elite member. Some members who are not 'elite' have been quite helpful and encouraging and this is my way of giving back, if my entries help or entertain anyone.

I started trading a new system today, live, on the VX futures. It was a strange day, to say the least. Let me summarize by saying that sim trading went well, but today was just sideways.

Today's results:
  • Traded 930 to 1632 EDT; my cutoff for trade entry is 1614, but that may change
  • 1 minute chart
  • Full-auto for trading, because that's how I roll
  • 5 round trip trades
  • Total day's P/L -$12
Not horrible, but my strategy report tells me that I should have had 7 trades (on the low end.... we should average about 12/day), and been mildly profitable. There were a couple of trades that were missed, as the VX requires limit orders and those orders were not taken. I won't get into the details, but I think the biggest problem I have is with liquidity.

This was only one day, and a weird one at that. Tomorrow will be day 2, but it could be equally weird given the holiday weekend.

No pretty pictures today. (....and should pure algo traders even need pretty pictures to trade? Hmmmm) For now, just enjoy that new journal smell.

Until tomorrow, I remain....

~vmodus

~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~

My old journal is here if you're interested: Click here for my old journal

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  #3 (permalink)
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vmodus View Post
I also decided to keep this journal in the general section, rather than put it in the Elite Journals, as I know not everyone who reads my old journal is an elite member. Some members who are not 'elite' have been quite helpful and encouraging and this is my way of giving back, if my entries help or entertain anyone.

I can only speak for myself, but this community has been incredibly helpful and elite-membership is definitely on my radar. I think I just need to find that "a-ha" moment where I prove to myself I'm not just messing around with sim and I'm actually able to carry over these concepts into live-trading. When I feel I have pushed through a couple of these hurdles I will join as elite, but its just an obstacle I have to overcome for myself in the meantime.

I appreciate all of your shared experiences!

Cheers @vmodus!

P.S. Then when I'm "Elite" I can finally know what all these "Big Mike in Ecuador" threads are about (plus all the new journals I'd have access to!)

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  #4 (permalink)
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snax View Post
I can only speak for myself, but this community has been incredibly helpful and elite-membership is definitely on my radar. I think I just need to find that "a-ha" moment where I prove to myself I'm not just messing around with sim and I'm actually able to carry over these concepts into live-trading. When I feel I have pushed through a couple of these hurdles I will join as elite, but its just an obstacle I have to overcome for myself in the meantime.

I appreciate all of your shared experiences!

Cheers @vmodus!

P.S. Then when I'm "Elite" I can finally know what all these "Big Mike in Ecuador" threads are about (plus all the new journals I'd have access to!)

Elite also lets you try the numerous custom indicators and strategies.

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snax View Post
I can only speak for myself, but this community has been incredibly helpful and elite-membership is definitely on my radar. I think I just need to find that "a-ha" moment where I prove to myself I'm not just messing around with sim and I'm actually able to carry over these concepts into live-trading. When I feel I have pushed through a couple of these hurdles I will join as elite, but its just an obstacle I have to overcome for myself in the meantime.

I appreciate all of your shared experiences!

Cheers @vmodus!

P.S. Then when I'm "Elite" I can finally know what all these "Big Mike in Ecuador" threads are about (plus all the new journals I'd have access to!)

By all means, do whatever you want. Elite or not is a choice.

For whatever it's worth, you may notice that almost all of the frequent posters are Elite (although it's not a requirement, as far as I know all the red-tab members since the beginning have been Elite. The red tab just means you're a high poster with a high number of Thanks, and only the Elite posters stay around long enough for that.)

As a simple matter, almost all the non-Elite posters drop away after a time, unless they go Elite.

How come? Elite means you've decided to become committed to the community. It costs a hundred bucks (lifetime), which is intentionally a dis-incentive to join: it's a barrier against the casually-interested. You need to want it.

It works out very well for all concerned: someone new comes in, looks around, decides whether they like what they are seeing. Either they don't particularly (so they go somewhere else, mostly) or they do and want some more (so they take a chance that they won't be sorry about the hundred bucks) or they waffle for a while and then do one or the other. Some show up as non-Elite now and then over several year's time, which is fine too.

People sort themselves out and it all works out.

But of course, you guys never know all the Secret Stuff we discuss over in the Elite side. (Wa-haa-haaa.)

Bob.

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bobwest View Post
By all means, do whatever you want. Elite or not is a choice.

For whatever it's worth, you may notice that almost all of the frequent posters are Elite (although it's not a requirement, as far as I know all the red-tab members since the beginning have been Elite. The red tab just means you're a high poster with a high number of Thanks, and only the Elite posters stay around long enough for that.)

As a simple matter, almost all the non-Elite posters drop away after a time, unless they go Elite.

How come? Elite means you've decided to become committed to the community. It costs a hundred bucks (lifetime), which is intentionally a dis-incentive to join: it's a barrier against the casually-interested. You need to want it.

It works out very well for all concerned: someone new comes in, looks around, decides whether they like what they are seeing. Either they don't particularly (so they go somewhere else, mostly) or they do and want some more (so they take a chance that they won't be sorry about the hundred bucks) or they waffle for a while and then do one or the other. Some show up as non-Elite now and then over several year's time, which is fine too.

People sort themselves out and it all works out.

But of course, you guys never know all the Secret Stuff we discuss over in the Elite side. (Wa-haa-haaa.)

Bob.

Thank you @vmodus, @bobwest, and @jmont1. Done!

@vmodus looking forward to "when robots attack!"

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vmodus View Post
I hate manually trading for two reasons:
  • I'm lazy
  • I'm human and prone to errors of emotion, decision making, and general impulsiveness

I have this quote on my white board
"You should replace humans by algorithms whenever possible. Even when algorithms don't do very well, humans do so poorly and are so noisy that just by removing the noise you can do better than people"

--Daniel Kahneman

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  #8 (permalink)
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centaurer View Post
I have this quote on my white board
"You should replace humans by algorithms whenever possible. Even when algorithms don't do very well, humans do so poorly and are so noisy that just by removing the noise you can do better than people"

--Daniel Kahneman

Superb. I'm adding it to my quote collection.

~vmodus

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Hello all! Sorry, but I'm usually pretty religious about posting my journal updates. I have family visiting and a bunch of other stuff happening this week. Here is a quick and dirty update.

Monday:
  • I started using my 5-minute VX strategy. It bombed. Not badly, but I found a bug where it was taking two orders instead of one. That cost me about $200 or so.
  • The strategy bombs because of liquidity issues. I have limit orders which sometimes take 30 minutes to fill. Monday was a slow trading day, but this strategy is useless without enough volume. I'm guessing > 100k per day.
  • I coded a fix to the strategy, but now the strategy trades mostly flat. I need to do some more work on it, as I may still be able to use it in a more macro environment (> 30 min).
  • My partner somehow ended up trading on my account, which was really weird (Tradestation, go figure). That earned me about $300 (she trades CL) until we figured that.
Tuesday:
  • Nothing much happened, really. I put myself on the bench until I can work out the VX strategy issue.
  • I went back to testing combinations of other strategies and instruments (TVIX, EC, ES, US). No success with that.
  • I'm considering trading CL, as we have a good strategy to trade that.
Today:
  • Haircut
  • Thinking about trading, just thinking
  • Optimizing and walk-forward optimization of existing strategies
I have two VX observations. #1, we are approaching all time lows (as seen just before last year's mini crash in October), which indicates a very positive sentiment for the market. I am not sure how much lower it will go. I cannot see it going lower than 11.00, as the bottom of this instrument is definitely not zero. See the blue line on this chart:

#2, my strategy may just be struggling against the low volume (see chart above). My 'fix' broke the strategy efficiency, somehow, so I have to go back to the earlier broken versions to see what might have gone wrong.

The VX is in range for the past couple of days:


That's all I have for now. My posts may be scarce until next week, but I will try to get something in daily.

~vmodus

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Hello fellow traders! I don't have a lot to report at this point. I took off work Friday for my birthday, as I traditionally do. I only traded Monday of this week, when I realized my strategy did not perform well in live trading (missed trades, missed exits).

Thursday, I spent some time running some of my existing strategies against the ES, VX, and EC (Euro FX), and the TVIX (equity). There are some glimmers of hope in there, but I need to be able to apply another layer of filtering.

In this example, my strategies will capture the good move, but also small moves within the range.


I know this is an age old problem, but it is one that I'm trying to work through. The biggest challenge is doing it programmatically. My partner uses her own algorithms, but they leave a lot of money on the table trading markets I trade.

One of the things that I tend to do is to treat an automated strategy like a blunt force instrument: Swing it at the market until the market submits or the strategy breaks. Usually the strategy breaks before the market does. I need to add a little more finesse to my tool.

Next week:
I have some not-trading related opportunities on my desk that are more profitable than trading (at this point), so I will be working on those. I will be revisiting MACD sometime this week, after setting it aside a long time ago. I may make some modifications to the tool to see if some of my methods can reduce lag in it.

Have a great weekend everyone!

~vmodus

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I was watching an old Malcolm in the Middle episode last night, Smunday, where the kids tricked their mother into thinking Monday was actually Sunday so they could stay home from school. Thus today's title.

It was a fun day for me, mostly. I was actually up late Sunday night (after 2 am), as I had a few ideas for trading that I wanted to hammer out. I was trying to see if trading Ehler's Instantaneous Trend indicator (as built into my strategy) would work for the Dow e-mini on the 120 minute chart. I did it manually using the indicator and chart data from Tradestation, in Excel. It was much of a mental exercise as anything.

That didn't come to much. It would be tradable if I avoid the ranges, which are pretty easy to identify (YMM19 1 minute chart):


The challenge that I have is calculating the range mathematically. I'm not sure if this is meaningful to anyone or not, but this is what it looks like in Excel:


It may be self-evident, but the smaller the number (or the distance between the two lines), the closer the iTrend and Trigger lines are. When the numbers go from negative to positive (crossing zero, essentially) it's a cross-over just like a moving average cross-over: indicates a change in trend. When we see the numbers close (0, 1, 2, -1, -2), then that is a tight range. I'll work through that eventually.

I modified one of my strategies to do what I was doing manually last night. Then I decided to take it a little further. I wrote and tested it as a scalping strategy on the YMM19, 1 minute chart. The rules are pretty basic:
  • When iTrend crosses over, enter a limit order a few cents above (short) or below (long) the closing price
  • Exit after 'n' bars once the entry occurs
  • Only trading this in the highest volume times: 925 to 1355 ET
I was able to get it written, tested, back-tested, optimized, and walk-forward optimized. It was promising enough, when testing on unseen data, that I just decided to activate it on my sim account, to see what it would do. I made a $10 profit (two ticks), less commission. It was only active for about an hour and the market was trending, so there were not any additional opportunities. It will be fun to see what it does tomorrow.

In other news....
My partner gently reminded me that I should be running my one strategy in sim (VX futures), so I turned it on, but noticed a problem that I think has been causing some of my headaches. If you look at this chart, you will see where I have 16 trades (these were just the strategy, not actual trades taken by the sim).



I actually only had one trade generated (the other ones would have happened before I turned on the strategy). My indicator only shows 5 cross-overs, not 16. Anyhow, that is a something I have to investigate. I think it is unique to this instrument, because of how tight the indicator can be (e.g. iTrend = 14.55 and Trigger = 14.54). If I can get this figured out within my code, then I will be in good shape.

For tomorrow:
  • Activate the simple YM scalping strategy and see what it does
  • Maybe, just maybe, fix my 'broken' VX strategy
One of these days, once I clear my backlog of other work, I will start showing some process flows for how our strategies work, at least theoretically.

See you all tomorrow!

~vmodus

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Today's lesson in algo trading, on the Tradestation platform, at least, is brought to you by 'Math'. It's not just for physicists.

Whenever a client or my partner comes to me with a wildly complex problem regarding numbers and outcomes, my go-to answer is: "It's just math". So when is math not math (talking applied math here, not number theory or such abstract things)? Apparently when working with Tradestation indicators and strategies.

One of the problems I have had, as alluded to yesterday, is that I'm getting a ton of entries that I don't think I should be getting. To put this mathematically (pick your favorite):
 
Code
Strategy Value  ≠  Indicator Value
... or ...
Strategy Value  <>  Indicator Value
... or ...
Strategy Value  !=  Indicator Value
The indicator does not return the same value as the strategy, even though the code calculating the math is identical. It is possible that this is a timing issue (indicator or strategy lags by a tick or bar). I haven't worked with EasyLanguage enough to be able answer the question, 'Why'? I'm sure the problem is in how/or when the calculations occur. There are things that happen 'intrabar', but apparently even a slight delay will throw off the calculation. I drew some dashed lines on the print log from Tradestation which show the possible delay (though this is a 5 minute bar...shouldn't be that far off):


In EasyLanguage (at least the Tradestation flavor), we have a tool called ADE (All Data Everywhere), which allows us to store data in memory and retrieve it anywhere else. My solution is to simply use ADE in the indicator to 'put' the data for my two values (iTrend and Trigger) and retrieve it in the strategy. That is how I figured out what you see in the screenshot above.

I've modified my strategy to use the indicator value, as I just described. I will be back-testing and optimizing it over the next couple of days to see if I get better results. If it passes, then the usual cycle of sim testing and then production, if it passes all of our tests.

Today's Results:
  • Re-coded my VX strategy. In back-testing it performed exactly the same as it's predecessor, but I expect different results in sim tomorrow.
  • Today was a weird day for VX, as it had only one long, strong move in the morning, followed by a slow reversal. By my strategy, only two orders would have been triggered on the 5 minute chart. Normally we see 5-10 orders per day.
  • I ran my YM strategy in sim. It did horribly, which is not surprising. It did not test well through walk-forward optimization. It got killed in range. More work to do on that.
  • I played a little with with a free pivot tool from Tradestation, called Person Pivots Daily. Interesting and might have a use.
Tomorrow:
  • Sim testing the new VX strategy.
It is late, I'm sleepy. Later, yo.



~vmodus

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Legendary Systematic Algo Trader
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I may not be able to post later, but I wanted to report my results trading the VX (5 minute) with my revised strategy ($100 profit target):

Today's sim results (as of 2:05 EDT):
  • Four legitimate trades, $390 profit (long, short, short, short)
  • One phantom trade, $97 profit (short) >> this was part of the second short trade, but it placed an order for two contracts, rather than one....still a mystery
  • No losses
  • Just for fun and practice with the Chart Trading tool, I day traded YM 1 minute in sim, manually using a simple crossover indicator and my intuition. Made $50 in funny money. I stopped right before a $250 move started (I was hungry). There are some weird things with execution in Tradestation that I will have to investigate.
So far, so good with VX. It is just sim, but since moving from 1 minute to 5 minute charts, I'm hoping my limit orders get filled. For those just tuning in, the VX does not allow market orders, only limit orders. The wait can be excruciating.

Here is the duplicate (phantom) order from earlier:


I have no clue why that's happening, but I believe I can code around it. It is likely due to a condition hitting twice, before the first limit order was filled.

I have one more observation about the Trade Manager screenshot (above). One advantage to using limit orders for our exits, is that the exit limit order is getting placed as soon as the entry order is being filled. If you see the first two lines above, you see my buy (exit) was placed when the sell (entry) was filled. I'm guessing that this will give the order a higher priority than if it were placed later. It could explain why when I was trading that my exits were getting filled a lot quicker than my entries.

I will evaluate my profit target later today/tonight, as $100 may be too conservative for a 5 minute chart ($100 = 2 ticks, if you will). I'm guessing $150-200 is probably reasonable. I will say that the VX is definitely not the easiest instrument to trade. If I can master it, then I think it will serve me well.

Tomorrow:
  • Keep running VX sim
  • Will not day trade YM in sim; that is just not where I am right now with my trading

Until next time....

~vmodus

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vmodus View Post
I may not be able to post later, but I wanted to report my results trading the VX (5 minute) with my revised strategy ($100 profit target):

Today's sim results (as of 2:05 EDT):[LIST][*]Four legitimate trades, $390 profit (long, short, short, short) [*]One phantom trade, $97 profit (short) >> this was part of the second short trade, but it placed an order for two contracts, rather than one....still a mystery[*]No losses

~vmodus

Nice work, @vmodus!

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Legendary Systematic Algo Trader
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Two things and I'm done for the day (Liverpool and Barcelona are playing... priorities you know).

1) One additional trade by my VX strategy, +$98 profit. It was a perfect day for the strategy (100% wins). It's sim, so we shall see how things go. I won't go live until I fix my 'extra order' bug.

2) I was looking at the 1 minute YM chart when the Fed news broke at 2pm today, and this falls under the "Hey kids, don't trade the news!" department:


I just thought it was hilarious to see how people initially reacted to the news. 50 point swing in the first minute ($250), 120 point swing in twenty minutes ($600). There are a couple of trades that I would have taken (@1352 long, and reverse @1429 to short position, out by 1454), if I had continued my day trading exercise from earlier. This makes me think about short term discretionary trading opportunities around other news events. I will explore other significant dates and events for non-algo trading.

Later on!

~vmodus

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vmodus View Post
This makes me think about short term discretionary trading opportunities around other news events. I will explore other significant dates and events for non-algo trading.

I've considered starting a database of previous news and econ events for backtesting. From watching the market react to the Fed over the last couple years I believe there is an exploitable pattern.

I wonder what some good sources for this information are. I usually use Forex Factory, but I'm sure there's some other alternatives.

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LittleFinger View Post
I've considered starting a database of previous news and econ events for backtesting. From watching the market react to the Fed over the last couple years I believe there is an exploitable pattern.

I wonder what some good sources for this information are. I usually use Forex Factory, but I'm sure there's some other alternatives.

I was thinking earlier today that I may have my assistant put together something. I know money.cnn.com usually has a weekly list of events (earnings, Fed notes, ADP reports, unemployment, etc.). If I could know the time and day of each of those, then I could easily back-test those. The important ones are the events that people tend to react/over-react to.

I did something similar with holidays and I actually built a function that my strategies could use that would avoid trading around certain holidays. It also helped in back-testing, avoiding holidays.

I'll post it here on FIO if we come up with anything.

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Hello all! Today was just a weird, weird day. As I mentioned and planned yesterday, I ran the revised VX strategy on our sim account today. It was scary good. Rather than get into too much detail, I'll just lead with my chart:


Results:
  • I don't know how many trades the strategy took. I stopped counting at noon. (feel free to count in the chart above)
  • Total P/L after commission: +$3,161
  • No slippage, as these are all limit orders
  • I had a few losses, and the day actually started off with some give and take
  • I do not have the final win/loss ratio, max drawdown, etc. I will calculate when I have more time or delegate it.
  • My automated exit did not go as planned, so I had to manually exit
  • My duplicate order checker did not work (described in prior posts); I will have to manually monitor this strategy until I can get a working solution.
  • As a result, I did hold two contracts for a short time, which I manually exited
Other Observations:
  • This market almost always has the daily high or low around noon (the chart above shows this perfectly). Yesterday was an exception, as the market reacted to the 'non-news' news event from the Fed meeting. This presents a potential trading opportunity. I have to go way back and see how well this theory holds up over the past two years.
  • As a result of yesterday's late action, I expected higher volume day, which we got. This probably had a lot to do with our good results.
  • Tradestation is still a pain in the butt. I had to totally hack the installation on my other computer so that I could free up my regular workstation for other, non-trading tasks. I was late into the market by about 10 minutes. I actually had to dig into the registry and manually purge a bunch of files.....ugh.
Reality Check:
I don't expect these type of results live. If I can pull $200 per day from this market, that would be just fine (for the account I'm trading). My goal is actually very modest for this month: ~ $79 / day. My bigger goal is actually to have a fully automated system, so that I can focus on other things (more algos, coding some indicators and functions, etc.). It was a goal I set for myself last month, but familial responsibilities took precedence the last two weeks of April.

This strategy appears to work well in a volatile market, or more specifically volatility in the S&P 500. Here is how I understand it:

S&P 500 >>>> S&P 500 Options >>>> VX Futures

If S&P 500 is highly active, so too will the VX be active.

Tomorrow:
  • Run the strategy live from 9:25 to 10:30 EDT
  • Assess the results against the strategy report
  • Decide to continue or pause the strategy

I can tell you right now, I could not trade the VX as a discretionary trader, at least in the 5 minute timeframe. It moves so slowly that it is nerve wracking. This is a big advantage of automation: being able to walk away and come back later. I would probably only attempt that as a swing trader, taking the two or three big moves per day that this market offers.

I have a ton of other work, so I gotta roll. Good thing I just had to watch the strategy today.

Have a good night and I'll see you all tomorrow!

~vmodus

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vmodus View Post

Results:
Total P/L after commission: +$3,161

Reality Check:
I don't expect these type of results live.


I can tell you right now, I could not trade the VX as a discretionary trader, at least in the 5 minute timeframe. It moves so slowly that it is nerve wracking. This is a big advantage of automation: being able to walk away and come back later.

~vmodus

Wow, @vmodus that is terrific. Don't sell yourself short though, sure today was more volatile than recent days but do you have any hard evidence that says you can't make 20-30% of this on less volatile days? I really like the progress you're making! You're making me more interested in automated trading

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Wow, @vmodus that is terrific. Don't sell yourself short though, sure today was more volatile than recent days but do you have any hard evidence that says you can't make 20-30% of this on less volatile days? I really like the progress you're making! You're making me more interested in automated trading

Thanks for the kudos and encouragement. We have had nothing in 12 years that has come close, though my partner trades a very good CL strategy. I have only been active for the past several months in the business, but as I mentioned early in this journal, I'm lazy, so I write code to do the dirty work.

The walk-forward optimizations for this strategy all pass, it works pretty much with a wide set of parameters. I could probably pick a few random numbers within a range for each of the three critical parameters, and still be profitable. It probably explains why the WFO is working so well....even with random data thrown in, it cannot find a bad set of parameters. These are the run results from last night:


I think the one thing that sets this apart from prior iterations of this strategy, is that I optimized a parameter in a way that was not intended (as the late, great Bob Ross would say, a 'happy little accident').
  • The parameter tells us what amount to set for our limit entry price.
  • Normally you want to set it at any value above 1, otherwise you're entering a worse price ( 1 = 100%, 1.1 = 110%, .9 = 90%).
  • This crazy strategy actually performs better when using a number less than 0% (in my case I think I'm using about 90%). It's basically a multiplier for determining the entry price. I don't know why this works, but that is the way it is.
Last week, when I tested the 5 min chart in sim and live, any value greater than 1.0 did not perform as well. I must have been feeling whimsical when I decided to optimize that parameter lower than intended, after all of my code changes. Apparently that was the thing that took this strategy over the edge. Here is the Monte Carlo analysis I just ran on the 'ideal' parameters.


So according to this run, there is a 100% chance that it will produce at least 2852% return on initial capital ($10k account) The general thought is that if a strategy passes a Monte Carlo test, then it is likely to work. I have tested strategies that passed back testing, but failed Monte Carlo and guess what? They failed in sim.

Again, this will come down to whether orders get filled. The more liquidity, the better. Today was at about 30% above average volume. Tomorrow should provide some proof. I'm with you. If I can get to 20-25% live, then I would be good with that. Then I can tackle some other beasts, like ES (that's my holy grail). Incidentally, this strategy probably would not work anywhere else.

I am excited to try this out tomorrow, but my feelings are tempered. We have had so many wonderful 'grail' type strategies that just didn't work out live for different reasons (execution, fear, doubt, etc.). Though, truth be told, we haven't had one quite like this.

cheers,
~vmodus

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Thanks for all the great info, I only really understand parts of it, but all of it is very interesting. Good luck tomorrow!


vmodus View Post
Thanks for the kudos and encouragement. We have had nothing in 12 years that has come close, though my partner trades a very good CL strategy. I have only been active for the past several months in the business, but as I mentioned early in this journal, I'm lazy, so I write code to do the dirty work.

The walk-forward optimizations for this strategy all pass, it works pretty much with a wide set of parameters. I could probably pick a few random numbers within a range for each of the three critical parameters, and still be profitable. It probably explains why the WFO is working so well....even with random data thrown in, it cannot find a bad set of parameters. These are the run results from last night:


I think the one thing that sets this apart from prior iterations of this strategy, is that I optimized a parameter in a way that was not intended (as the late, great Bob Ross would say, a 'happy little accident').
  • The parameter tells us what amount to set for our limit entry price.
  • Normally you want to set it at any value above 1, otherwise you're entering a worse price ( 1 = 100%, 1.1 = 110%, .9 = 90%).
  • This crazy strategy actually performs better when using a number less than 0% (in my case I think I'm using about 90%). It's basically a multiplier for determining the entry price. I don't know why this works, but that is the way it is.
Last week, when I tested the 5 min chart in sim and live, any value greater than 1.0 did not perform as well. I must have been feeling whimsical when I decided to optimize that parameter lower than intended, after all of my code changes. Apparently that was the thing that took this strategy over the edge. Here is the Monte Carlo analysis I just ran on the 'ideal' parameters.


So according to this run, there is a 100% chance that it will produce at least 2852% return on initial capital ($10k account) The general thought is that if a strategy passes a Monte Carlo test, then it is likely to work. I have tested strategies that passed back testing, but failed Monte Carlo and guess what? They failed in sim.

Again, this will come down to whether orders get filled. The more liquidity, the better. Today was at about 30% above average volume. Tomorrow should provide some proof. I'm with you. If I can get to 20-25% live, then I would be good with that. Then I can tackle some other beasts, like ES (that's my holy grail). Incidentally, this strategy probably would not work anywhere else.

I am excited to try this out tomorrow, but my feelings are tempered. We have had so many wonderful 'grail' type strategies that just didn't work out live for different reasons (execution, fear, doubt, etc.). Though, truth be told, we haven't had one quite like this.

cheers,
~vmodus


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Here is a quick update from the first hour of my VX strategy that I'm trading live today:
  • Tradestation stinks > my strategy wasn't working at all for the first 30 minutes
  • I had to reboot my laptop to get the strategy to work....just another day with TS
  • I don't think the strategy would have generated any trades, as the day started with a down trend and a reversal hasn't happened since before the opening bell
  • No trades yet, but setup is happening within the next 20 minutes....we are approaching an all-time low again for this instrument.
More to come later....

~vmodus

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As exciting as yesterday was in sim, today is the complete opposite. Happy days are here again, if you are trading ES, NQ or YM. But whatevs, as the kids say these days.

Still no trades. The first crossover happened at the time of the jobs report, and nothing since. I expect the noon reversal that is common for VX:


Boring....

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Nothing happened today. Seriously. I did not have a single crossover, thus no entries. All of the volume was used up in the downtrend this morning, so now we've bottomed out and will likely stay in or around there for the rest of the day.

Given that this strategy struggles with entries and exits in low volume, I've shut it down for the day. As I mentioned over on @snax's journal, there is no need to trade just for trading's sake. I also don't want get stuck in a position over that weekend and be on the wrong side of a gap up/down.

Today's Results:
  • 0 Trades
  • 0 P/L
I am disappointed, especially after yesterday's busy sim trading day. I counted about 55 trades yesterday, which explains the +$3k day.

Today was just one of those happy market days, with a good jobs report that blew the lid off the market. I could have entered at some point, from a discretionary perspective, but >> "that move wasn't my move".... and ....this is an algo journal (no cheating).

Next week:
  • Try strategy again Monday, live

I'm done here for the week. I hope you all have a restful weekend and I'll see you all Monday!

~vmodus


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vmodus View Post
Nothing happened today. Seriously. I did not have a single crossover, thus no entries. All of the volume was used up in the downtrend this morning, so now we've bottomed out and will likely stay in or around there for the rest of the day.

Given that this strategy struggles with entries and exits in low volume, I've shut it down for the day. As I mentioned over on @snax's journal, there is no need to trade just for trading's sake. I also don't want get stuck in a position over that weekend and be on the wrong side of a gap up/down.

Today's Results:
  • 0 Trades
  • 0 P/L
I am disappointed, especially after yesterday's busy sim trading day. I counted about 55 trades yesterday, which explains the +$3k day.

Today was just one of those happy market days, with a good jobs report that blew the lid off the market. I could have entered at some point, from a discretionary perspective, but >> "that move wasn't my move".... and ....this is an algo journal (no cheating).

Next week:
  • Try strategy again Monday, live

I'm done here for the week. I hope you all have a restful weekend and I'll see you all Monday!

~vmodus


I'm learning that these happy market days can be some of the hardest to trade, because it doesn't really seem like there are any obvious opportunities to enter and then you look up and the market has gained 16 points since the opening bell. Add the occasional wood-chipper chop-action thrown in randomly and it can be very difficult to find the right opportunities. But 16 points have passed so now FOMO sets in! Very tricky.

Your strategy is showing potential, I hope it continues to do so. Have a great weekend!

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snax View Post
I'm learning that these happy market days can be some of the hardest to trade, because it doesn't really seem like there are any obvious opportunities to enter and then you look up and the market has gained 16 points since the opening bell. Add the occasional wood-chipper chop-action thrown in randomly and it can be very difficult to find the right opportunities. But 16 points have passed so now FOMO sets in! Very tricky.

Your strategy is showing potential, I hope it continues to do so. Have a great weekend!

FOMO can be a killer, but we've all been burned by it at some point in our lives, whether in trading or otherwise. I have had some time to think about Friday. Because I still so new to trading the VX, I did not trade Friday afternoon, as mentioned. Mainly, I don't know how volume behaves yet. There would have been some entries shortly after I turned off my strategy and there was enough volume to support the trades my strategy would have taken. But I resisted the temptation to restart my strategy late in the day. Because FOMO is a cruel mistress.

I am disappointed that I didn't pick up any trades, but I don't want to have remorse over a hasty decision. I am practicing mindfulness to get to that place of peace while I wait.

Hope you have a great weekend as well!

~vmodus

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I just saw a pleasant thing on my profile:


I got an activity award! Hooray for me (yeah, braggin' on myself). I've usually given up journals, etc. by the point, so I guess FIO is now a habit.

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This is a terse update from Monday:

My strategy does not execute well live. I had some wins and some losses, but the losses outweighed the wins. The biggest issue is having orders filled: it just isn't happening, even with a ton of volume. There is a huge discrepancy between the orders that should have been filled and those that actually did get filled.

Here are my three big problems:
  1. Strategy report doesn't match sim, which doesn't match live. That is normal, but the differences are exceptionally large (a couple thousand dollars large)
  2. Tradestation does not have a market replay feature like NT or SC, so I cannot playback yesterday to see how my strategy would have performed
  3. There is an execution problem within the code: where a condition occurs maybe 3-5 times per day, it is actually generating 8-25 entry signals per day. That was fine in sim, not so fine live.
This is not all doom and gloom, but for now I have to shut this strategy down. It has so much potential, but is worthless if I cannot get in the market. The glimmer of hope is that I can manually trade the same strategy, by watching the indicator. Manual trades somehow appear to go in faster, probably because my limit price is usually the current price. However, the main idea of the strategy is to have the machine to do the work.

Not charts for Monday kiddos. I'm super swamped with other activities this week. I'll do my best to update, but since my strategy is not working properly, I'll sit on the bench. If I have time, I will try to tinker with the strategy, but that is probably not going to happen.

I'll try to update as I go along, but I cannot promise anything.

~vmodus

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vmodus View Post
This is a terse update from Monday:

My strategy does not execute well live. I had some wins and some losses, but the losses outweighed the wins. The biggest issue is having orders filled: it just isn't happening, even with a ton of volume. There is a huge discrepancy between the orders that should have been filled and those that actually did get filled.

Here are my three big problems:
  1. Strategy report doesn't match sim, which doesn't match live. That is normal, but the differences are exceptionally large (a couple thousand dollars large)
  2. Tradestation does not have a market replay feature like NT or SC, so I cannot playback yesterday to see how my strategy would have performed
  3. There is an execution problem within the code: where a condition occurs maybe 3-5 times per day, it is actually generating 8-25 entry signals per day. That was fine in sim, not so fine live.
This is not all doom and gloom, but for now I have to shut this strategy down. It has so much potential, but is worthless if I cannot get in the market. The glimmer of hope is that I can manually trade the same strategy, by watching the indicator. Manual trades somehow appear to go in faster, probably because my limit price is usually the current price. However, the main idea of the strategy is to have the machine to do the work.

Not charts for Monday kiddos. I'm super swamped with other activities this week. I'll do my best to update, but since my strategy is not working properly, I'll sit on the bench. If I have time, I will try to tinker with the strategy, but that is probably not going to happen.

I'll try to update as I go along, but I cannot promise anything.

~vmodus

Ugh. Getting a match between sim and the strategy backtest does not really concern me (sim is notorious for having issues), but if you can't get match between strategy backtest and live, you are dead in the water.

It could be an easy fix, or maybe the strategy will have to be abandoned. Hard to say.

The key (for next time) is to develop a strategy that you know will work the same in backtest as in real time. I learned how through trial and (lot of) error...

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kevinkdog View Post
Ugh. Getting a match between sim and the strategy backtest does not really concern me (sim is notorious for having issues), but if you can't get match between strategy backtest and live, you are dead in the water.

It could be an easy fix, or maybe the strategy will have to be abandoned. Hard to say.

The key (for next time) is to develop a strategy that you know will work the same in backtest as in real time. I learned how through trial and (lot of) error...

Thanks for the feedback. Sim and backtest were pretty close, actually, it was the live that diverged the most. I'm actually not surprised that it did not work well. I can still use this strategy for my signals, but I think it may be best served to manually make the entries. There is definitely opportunity, I believe.

VX has, usually, 2-3 good moves in a day. This week has been a little weird with the trade war talk and the tug-of-war that fear and greed are having, but I benched myself after Monday. I need to work through some things with the code and then retest.

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I know this is kind of lame, but I am still benched. I have been busy with client work, thus have not had a chance to work on my strategy. I may have time later tonight to work with it.

I will leave you with one interesting chart for the VX, that amuses me. I explained last Friday that I don't hold a position in the VX over the weekend, as it has a tendency to gap from time to time. Here is the chart from Friday close (5/3 to the open Sunday evening, 5/5):


My strategy would have had me long right before close, so I would have exited with a cool $2k. But since I don't hold contracts over the weekend, I wasn't in. Of course, I could just as well been on the short end (literally and figuratively) of that move, with at least a $1k loss, possibly more.

That is all for today. I'll post more as I work through things.

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LittleFinger View Post
I've considered starting a database of previous news and econ events for backtesting. From watching the market react to the Fed over the last couple years I believe there is an exploitable pattern.

I wonder what some good sources for this information are. I usually use Forex Factory, but I'm sure there's some other alternatives.

See the second seasonal strategy at https://quantpedia.com/quantpedias-composite-seasonalcalendar-strategy-case-study/

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Thanks for sharing! I don't really look at seasonality, but should. This will prove interesting reading.

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I am still on the bench, but I was able to do a little analysis and some discretionary sim trading. First, the analysis:


If you have followed my other journal, you will know I use the Instantaneous Trendline designed by John Ehlers. I use this a lot in my analysis, so I will show you two great examples of how it can be useful in trading. First, I have the VX futures. As mentioned earlier in this journal, the VX seems to have 2-3 good moves per day and typically peaks/bottoms between 1100 and 1300 ET (5 minute chart):


The cross-over from 810 to 820 is notable and would have earned at least a $550 profit at the next cross-over (1 contract), or more if we had used different exit criteria. Then on the reversal, by the time I took this screenshot, would have earned $1k in the other direction.

Now on to the Dow e-mini (1 minute chart on top, 5 minute on bottom):


Similar situation, but even better results, resulting somewhere around $2k net profit for one short and one long entry. These are trades that our strategy is designed to take. There are some nuances (annoyances?) with Tradestation and Easylanguage that we need to work out to get our strategy executing as expected. That is just part of the process. One thing I need to improve upon is to stop treating my strategies like a blunt force instrument.

~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~

Just for practice, I did a little discretionary trading on my sim account. I missed the earlier moves shown above, as I was doing non-trading work first thing this morning. I took a few trades on both VX and YM, and netted $263 for my sim account. All-in-all, I spent about 20 minutes on these, and just followed the trend (my friend) using the Instantaneous Trendline as reference. I know it is not sophisticated and I would probably not do this live. I'm just more interested in keeping in practice with using the tools within Tradestation for order execution.

As a rule, I'm not too fond of day trading manually. Although I know it is a probability game if I use sound strategy and indicators to guide me, it still seems too much like a game while I'm doing it (like a coin flipping game). Hats off to you folks who can do it successfully.

I have one final comment about a couple of orders, particularly the VX. The orders for VX (limit) are not filled right away in sim, even when price is hit. I think the sim engine is trying to emulate where/when an order will be filled in the queue. It is a good thing, I think. This is something I will pay attention to if I continue to work with the VX.

~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~

Other algo work:
My partner is working on a strategy that is pretty cool. It is essentially a pivot strategy, but she calls it 'contrarian', in that it takes trades in the opposite direction than one would assume. I'm not sure contrarian is the right term, as technically it looks to take trades in either direction from the pivot points. Anyhow, she is refining it for the Dow e-mini before she passes it along to me. Once she can define the rules, I will code it in a strategy and test it further. It is a novel idea and hopefully one we can automate and capitalize upon.

For tomorrow:
  • Not much trading-wise, as I play catch-up with other work
  • Will try to describe the general idea of our pivot strategy, without giving away the farm

I'm done here for the day. Still super busy on other work, but wanted to try to win my activity badge back from @snax.

~vmodus

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  #35 (permalink)
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vmodus View Post
I'm done here for the day. Still super busy on other work, but wanted to try to win my activity badge back from @snax.

~vmodus

I truly want you to have it, you deserve it! (I didn't just post this in a ploy to win it back in subtle fashion)

P.S. I want to check out those Instantaneous Trendlines by Ehlers. And there's a book you recommended a while back by Ehlers that I just put on my reading list "rocket science for traders".

Learning lots of algo stuff from your journal! Cheers!!

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snax View Post
I truly want you to have it, you deserve it! (I didn't just post this in a ploy to win it back in subtle fashion)

P.S. I want to check out those Instantaneous Trendlines by Ehlers. And there's a book you recommended a while back by Ehlers that I just put on my reading list "rocket science for traders".

Learning lots of algo stuff from your journal! Cheers!!

I'm glad this is helping. Rocket Science for Traders was his first book, and a lot of what he covered is improved upon in his later works. I think it lays a good foundation for understanding his later works. After that, I would say Cybernetic Analysis for Stocks and Futures and then Cycle Analytics for Traders, which was his final book. The books are expensive, imho, but they have value. Maybe your library system has them to borrow (ours does not).

The books are heavy on the advanced math (advanced for me, that is) and may require multiple readings. I don't completely understand all of the content, but I've found some of his stuff useful (and other stuff head scratching.... again, multiple reads). Also, most of his code is in EasyLanguage, so if you're not using Tradestation or Multicharts, you may have to recode indicators for your own platforms, unless you can find them somehow or your platform includes them (not likely).

Big Mike interviewed him a couple of times, so check out the YouTube channel for FIO and just search for Ehlers.

~vmodus

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Well, I look like a slacker by not updating Friday, but there really was no news for me Friday or today. I have another business which has pulled my attention away from trading, and I am okay with that. I was away this weekend at a soccer tournament and getting drenched yesterday morning (in 50 degree weather)....so needless to say, my update here was not at the highest of my list of things to do.

I'm still on the bench. It's cool.

I was following the markets Friday for a short while. Here are my observations from the VX:
  • There was some chop and I am sure there could have been some profitable trades, especially after noon.
  • The gaps this instrument tends to experience would have killed us if we were holding after close on Friday (the same gaps everyone saw on ES, YM, etc.)
  • Again, the top or bottom of the VX happens right around the noon time period (+/- 1 hour), with the exception of market moving afternoon new, such as the FOMC reports. Something for me to look at deeper.
I didn't really tune in to any news until 2pm EDT, but I figured there would be more trade war nonsense (I wasn't disappointed). Saw the bloodshed and wasn't terribly surprised. There were some really good trading opportunities, but I'm still okay being on the bench for this. I do not have a stable plan and system, thus I will not trade without one. I have a fairly reliable set of indicators, but I cannot focus on my other work (which is pretty profitable in its own right) and trading and hope to be successful.

I do not have time to work on any automated strategies, but I will still look at the markets and make my analysis on the VX with respect to trades we may have made. Maybe, just maybe I will try to simulate my strategy trade execution for last Friday and today to see if my strategy would have been profitable.

That's all I have for now. I will update as I can this week.

~vmodus

"Luck is where opportunity meets preparedness" (my dad and countless others)

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Well, this was quite unexpected, but I am back in sim. I had some 'down time' yesterday waiting for soccer practice to finish, so I went to the library and worked on fixing my broken strategy.

I had a really boneheaded set of conditions in there that had me entering and exiting positions way too often. Anyhow, neither here nor there, I was able to partially fix my code yesterday and then wrap it up this morning. I back-tested it, then did a walk-forward optimization. Tradestation is a little hateful to me (it would only back test a small subset of what I wanted....no idea why....), but I was able to get things rolling.

Here is an equity curve from my walk-forward optimization (number of trades on the x-axis; profit on the y-axis):


...and Monte Carlo results for the best performing WFO (100% chance of being 164% profitable):


I started sim at about 900 EDT, just missing the earlier move of the day. But my strategy did capture the move it should have (albeit a little late....something to look into). Here is my chart this morning:


So I am running an $850 profit as of when I took this screenshot. My optimizations (back and forward) suggest that $1300 is a good profit target.

Reality check:
Now, as before, I am not going to get too high on this. One good trade in sim does not a successful system make (...bumper sticker quote?). I am happy to see it taking the trades it should. I changed a few of the sim trading parameters (control how automated and sim trading work, not related to my strategy), to try and replicate live trading a little better. I'll have to see how/if that works. I do feel good about this, as I do not believe I will miss the moves I want. This really behaves like a intraday swing trading strategy, if there is such a thing.

There is the issue of the order happening a couple of bars late that needs to be addressed. That is probably in the code, which is an easy fix. To explain, my strategy and my indicator are two different sets of code, but the calculations are identical. However, the indicator seems to be 2-3 bars earlier (i.e. more responsive), which I talked about in an earlier post (It's Not Just Math).

~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~

I won't post again today, as I'm busy with other stuff. I will leave sim running and post results daily for the rest of this week. I hope you all have a great trading day!

~vmodus

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  #39 (permalink)
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End of day results (sim trading):
  • +$1448
  • 1 short trade
This is my chart:


What went right:
  • The order was triggered in the correct direction
  • The strategy did not kick me out during a consolidation period
  • Padded my sim account
What when wrong:
  • The order was a couple of bars late
  • Limit order was not placed with profit target was hit (should have been at $1300)
  • I should have had an exit at 1510, but the order was not triggered in the strategy
  • I should have exited after 1605, but no order was triggered
Obviously there is some work to do. The strategy will be running tomorrow, so I will update results then.

See you all tomorrow!

~vmodus

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  #40 (permalink)
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Thursday was an interesting day for my sim. I ran it like normal and then tried to see how it would perform today.

It was bad. Let's start with a chart:


A) Normal cross-over entry .... so far, so good.

B) The stop loss was missed .... I will explain shortly why; also notice that on the chart, there are two other cross-overs, but neither of those were taken.

C) Reversal was missed .... same reason a couple of the cross-overs were missed.

D) I had to manually exit. I let this run deep into a loss, just to see if anything would happen within the strategy .... it did not. Loss of about $802.

E) I restarted Tradestation .... and entries and exits worked normally

F) End of day exit was not made, because limit price was not hit .... manually exited.

A, E, and F all worked as designed. The major failure in the system was with Tradestation. For some reason, Tradestation just stopped executing my strategy, with no warning. I realized that after my stop loss was missed (the entry never came). The strategy performance report, which runs independently of the strategy itself, did not detect any of the exits or entries after the entry described in 'A'.

Closing and restarting Tradestation was the only way to get it working again. I'm not doing anything terribly exotic and the calculations are not terribly intense. My workstation has a ton of memory, powerful CPU, SSD drive, and powerful graphics card. This is my life with the platform. If you are a long time reader, you will know that I will be moving away from this platform sometime this year, precisely for these types of issue.

Today's actual results (sim):
  • -$1214 net loss
  • Manual intervention required on this strategy twice
  • Not quite what I would call 'automated'
Today's results, as they should have been:
  • -$789 net loss
  • This probably would have been the result if I had restarted Tradestation clean, with only that chart and strategy up
Today's results, as they could have been:
  • -$236 net loss
  • There is a trade the strategy should have taken, but didn't
  • Further research required
The biggest lesson is that I cannot trust Tradestation, for now. I must babysit it, and must make sure that it is running only the bare minimum items needed to execute my strategy. What a pain in the butt. I admit, this is frustrating, but at least it isn't discouraging.

~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~

My partner wanted to see the code, so she actually rewrote the code in her own way, to see if she got the same results. She did, but we did come across a quirk, which does affect some of our trades. Easylanguage has a 'crossover' function, which allows for us to trigger an order when value 'X' crosses value 'Y'. The problem is that the values are sometimes equal:

Example:
  • 1 bar ago: X = 15.00 and Y = 15.00
  • This bar: X = 15.05 and Y = 15.00
  • This is not a cross over, because x is not really crossing over, but rather pulling away
I can code around this easily enough (i.e. not use the 'crossover' function), but it was an interesting learning moment. This explains why some cross-overs in my strategies are being missed.

Tomorrow:
  • I will run sim again.
  • Start to plan discretionary trading, if needed, alongside this strategy.
  • If I have time, I will make the code changes to remove the 'crossover' condition and use the actual indicator values to determine what I mean by cross-over. I suspect this will improve the strategy performance.
See you all tomorrow!

~vmodus

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  #41 (permalink)
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kevinkdog View Post
There is almost certainly a reason why you are missing orders, and it may or may not be the fault of Tradestation. I don't know.

BUT, what I do know is that any automated software solution will have its issues. So, changing from one software platform might just solve some issues, but bring up others.

The key with any platform you use is to perform root cause and corrective action analysis of any significant errors. I recommend you do just that. Then, depending on what you discover, you might conclude that a platform switch is appropriate.

I hope you solve it!

Order execution is really the least of our problems and we have had pretty good success on that front.

I suspect that the missed orders are a result of a memory leak or some bug in the Tradestation code. Running the same strategy against the same data set gives me two different results..... one set of results before restarting Tradestation and a different set after restarting. If I see it again, I will post an example of exactly what it looks like before and after a restart of the application. The strategy is clean.

Our Tradestation issues run far and deep beyond this particular issue and we have experienced a ton of problems over the years. I have installed and uninstalled TS more times than I care to think. Registry edits, lost data, corrupt files, installation failures.....you name it, we've done it with TS. We just don't trust the platform any longer, especially as we continue to grow our trading operation. I work with high end ERP systems, both functionally and technically, and what I'm seeing is definitely a bug. I don't expect a perfect system, but I do expect some level of stability and reliability. I have had TS freeze on me at least twice this past month, while in a live position.

I appreciate the encouragement. I know I can get through this, but as I've said in other posts, TS days are numbered in our shop.

~vmodus

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@kevinkdog , I'm sorry if I may have sounded grouchy in my response last night. I gave what you said last night some more thought. It occurred to me that I can/should use the print feature in Easylanguage to see what my code is doing.

I have the print feature written in all of my strategies and have a parameter to turn it off or on. Here is the code:
 
Code
// Easylanguage code snippet
inputs:  // just add the inputs below to your existing inputs
   print_on(0),                  // 1 = turn print log on
   print_start_date(1190101),    // start date for the print log
   print_end_date(1190101)       // end date for the print log
   ;

vars:    // these variables are just for reference
   iTrend(0),
   Trigger(0)
   ;
   
// Condition to print 
Condition90 = print_on = 1 and Date >= print_start_date and Date <= print_end_date ;

// if condition is true, then print to the log
if Condition90 
   then
      print(Date, "-", Time, " - ","iTrend: " , iTrend, "Trigger: " , Trigger) ;
I actually add more 'print' statements as needed, to see other things as well.

Here is what the parameters look like on one of my strategies:


So today I'm running it in sim again this morning, with print activated. Thanks again.... you got my thinking turned in the right direction. I'll let you know if I need assistance.

~vmodus

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  #43 (permalink)
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My weird trading thought of the day:

I am working primarily with the VX tool, and I'm pretty much in an upside down world. Like most people here on FIO, I don't care which way the market moves, as long as it moves. The weird part is that, as I'm watching my instrument fall (short), it is actually good news for the markets. So I cheer for my instrument to crash, this means the market (specifically the ES) is moving up.

Just a weird thing to experience.



~vmodus

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  #44 (permalink)
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So today's sim run worked a lot better than yesterday. Using my lessons learned, I started TS fresh, only one strategy and nothing else (except trade manager once trading commenced.

Of course the results were not the best:


From a market standpoint, there were three ranges that got to us. We were whipsawed a little at pre-market and then just at open, got in the correct side for most of the morning, then some whipsaw action, then another long trade, then a little more back and forth.

Today's Results:
  • -$764
  • 5 trades, 3 losses and 2 wins
  • Compare to the strategy performance report: -$867
So we did a little better than predicted by the strategy performance report. Obviously this was a losing day, but this week, for this strategy, would have been flat.

What I liked
  • Strategy identified all potential trades
  • Our actual P/L was close enough to the strategy report
  • Signals were good
  • Code did not fail like yesterday
What I didn't like
  • Strategy missed one trade, because of a timing issue; the limit price was not hit and thus we didn't get in.
  • There still work to be done on the trades that get missed
  • For this market and strategy, true automation might be difficult to accomplish
  • I pulled the plug on my strategy 4 minutes early.... I thought my EOD exit was not being hit.... then realized it evaluates at the end of the bar, thus I should have waited until 1610.
The VX is one challenging beast. I like the challenge, but the learning is painful. This strategy needs more work and I will have to think about whether I will trade this next week in sim or live. I am leaning towards sim, but will make a decision by Sunday night.

Anyhow, that is all I have for this week. I hope you all have a restful weekend and let's do this again next week.

~vmodus

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  #45 (permalink)
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Fascinating stuff as always, do you think it is odd that a volatility index like the VIX goes down when prices go up in a volatile fashion? I need to look to see if there is a gauge for volatility that disregards (or is neutral with regards to) direction and only focuses on the "spikiness/variance" of the movement itself.

Have a great weekend!

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  #46 (permalink)
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The VIX is skewed because investors in equities are typically long-only, and when fear rises, PUT prices rise faster than the drop in CALL prices, increasing the VIX, and when the market is going up and doing well, fear subsides so PUTs go down in price faster than CALL prices rise, so the VIX drops. This is why the VIX usually rises in down markets and drops in up marketsx.

In short, if people are bullish they generally buy underlying instruments like futures, ETFs, and stocks, instead of CALLs, and use PUTs to insure them.

Also, an underlying can't go lower than zero, but it can theoretically go up to infinity. This absolute-zero floor also makes puts more expensive than calls.

If you want to just measure volatility in terms of actual up/down movement, just use ATR.

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shodson View Post
The VIX is skewed because investors in equities are typically long-only, and when fear rises, PUT prices rise faster than the drop in CALL prices, increasing the VIX, and when the market is going up and doing well, fear subsides so PUTs go down in price faster than CALL prices rise, so the VIX drops. This is why the VIX usually rises in down markets and drops in up marketsx.

In short, if people are bullish they generally buy underlying instruments like futures, ETFs, and stocks, instead of CALLs, and use PUTs to insure them.

Also, an underlying can't go lower than zero, but it can theoretically go up to infinity. This absolute-zero floor also makes puts more expensive than calls.

If you want to just measure volatility in terms of actual up/down movement, just use ATR.

Ahh thank you. I have never thought of volatility-skew in this fashion, I probably mis-understand it. I always think of it as merely "markets tend to crash faster than they rally" but the option-pricing is skewed as well. Thanks!

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  #48 (permalink)
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snax View Post
Fascinating stuff as always, do you think it is odd that a volatility index like the VIX goes down when prices go up in a volatile fashion? I need to look to see if there is a gauge for volatility that disregards (or is neutral with regards to) direction and only focuses on the "spikiness/variance" of the movement itself.

Have a great weekend!

I think it is better to think of the VIX as a fear gauge than a measure of volatility. Volatility can exist and the VIX (or VX, which is what I'm trading) can be low. For example, if this trade war were to be resolved, you would see the VIX drop like a stone, but see a ton of positive (bullish) volatility in equities.

Since the VX is tied to options rather than the underlying equity, it is related to options activity. I've oversimplified it, I'm sure, but I think that's the crux of it. Still learning about it as I go along here.

as @shodson mentioned, ATR is a good measure of volatility.


~vmodus

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  #49 (permalink)
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Well, today was a good day. I decided yesterday that I would trade for at least one more day in sim. Today was the first day that sim actually matched my strategy performance report. Everything is spot on, so it is a very nice place to be.

Sim account, closed P/L = $188:


Strategy Report (what would have been in a perfect world): P/L = $188


Trade Manager Report, 5 round trip trades, no cancelled or missed trades:


Today's Results (sim):
  • 5 round trip trades (S, L, S, L, S)
  • +$188 net profit

I believe I have worked out most of the bugs. My end of day exit worked as planned, unlike last week when I was pulling the plug too early.

Final thoughts for today. Here is today's VX chart:

There are generally 2-3 good moves in this market per day. Unfortunately the best move of the day happened at 4:40. Do I want to trade at that time? Probably not. My partner tried it and didn't sleep well for six months. I would really have to trust the execution of my automated strategy to just let this run overnight. I'm far from that point. Just some things for me to think about.

Tomorrow:
I might trade live, but I think I want one more day of sim.

That's it. Algo should be sweet and simple like this. I didn't do any trading work, other than restart my PC and login. And update this journal.

See you all tomorrow!

~vmodus

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  #50 (permalink)
Legendary Systematic Algo Trader
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shodson View Post
The VIX is skewed because investors in equities are typically long-only, and when fear rises, PUT prices rise faster than the drop in CALL prices, increasing the VIX, and when the market is going up and doing well, fear subsides so PUTs go down in price faster than CALL prices rise, so the VIX drops. This is why the VIX usually rises in down markets and drops in up marketsx.

In short, if people are bullish they generally buy underlying instruments like futures, ETFs, and stocks, instead of CALLs, and use PUTs to insure them.

Also, an underlying can't go lower than zero, but it can theoretically go up to infinity. This absolute-zero floor also makes puts more expensive than calls.

If you want to just measure volatility in terms of actual up/down movement, just use ATR.

Thanks for the insight, @shodson. I did a lot of studying on options about 20 years ago, but never needed to know much until I started working with the VX.

~vmodus

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  #51 (permalink)
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I think it is better to think of the VIX as a fear gauge than a measure of volatility. Volatility can exist and the VIX (or VX, which is what I'm trading) can be low. For example, if this trade war were to be resolved, you would see the VIX drop like a stone, but see a ton of positive (bullish) volatility in equities.

Since the VX is tied to options rather than the underlying equity, it is related to options activity. I've oversimplified it, I'm sure, but I think that's the crux of it. Still learning about it as I go along here.

as @shodson mentioned, ATR is a good measure of volatility.


~vmodus

*** Warning: I'm gong to talk about something I know almost nothing about. ***

(At least I know it this time. I don't always. )

VIX is a measure of what is called "implied volatility," which is very different from "historical volatility," the kind of thing we generally think of volatility as being. In other words, if you look at how prices have moved, that kind of volatility (which is what ATR addresses) is "historical" volatility. It's what has happened.

VIX is an attempt to predict near-term (30 day) future volatility based on current option pricing. "Volatility" is a component of option pricing models, like BlackĖScholes. If you plug in the current price of options and the other components, you can solve it for the volatility that is implied by the other values.

For example, what should happen to option prices if volatility is expected to rise? They should go up, because it's uncertain what will happen. This is the connection of expected volatility and option pricing, and why it's a part of valuation models. If you know all the other components of the model, including price, you can derive what the expected future volatility has to be, at least according to the formula.

I half-way remembered some of this, so I thought I would just go to Wikipedia and get a simple explanation, but there seems to be a law that says anything theoretical about option pricing has to be carefully written in a way to make it unintelligible. You are welcome to try your luck with it, but you will need some luck, I think: https://en.wikipedia.org/wiki/VIX

Anyway, I think that what I just wrote is correct to a fair approximation.

Is VIX useful? It reflects the opinions of presumably knowledgeable options traders, since implied volatility is baked into the option price (to the extent that the option pricing model is correct.) I believe that the way people use it that a high VIX means uncertainty about the future, which is why it is called a "fear index." I have never been sure if it's a predictive or a reactive measure, in terms of what the market will do now. (If it is rising, does this tell you the market will go down, or is it rising because the market has gone down?) Dunno.

But I said I didn't know what I was going to talk about, and I don't. I do have at least a slender grasp on the difference between VIX-type volatility (a prediction based on option pricing) and ATR-type volatility (what has actually happened to price.)

Bob.

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.... there seems to be a law that says anything theoretical about option pricing has to be carefully written in a way to make it unintelligible. You are welcome to try your luck with it, but you will need some luck, I think: https://en.wikipedia.org/wiki/VIX


@bobwest, okay, you had me rolling with that line. This is why I never pursued options writing. It is all alchemy to me and I was never good in Potions class.

I know some people use VIX in their trading. The VX (the options future which I trade) reflects the VIX pretty closely from what I observe. I have toyed with it a little just for general amusement, but I haven't found VIX useful, though I don't work with ES or S&P 500.

~vmodus

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The VX that I trade has contracts for every month of the year. So our 'witching' day happens once a month. Technically the witching day, or contract expiration if you will, is tomorrow, but the effects for the VXK19 (May 2019 expiration) were felt today. It was a meh day and there wasn't much movement, at all. That was on the May contract.

The June contract, which is receiving about the same amount of volume, was only a little more exciting, but I will start trading that tomorrow.

Today's results:
  • -$214 net loss
  • A lot of back and forth trades
  • 5 round trips
  • Missed on minor entry because the price wasn't hit

What I liked:
  • My strategy worked, with no real fails

What I didn't like:
  • This is not trading related, but I had some external interruptions that made trading difficult
  • Tradestation bombed on me again (see the picture below)
  • Had to do a complete reinstall of TS

My picture of the day:


This should have been a chart (a workspace, they call it). This is what I have to deal with using Tradestation. Fortunately it is working on my other PC.

That is all I have, sorry if it is meh like the market. I expect tomorrow to be hella more exciting....I just feel it.

~vmodus

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Today was a pretty busy day outside of trading, so I just set my strategy up in sim and let it run. Today was just a little less 'meh' than yesterday and the VX just drifted for most of the day.

I took one trade, which I exited manually. Why did I exit manually? Well, take a look at this chart, then I will explain:


My indicator visually shows two cross-overs, which should have resulted in a reversal (exit short, enter long; then exit long, enter short). But..... that didn't happen when looking at the data (nor did my strategy detect them). So, foolish me, I figured that the orders were just missed. Wrong.

What you see is not what you get, apparently. I checked my strategy report, which would have more accurately shown exit and re-entry. Nope, they were not identified by my strategy. Then I checked the actual values..... there was no cross-over when I evaluated each bar. In other words, what I see on the chart does not match the underlying data.

What the frack?

I will chalk this up to Tradestation weirdness. I am glad I'm not a chart trader or I would be pretty upset. The good thing is that my strategy would have stayed in the trade. I don't know why it did not paint on the chart properly. I will have to try this on another PC to see if the problem exists on both instances of TS. I will try to post some pictures or video to explain what I am seeing.

Without my early exit, my p/l would have been +$248.

Today's results (sim):
  • +$48
  • 1 short trade.... meh
What I liked:
  • I was on full-auto today
  • Strategy worked flawlessly in sim
  • Got a haircut, ran some errands
  • I didn't worry
What I didn't like:
  • The indicator failed, for the first time that I know of.
  • The fact that I intervened by exiting prior to identifying the issue with the indicator
In general, I like trading how I'm trading now. Allowing the automated strategy to enforce my trading rules frees me in a great many ways. Although I have some concern regarding Tradestation, I think I can work with it for now while I finish other activities that need closure.

I think tomorrow I will go live with this strategy and see how it performs. I have had four days where it has performed as designed. Let's see!

~vmodus

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  #55 (permalink)
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This is going to be a short post, as it is late. I went live with my strategy today and it worked, for the most part. The VX was pretty wild today. Here is what my strategy report shows:
  • 8 round trip trades
  • -$219 net loss (what could have/should have been)
Actually not bad, considering the wild volatility. However, here is what I ended up with:
  • +$334 net profit
The reason was mainly that I did some discretionary trading on the YM alongside the VX, basically using the same methodology, but manually. Obviously it works, but I am not really in this to day trade.

There were a couple of entries on the VX that were missed, but that is accounted for in the strategy report. So tomorrow, we keep trading live and see where this strategy takes us.

Nighty night, my peeps.

~vmodus

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If you have read this journal much, or my old one, you will know that I now trade the VX, primarily. This particular instrument does not allow for market orders, only limit orders. These constraints have made it difficult to automate a strategy.

However, the one very important thing that I've learned trading the VX is this: using limit orders. The main issue with market orders is the slippage factor. Of course, there is the downside of limit orders, in that they don't always get filled. Aside from that, when I am trading another instrument, I have found using limit orders has been crucial to avoid slippage. I have been able to effectively cover commission, hit most of my orders (80% of the time) and meet my trading goals for an individual trade. At this point, I look at a market order as a fail-safe, last resort tool.

That's all for now. I'll post my end of the day results at... you know... the end of the day.

~vmodus

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Today will be another short post (sorry, just super busy).

Today's Results (live):
  • -$101
  • Had both automated trades and discretionary trades
  • I stopped trading early, as we generally don't like to trade after noon before a holiday
  • Strategy would have produced -$152 net loss, if running
My VX chart, without any commentary:


This Weeks Results (live):
  • +$233, over two days of trading
  • My strategy would have produced +$304 net profit, if all orders were filled (about 10% are not filled, as the limit price is not met)
All-in-all it was a good week, in that my strategy mostly worked in both sim and live. There were some missed trades, but nothing to boo-hoo about. My discretionary trades helped keep me in the black, but I would rather not day trade.

I missed two really good discretionary trades today, because I was distracted (first missed trade) and then I stepped away to eat lunch (second missed trade). Again, I don't want to do discretionary trading, but I had some separate goals tied to that (primarily catching up my account and covering monthly data fees).

My strategy:
The strategy worked. The two things that I liked were:
  • End of day exit executed perfectly
  • Stop loss (today) executed correctly
Here is a sample of the strategy performance report summary:


I have to go back and do some additional backtesting and do another round of walk-forward optimizations. I want to make sure my expectations for the strategy are realistic.

I hope all of you in the US have a safe Memorial Day holiday. See you again Tuesday!



~vmodus ... out

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I haven't posted in my journal this week, as I have been super busy with other things. I only traded Tuesday live, which was not a good trading day (strategy worked, but it was one of those bad days).

For the rest of this week, I did not run my strategy, not even in sim. I have other non-trading related work that requires my attention. I will try to update my journal later today with my week's results and what I have been working on, with the little time I have.

~vmodus

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I have a couple of quick updates, but I don't have much time in the next two weeks to trade or update my journal. I will get right to it.

Last week:
  • Ran my automated VX strategy Tuesday, live
  • Total P/L: -$541 (live trading)
  • Execution of trades was near perfect, i.e. my strategy took all the trades it should have
  • 5 trades, 4 losses, 1 win.... two of these were stop losses (-225 a piece)
  • My emotions were fine throughout, but I was disappointed at my strategy performance
  • Discretionary trading on the YM last Friday, +$941 in sim on three trades .... just testing some theories around movements and market psychology.
I pulled the plug on the VX strategy, and good thing I did. Last week would have been one of those weeks. By my strategy performance report, which now track pretty close to my live trading, I would have been down $2500 for the week. So it might have been one of those weeks or there is something fundamentally wrong with the strategy. I suspect that it was an outlier week. I need to spend some time on it, of which I have little. I was happy with Friday's results, even though they were only sim. I have taken similar live trades with good results. My YM trading habit supports my VX trading habit....

This week:
I will be traveling for a couple months, starting next week, so I am swamped with client (non-trading) work before I leave, tying up loose ends, etc. The thing right now is, to use a biblical reference, I cannot serve two masters, or in my case 3 or 4. I know that I cannot effectively trade or develop trading strategies while attending to other responsibilities. As a result, I have to set aside my trading activities, except for one.

My partner has developed a new strategy that appears to be promising. However, she needs a custom stochastic. I need to code this for her in the limited time I have, so I have to do that. Coding and talking about custom code is not exciting, but if I can get it working, then her system can be fully automated, which would be a first for her. The best thing is that it works on multiple markets. So hopefully I can get to it this week.

That is all I have. I may run my VX strategy in sim, just to see what would happen. I will pop in here to see how my fellow traders are doing.

~vmodus

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  #60 (permalink)
Legendary Systematic Algo Trader
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I only have a few minutes this week, but I thought I would check in. I have not done any live trading this week, as I do not have the mental bandwidth to dedicate to trading.

My VX Algo system:
It appears to be busted, according to my strategy performance report. I'm not sure why, but it has been flat this month. It could just be a bad two week stretch.. I don't have time to spend investigating if the system has an issue or if it is just busted. Regardless, I will be traveling soon and probably won't have time to look at it prior to next week at the earliest.

Discretionary trading:
I did some discretionary trading on my sim account yesterday, just to keep up my skills. I only traded yesterday in two small windows of time (about 1 hour total). My main goal was to acclimate myself to trading larger lots (i.e. larger than one contract). It worked pretty well, considering that my setups were not ideal.

Sim results for Monday (11-Jun-2019):
  • Traded YM (Dow e-mini)
  • 5 trades, 3 wins, two losses
  • +$1021
I've probably stated this before, but my plan is not to be a day trader. I have been able to use my day trading skills to help pad my account (both real and funny money accounts) and absorb losses from some of the system trading I've had.

I'll be on the other side of the pond by the next time I check in, probably next week. For now, best of luck in your trading!

~vmodus

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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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Legendary Systematic Algo Trader
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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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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.

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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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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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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.

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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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I have spent some time working out the kinks in my strategy. I now have all of my entries and exits working as intended. I like my strategy, but it doesn't perform well enough for prime-time. It does not pass walk-forward optimization (WFO) and crashes and burns with Monte Carlo simulation. My need to be right does not outweigh my need to practice good money management.

What I like about my strategy:
  • When it catches a good move, it is usually stellar
  • It generally catches trend reversals early
  • It avoids early exits
What I do not like about my strategy:
  • It stays in too long, i.e. my exits stink, and I am giving back way too much. One of the hallmarks of this strategy is it attempts to follow a trend as long as possible without early entry.
  • It enters some 'meh' moves, which I can see on the chart as 'meh', but cannot code around. Most of the losses are on these 'meh' moves;
  • Strategy efficiency is negative, which is due to the issues in the first two points.
I can look at the numbers generated by the strategy, specifically the Confidence Score, and infer some things about when an exit should occur. However, I think I need to add another filter. I dusted off MACD, just for fun and it may have some value. Here is what I'm thinking with the MACD:


In other news, my partner recommended this video on optimization. I want to make sure I'm utilizing best practices:


Next steps:
  • Look at MACD as another possible filter to see if it can be used to avoid meh entries and provide earlier exit signals.
Unless I have some epiphany, this is my last post of the week. Have a great weekend everyone!

~vmodus

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So much for my silence until Monday.

I decided to test something against Eurodollar (ED or GE). If you followed this journal or my old journal, you will know that I worked a lot with the VX. I had a killer strategy that absolutely bombed live, because the VX requires limit orders and my orders were not getting filled in a timely manner.

The Eurodollar has been interesting to me since I first started tinkering with futures over twenty years ago. If you don't know much about Eurodollar, the Wikipedia article is a pretty good primer: Eurodollar Futures Contracts. After looking at a chart for the first in forever (sorry Frozen fans), I was reminded of the VX charts.

So I figured, what the hey, let's apply my old VX strategy to this on the 60 minute chart. The results were impressive:


So here is how optimization works in Tradestation, at least how I do it:
  1. Optimize some of the input parameters to a strategy, selecting Walk-Forward as the 'Type'; there must be at least 10,000 combinations (tests) for the WFO to work.
  2. Run the optimization and wait for it to finish
  3. If the results look good (profitable, good win/loss ratio, etc.), then...
  4. Open the WFO tool
  5. Load the optimization file that was created when you ran the optimization
  6. Run the cluster analysis
  7. Evaluate the results (pass/fail)
  8. Run Monte Carlo analysis on one of the tests; I do at least 5000 tests, and will run it several times to verify the results
  9. If it passes Monte Carlo analysis (i.e., it is profitable), then apply the parameters for the best cluster test to unseen data
  10. If the parameters create profitable trades on unseen data, then there is a strong probability that I have a winning system
So for me, a strategy must pass optimization, WFO and Monte Carlo testing to be considered for live trading. This strategy checks all the boxes.

Eurodollar has the volume to support the trading, especially if I restrict my trading to peak hours. Margins are low ($300/contract). The VX strategy has a lot of similarities with the strategy that I've been working on the past couple weeks. I am not going to get too excited, as Eurodollar trading may not be what I expect it to be, as I learned with the VX.

Next steps:
  • Rewrite the VX strategy for market orders
  • Test in sim starting Monday
That's all, for real this time. See you all Monday!

~vmodus

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  #73 (permalink)
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I worked on my Eurodollar strategy/algo over the weekend, primarily doing walk-forward optimization. WFO was successful, so I decided to activate my strategy in sim last night when the markets open. Ideally this strategy will work best from the morning (4am to 8am start) and finish trading by 4pm ET, but I wanted to allow the strategy to run so that I could work out any bugs or other problems.

Problem #1:
The first problem that I found was that my exits were setup wrong in my strategy. I was setting the number of contracts for exit to be the same number as I am trading. Example: I trade 10 contracts, but only 9 contracts get filled by the trade manager. I was trying to exit 10 instead of 9. I think that caused a problem, because the orders looked a little wacky.

Problem #2:
The next problem was that I was having orders rejected because the price was not correct. For this go around, I am using limit orders. I was sending an order like this: buy 10 @ 98.3105. The price was not to the precision allowed by the market. I could enter at 98.31 or 98.315, but no other price between that. I am new to trading this instrument, so that was a good lesson learned.

One thing that annoys me about the Tradestation backtesting engine is that it allows trades on invalid prices, as seen in problem #2. It would be great if it actually identified an invalid price, for example.

I have re-coded my strategy to fix these problems. For problem #1, I just exit the same number that I am currently holding. The second issue required some programming to get the value I want for entry or reversal (rounding to the nearest 5/1000 or 1/100). I wrote a function to handle the heavy lifting, since the rounding functions in Easylanguage are not very robust. The function works well. I have to convert number to text, manipulate it, then convert back to number again.

Next steps:
  • I think the short side of the strategy is at a disadvantage with my calculation, so I will work on that a little more.
  • Run the strategy in sim
  • Do a bunch of other non-trading related tasks that I have to do
This is my only post of the day. Have a great trading day everyone!

~vmodus

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  #74 (permalink)
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Good morning friends, colleagues and lurkers! I was able to fix most of my problems with the automated Eurodollar strategy, but we are still in testing it.

I did my regular optimization procedure: optimization, walk-forward optimization, Monte Carlo testing, but this time on a 5 minute chart, specifically the EDZ19. I chose the 5 minute chart because the strategy works (almost) as well on the 5 minute time-frame as the 60 minute. The main reason for the 5 minute timeframe is that I want to get through testing faster, in this case, 12 times faster. The trade-off (no pun intended) is that there is not always the volume to support the number of contracts (10) that I am attempting to trade.

Just for giggles, here is what the EDZ19 chart looks like this morning (I'm short 10 contracts right now):


Since everything passed my testing, I activated my strategy last night and let it run. This morning I woke up and was down about $200. One issue I have is that orders may not get filled, so they are hanging out there and then get picked up later. I'm working with limit orders, so they sit out there until it fills or I cancel them. This is the main reason I'm running a loss. If all orders had been taken, I should be about +$130. After a quick chat with my partner, she said knows how to fix that.

The sim testing process is actually working pretty well. Orders are sent into the queue and the order is 'filled' when it's our turn. The application makes a reasonable assumption about where our order should go in the queue. Sometimes we're filled quickly, other times not.

~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~

Eurodollar
Since I started working on the Eurodollar, I've learned some very cool things about it. The main thing, and of great importance and value to me, is that there are 4 contract months that have high volume: Dec 2019, Mar 2020, May 2020, and Dec 2020. This volume is high enough to trade one or more of these contract months at one time. This is a huge shift from trading any other contract I've work with (YM, CL, ES, etc.), where most people are only trading the nearest contract month.

This opens a range of new possibilities. I could, conceivably, just trade Dec 2020 for the next year without having to worry about rollover or contract expiration. I could use my strategy and trade a couple of contracts on each of the most active contract months, thus assuring that I am trading the number of contracts I want to trade.

One thing that I will explore is the price relationships between contract months and see what sort of correlation may exist between them. Something caught my eye between the Dec 19 and Dec 20 contract months that I might be able to capitalize upon.

This is going to be fun.

~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~

VX Revisited
So this strategy is a direct descendant of the strategy I built for the VX last Spring, but which failed when I went live. I am now seeing that some of the code errors that I didn't recognize back then contributed to it's failure. So once I free up some time, I will revisit the VX and see if my code changes fixed some of my issues. I have a fondness for that weird little contract.

~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~

Next steps:
  • Let the strategy run
  • Clean up any old orders that have accumulated in the Trade Manager
Have a great trading day everyone!

~vmodus

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  #75 (permalink)
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Hi @vmodus, I really recommend you take @kevinkdog strategy factory workshop. It has a focus on making sure what you code performs in the real market as it Does in the walk forward and it looks to me like it will save you a lot of time developing and a lot of money testing. I was making many of the same mistakes youíre making here and @kevinkdog cleared them all in the first hour of strategy factory.Itís also geared to TS users and from seeing your strategy here I assure you, you would benefit greatly


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numberjuani View Post
Hi @vmodus, I really recommend you take @kevinkdog strategy factory workshop. It has a focus on making sure what you code performs in the real market as it Does in the walk forward and it looks to me like it will save you a lot of time developing and a lot of money testing. I was making many of the same mistakes youíre making here and @kevinkdog cleared them all in the first hour of strategy factory.Itís also geared to TS users and from seeing your strategy here I assure you, you would benefit greatly

Thanks so much for the advice. I will definitely check it out later today or tomorrow. I've been muddling along and learning as I go, but I love learning from others.

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  #77 (permalink)
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numberjuani View Post
Hi @vmodus, I really recommend you take @kevinkdog strategy factory workshop. It has a focus on making sure what you code performs in the real market as it Does in the walk forward and it looks to me like it will save you a lot of time developing and a lot of money testing. I was making many of the same mistakes youíre making here and @kevinkdog cleared them all in the first hour of strategy factory.Itís also geared to TS users and from seeing your strategy here I assure you, you would benefit greatly


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@kevinkdog is well known on this forum, and has a number of videos and threads on automated trading design and testing here.

He's also got a book out that is well thought-of (I've never even opened it myself because I'm not into automated trading , but people who are seem to like it.) It's on Amazon, I believe. Do an Amazon search for Kevin Davey (his real name) and you should find it.

Edit: I just searched for it myself, and there are four books by him. I think the one that people usually refer to is the expensive one (of course.)

Again, not a plug, just some info you might be able to use.

Bob.

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vmodus View Post
Thanks so much for the advice. I will definitely check it out later today or tomorrow. I've been muddling along and learning as I go, but I love learning from others.

He won the World Cup of trading using fully automated strategies in TS, and he really adds a lot of value to the class by giving you 7 ready to trade strategies, and phone/email support. You also get access to the "strategy factory club", which means once you get the process and are able to create strategies that meet specific ( very demanding) criteria, you will be able to pool them in with other members verified strategies. For me it was trade-life changing.
Check it out here
https://kjtradingsystems.com/index.html

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  #79 (permalink)
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numberjuani View Post
He won the World Cup of trading using fully automated strategies in TS, and he really adds a lot of value to the class by giving you 7 ready to trade strategies, and phone/email support. You also get access to the "strategy factory club", which means once you get the process and are able to create strategies that meet specific ( very demanding) criteria, you will be able to pool them in with other members verified strategies. For me it was trade-life changing.
Check it out here https://kjtradingsystems.com/index.html

I looked at his site after you mentioned it the other day and checked out his workshop. I did not realize who @kevindog was until I checked out his website. I'm familiar with his writings and his successes at the World Cup, but did not put two and two together. I'm glad he is a member here.

Thanks again for the advice!

~vmodus

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When you have a day that is between blah and meh, it's a bleh day. I just made that up.

I didn't have too much time to spend on my strategies yesterday or today, mainly due to client work this week. And this little episode occurred today. I drop my son at school in the morning because it is about 2 minutes from the Y. I use it as an excuse to work out. So when I get home, I grab a bowl of cereal and am happily munching it when a movement catches my eye: one of our hamsters is walking across the floor of our living room. This also caught the attention of our cat, a lean and stealthy hunter who goes by the name 'Chi'. Well, I quickly scoop her up and lock her in our bedroom. Then I had to search for the stupid hamster, which failed. Eventually my wife came back from the Y and we found and caught the little booger. So, that killed about an hour.

Yesterday, I learned something new about the Eurodollar. The tick size varies depending upon which contract you are trading. In brief: the nearest contract month has a tick size of .0025 and all other contract months have a tick size of .005. Since I'm still new to trading over multiple contract months, this was a neat thing to learn.

I wondered why some orders for the Dec 2019 contract (EDZ19) were rejected on Nov 18th, but none rejected on the 19th. Turns out, the November 18th was the expiration date for the November 2019 contract. I use limit orders in the strategy, so I have to send a valid price. So I would send an order at 98.1125, but it would get rejected. I would have to send 98.115 or 98.110. Once the December contract was the nearest, no more rejected orders.

I wrote those changes into my code, so I should not have those issues moving forward. I am following @numberjuani's advice and looking into @kevinkdog's workshop and books. Aside from that, I haven't had any time to work on anything else. Tomorrow I have to travel, so I will not be doing any trading related work. I may post an update tomorrow, but don't hold your breath.

Have a good evening everyone and happy trading Friday!

~vmodus

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Happy Tuesday everyone! For those in the US and/or those who trade the US markets, this is a weird and short trading week. I am finally catching up from my client work and am now reviewing some of what I did last week.

Strategy Factory
I have been looking into KJ Trading's (@kevinkdog's) Strategy Factory workshop. I discussed it with my partner and she thinks it would be a good investment. I am tasked with writing and testing most of our strategies, so this workshop may have some value. I will give it some more thought and decide by tomorrow. In the meantime, I've been reading his book Building Winning Algorithmic Trading Systems. The workshop is in late January and the date looks good to me.

Sim Trading
I did some optimizations Monday because I didn't keep my optimization results from last week and I had some minor code changes. I'm not sure why I didn't trade yesterday, but my partner reminded me.

Anyhow, this is my Eurodollar strategy I'm working. My earlier sim tests were on a 5 minute chart, but the strategy is designed for 60 minute chart. I set it to run last night (it starts trading at 0400 ET) and woke up to find it had successfully taken two trades. I'm currently long 10 contracts.
  • 1st trade: short, -$99
  • 2nd trade: long, +$312.50 (still open)
There are two issues I have found:
  1. The entry occurred one bar earlier than the strategy indicated. I'm guessing that the strategy sent the wrong price.
  2. The price generated by the strategy was different than the entry price, even though I was using a limit price. I will have to identify the root cause of that, but it's likely a miscalculation in the strategy.
~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~

Other stuff
I spent a little time last night doing some research on Forex. I mainly wanted to see how some of our existing strategies would work on forex. I'm a total noob, so I learned a lot. The main takeaway is that I will probably need to use a different broker and software vendor, though Tradestation offers forex data.

So that is about all I have to report.

For today:
  • Decide on Strategy Factory (probably 'yes')
  • Spend some time on calculating and understanding expectancy scores
  • Read some more of of the algo book....maybe I'll start at the beginning this time
  • Lurk around here for a little bit

~vmodus

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So just a quick update on my trading results for my Eurodollar strategy (60 minute, EDZ19 December contract): Net Profit $265, two trades. My strategy report indicates that it should have been $315, but as I mentioned earlier, I have an issue to resolve with the limit price the strategy is sending.

Here is my cropped chart for today:


My goal is to get my sim account back to $16k, which is where I started back in the Spring. I am at $ 15,886 and am sure I will get back there by next week.

I am done trading for the week. I probably should not have traded today, but Thanksgiving snuck up on me. Tomorrow is a special day for our family, so the wife, kids and I are spending the day together having fun. I will be cooking a feast Thursday.

This will be my last post before next Monday. For those who celebrate, happy Thanksgiving!


~vmodus

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Happy Monday and December to all! I hope everyone had a restful holiday, for those here in the States.

I activated my Eurodollar strategy last night, which starts trading at about 0400 ET. I woke up this morning and saw a missed entry, short. I forgot to reset the dates in my strategy, meaning that I had a trade ending date of November 26th. That was okay because it was a losing trade anyhow. I am currently long (in sim) 10 contracts EDZ19.

This is so boring.....for reals, as the kids now say. Backtesting is a lot more fun. Hurry up and wait for the next bar to close. Anyhow, I'm up $187.50 at the moment. With this particular strategy and timeframe, I close my positions at end of day. So I am inching closer to my $16k goal. Hopefully we can close strong.

I'm not doing much else, other than working on correcting some code for my partner. I'm catching up on some technical reading. All-in-all, just a boring day.

Hopefully I will have more exciting things to report tomorrow. Have a great rest of your day folks!

~vmodus

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Well, today is interesting in the markets. Today would have been a really good trading day for my current Eurodollar strategy (60 minute). However, this happened...

Last night I was really tired and went to bed early. I had done some cleanup of my PC before heading to bed, but I powered down my PC. I decided to not restart my machine and enable my ED strategy. Big mistake.

My trading day for this strategy starts at 0400 ET. When I got back from my workout at around 0800, I fired up my computer and saw that I missed my 0600 ET entry.
This is what stupidity looks like:


Sometimes trading is about one really good move. I recall George Kleinman stating that sometimes you need just that one good move and it makes your month or year. This would have made my week. Or month. This particular move is worth about $687 right now, and it is still moving. I am fairly certain the trade would have been made, as my limit price was hit multiple times.

On the upside, it was only sim trading. I will likely not hit my goal of reaching $16k on my sim account today (currently $13 away from that goal), since market momentum will probably continue past close, barring any major market moving news.

So I am done for today, at least trading.

For the rest of the day and tomorrow:
  • Prepare to begin live trading Eurodollar in January
  • Backtest my strategies on some other markets
  • Revisit ATR (average true range) calculations; I spent some time in the Spring on this topic, but never integrated this into any strategy

Stay safe out there today in the markets!

~vmodus

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Today was a strange day. My Eurodollar strategy ran, but it had a couple issues.

Issue #1: Order rejected

The system rejected a 'buy to cover' order, at the price of 98.1175. This makes no sense, as this contract has a minimum price movement of .0025. This is not a one-time thing. Either I'm stupid, naive, or ignorant about this instrument, but this just doesn't seem to work. Here is a little screenshot of the market depth chart:

I need to call Tradestation about this, but I dread it. My last call to them lasted over 2 hours, not including the hold time, and didn't solve my problem.



Issue #2: End of day exit did not occur
This is weird. The conditions in my strategy have me placing an exit order (sell or buy-to-cover) after 1600 ET, if I am in a position. So I am still in a position that should have exited. My strategy report shows it should have happened, but it didn't get to the I have had this issue before, which is resolved by restarting Tradestation and/or my PC. Not cool for an algo trader, but I have to use the software I have (for now).

Strategy Results versus Sim Results
  • My strategy has me at +$127.50 for the day, with two trades (one long win, one short loss)
  • My actual trading has me at -$200 at the close, with only one short trade (one rejected exit and no re-entry)
So this is not ideal. If the order had not been rejected, I should have entered long after exit short and then exited my position at the end of the day.

Other stuff
I have been reading Building Winning Algorithmic Trading Systems (@kevinkdog), which is really good stuff. Kevin writes it in a narrative style which makes it easy to read. Although it is geared to algorithmic traders, I think the book has value for discretionary traders. I can see some mistakes that I have made regarding systems trading, in particular testing one strategy against multiple instruments and picking the best performer.

Next steps:
  • Call Tradestation regarding the price issue with my strategy
  • Keep reading Building Winning Algorithmic Trading Systems
  • Keep running my Eurodollar strategy

~vmodus

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You might check to see if tradestation has some variety of an audit log, which might shed more light on why your order was rejected.

You also might keep in mind that Eurodollars have a different matching algorithm than most futures, orders fill based on a size priority (pro-rata), instead of time priority (fifo). I don't know of any retail platforms that accurately simulate order matching in eurodollars, so it's likely your live results won't ever match up to sim (not saying it won't make money, just that sim won't be indicative of a strategies pnl, even remotely).

.
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vmodus View Post
Today was a strange day. My Eurodollar strategy ran, but it had a couple issues.

Issue #1: Order rejected

The system rejected a 'buy to cover' order, at the price of 98.1175. This makes no sense, as this contract has a minimum price movement of .0025. This is not a one-time thing. Either I'm stupid, naive, or ignorant about this instrument, but this just doesn't seem to work. Here is a little screenshot of the market depth chart:

I need to call Tradestation about this, but I dread it. My last call to them lasted over 2 hours, not including the hold time, and didn't solve my problem.



Issue #2: End of day exit did not occur
This is weird. The conditions in my strategy have me placing an exit order (sell or buy-to-cover) after 1600 ET, if I am in a position. So I am still in a position that should have exited. My strategy report shows it should have happened, but it didn't get to the I have had this issue before, which is resolved by restarting Tradestation and/or my PC. Not cool for an algo trader, but I have to use the software I have (for now).

Strategy Results versus Sim Results
  • My strategy has me at +$127.50 for the day, with two trades (one long win, one short loss)
  • My actual trading has me at -$200 at the close, with only one short trade (one rejected exit and no re-entry)
So this is not ideal. If the order had not been rejected, I should have entered long after exit short and then exited my position at the end of the day.

Other stuff
I have been reading Building Winning Algorithmic Trading Systems (@kevinkdog), which is really good stuff. Kevin writes it in a narrative style which makes it easy to read. Although it is geared to algorithmic traders, I think the book has value for discretionary traders. I can see some mistakes that I have made regarding systems trading, in particular testing one strategy against multiple instruments and picking the best performer.

Next steps:
  • Call Tradestation regarding the price issue with my strategy
  • Keep reading Building Winning Algorithmic Trading Systems
  • Keep running my Eurodollar strategy

~vmodus

If you have not shutdown TS since that rejected order issue, try going to Trade Manager and click on Messages tab. That should show you the reason it was rejected.

You could call the Trade Desk instead of Client Services, since this was an active trade issue. They should be able to tell you what they see on their end...

And Thanks for reading that book!!!!

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addchild View Post
You might check to see if tradestation has some variety of an audit log, which might shed more light on why your order was rejected.

You also might keep in mind that Eurodollars have a different matching algorithm than most futures, orders fill based on a size priority (pro-rata), instead of time priority (fifo). I don't know of any retail platforms that accurately simulate order matching in eurodollars, so it's likely your live results won't ever match up to sim (not saying it won't make money, just that sim won't be indicative of a strategies pnl, even remotely).

Thanks @addchild. The Trade Manager gives me the reason, which is a limit price precision issue. This would be an okay error for contracts beyond the nearest contract (e.g. June 2020), but not for the nearest contract, which has a .0025 minimum price move. So it will allow 98.115 but not 98.1175, which it should. Gotta call Tradestation (dread).

~vmodus

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If you have not shutdown TS since that rejected order issue, try going to Trade Manager and click on Messages tab. That should show you the reason it was rejected.

You could call the Trade Desk instead of Client Services, since this was an active trade issue. They should be able to tell you what they see on their end...

And Thanks for reading that book!!!!

Thanks for writing the book @kevinkdog. There is a lot of value for us. It is like holding up a mirror and realizing what we should have seen in ourselves long ago.

I know the reason for the rejection, but it doesn't make sense for the Dec 19 contract. I will try the Trade Desk, but not sure if they can help with a sim order. In any case, they can route me to someone who should be able to help. I will report back here with the answer.

As a side note, I signed up for your workshop last night and am super excited about that in January! Thanks for all the work you put into that and here at FIO.

~vmodus

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Well, I made the dreaded call to Tradestation. I started with the Trade Desk (wishful thinking), but they passed me along to client services. Client services told me that a price to the fourth decimal place (10 thousandths) was not allowed. This did not resolve anything. They said it may be a sim thing (it isn't....stay tuned).

So I thanked them for the help. Then I tried to place a live order with a legitimate price (according to CME contract specs, that is): 98.1025 long (well below current bid/ask). This is what I get:



Either I am dense, or there is a problem here. Of course, Tradestation support did not help me with my issue, but I didn't expect them to have an answer. There was still some uncertainty about why the system would not accept it.

I think my next step is to try to place a live limit order via strategy, allow the system to reject the order, then call the Trade Desk again and find out why.

If anyone has any thoughts on this, feel free to comment.

To be continued....

~vmodus

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vmodus View Post
If anyone has any thoughts on this, feel free to comment.

To be continued....

~vmodus

Hi vmodus, I probably can't help all that much, but just wondering...
Since you're testing things...
Did you enter your live limit order test by clicking on a DOM at the 98.1025 price?
How about the same for a later contract month? All good?
Maybe the platform somehow thinks that EDZ19 is not the front month anymore.
Does TS have any other interfaces you can enter an order in, say a web or mobile?

Also, what about the tradestation discussion forum? I searched on there and there are at least one result about rejected orders. I can't read that forum since I'm not a TS customer, but maybe there are people on there that would have more insight.

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Today was 'No Trade Thursday' for my ED strategy, apparently. My strategy did not produce any trades. There were a couple of interesting things that deserve further attention.

#1 - Phantom Order?
Sometime around mid-day, an order for 10 contracts long showed up in the Trade Manager. The order was never filled (I'm all limit orders over here, so sometimes it takes a will for an order to fill), but it does not appear that the strategy created the order. Which leads to my next item....

#2 - Cross-over Order Missed?
A cross-over (my entry or exit signal) occurred at the 1400 bar. However, no order was created by the strategy and it did not appear on the strategy report. This is okay, I suppose, since the signal was weak. The 1300 bar shows my two values (iTrend and Trigger) as equal. So maybe it was not detected as a true crossover. I will have to look back at this situation. It is not really an entry I would have wanted.

So maybe #1 happened because of an apparent cross-over, but it did not show has being generated by the strategy. I'm sure that was the origin, as the number of contracts is 10. Anyhow, something to keep an eye on, for sure.

~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~

In other news, I signed up for KJ Trading System's Strategy Factory workshop. It is scheduled for January and I'm pretty amped about it. It was fairly expensive, but I am sure it will pay for itself many times over. I consider this a 'continuing education' expense, just like any other training cost I would incur in my other business.

Tomorrow:
  • Send a live order to Tradestation for Eurodollar, to get it rejected; then call the Trade Desk and have them explain why it go rejected.
  • Sort through the rive of content I received for Strategy Factory

Have a great evening everyone and see you tomorrow!

~vmodus

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Well, I made the dreaded call to Tradestation. I started with the Trade Desk (wishful thinking), but they passed me along to client services. Client services told me that a price to the fourth decimal place (10 thousandths) was not allowed. This did not resolve anything. They said it may be a sim thing (it isn't....stay tuned).

So I thanked them for the help. Then I tried to place a live order with a legitimate price (according to CME contract specs, that is): 98.1025 long (well below current bid/ask). This is what I get:



Either I am dense, or there is a problem here. Of course, Tradestation support did not help me with my issue, but I didn't expect them to have an answer. There was still some uncertainty about why the system would not accept it.

I think my next step is to try to place a live limit order via strategy, allow the system to reject the order, then call the Trade Desk again and find out why.

If anyone has any thoughts on this, feel free to comment.

To be continued....

~vmodus


My guess is that for Eurodollars the non-current months are priced at .005 increments, and only the front month is at .0025 increments. So, I'm thinking Tradestation put a restriction of .005 increments, and their system is not able to do some months at .0025 and others at .005.

I recall another broker (I forget who) having a similar issue.

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kevinkdog View Post
My guess is that for Eurodollars the non-current months are priced at .005 increments, and only the front month is at .0025 increments. So, I'm thinking Tradestation put a restriction of .005 increments, and their system is not able to do some months at .0025 and others at .005.

I recall another broker (I forget who) having a similar issue.

You are correct regarding the front month and other months. I am curious to see how my experiment with the Trade Desk goes tomorrow. It would be a shame if they can't handle this.

~vmodus

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You are correct regarding the front month and other months. I am curious to see how my experiment with the Trade Desk goes tomorrow. It would be a shame if they can't handle this.

~vmodus

I tried entering a limit order at an .0025 price, and that same window popped up before it even got sent.

So, my guess is Trade Desk will say "wow that is weird, you should talk to Client Services, and they can get a ticket to engineering for a bug fix. In the meantime, I can enter the order manually here for you."

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@kevinkdog, thanks for validating this. I agree, this looks like a bug. Hopefully they can get a bugfix pushed down at some point. I work with software development, so I'm not holding my breath, but maybe they will surprise me.

Thanks again!

~vmodus

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I have been working on a number of things today, trading and non-trading related. I turned on my ED strategy last night (starts trading at 0400), but it has been a dreadfully boring (my 60 minute chart for your amusement):


Yeah, it is a real snooze fest in Eurodollar today.

Dread:
I have been dreading calling Tradestation regarding the ED nearest contract price issue wrote about last week. I had some technical issues with one of our servers and a client matter to attend, so I had an excuse to not call. I will have to do it, since my strategy relies on that price increment.

Learning:
I have been reading Building Winning Algorithmic Trading Systems, which is a great book for algo traders. I wish we had this book 10 years ago (though it was only published 5 years ago. Anyhow, the process Kevin maps out is solid. There are some conclusions regarding system development that we have painstakingly learned on our own (diversification, over-optimization), but there is some pure gold in here, if nothing else than for capital preservation.

Probably the biggest lesson thus far has been that every tweak to an automated system is an optimization. So any data that has been seen by the strategy needs to be tossed after tweaking it.

For tomorrow:
  • Keep reading Building Winning Algorithmic Trading Systems
  • Keep running my Eurodollar strategy
  • Try to make a trade on ED and then call Tradestation when it gets rejected

Have a good evening all and see you tomorrow!

~vmodus

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vmodus View Post
I have been working on a number of things today, trading and non-trading related. I turned on my ED strategy last night (starts trading at 0400), but it has been a dreadfully boring (my 60 minute chart for your amusement):


Yeah, it is a real snooze fest in Eurodollar today.

Dread:
I have been dreading calling Tradestation regarding the ED nearest contract price issue wrote about last week. I had some technical issues with one of our servers and a client matter to attend, so I had an excuse to not call. I will have to do it, since my strategy relies on that price increment.

Learning:
I have been reading Building Winning Algorithmic Trading Systems, which is a great book for algo traders. I wish we had this book 10 years ago (though it was only published 5 years ago. Anyhow, the process Kevin maps out is solid. There are some conclusions regarding system development that we have painstakingly learned on our own (diversification, over-optimization), but there is some pure gold in here, if nothing else than for capital preservation.

Probably the biggest lesson thus far has been that every tweak to an automated system is an optimization. So any data that has been seen by the strategy needs to be tossed after tweaking it.

For tomorrow:
  • Keep reading Building Winning Algorithmic Trading Systems
  • Keep running my Eurodollar strategy
  • Try to make a trade on ED and then call Tradestation when it gets rejected

Have a good evening all and see you tomorrow!

~vmodus


I saved you some aggravation. I just posted this issue to the Tradestation forum. a TON easier than dealing with phone support.

https://community.tradestation.com/Discussions/Topic.aspx?Topic_ID=170330

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kevinkdog View Post
I saved you some aggravation. I just posted this issue to the Tradestation forum. a TON easier than dealing with phone support.

https://community.tradestation.com/Discussions/Topic.aspx?Topic_ID=170330

Thanks, I appreciate that! I held off calling TS, mainly because I am fighting a cold and don't want to fight TS as the same time.

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So yesterday was a little boring for December 19 Eurodollar, which got me thinking last night that maybe I should switch to the March 2020 contract. So I set my strategy in sim on the EDH20 before I went to bed.

When I had a little more time to look at it this morning, I found that if I had this strategy on this contract, I would have had a couple of minor, but profitable trades (~$250 worth). Anyhow, my strategy did pickup a short trade (currently +$375). Hopefully it holds and I can eek $250 profit, which puts my sim account balance back to $16k, my little goal.

EOD Exits in Easylanguage
So I have a parameter in my strategy that I can set to exit at the end of the day. I coded the exit, but it did not work properly.... or rather, didn't work at all. So I stumbled across SetExitOnClose, which is a function that will exit whatever positions I have open for this instrument at the end of the day. So I created a new version of the strategy and replaced my faulty exit with SetExitOnClose.

At first blush (backtesting), it appears to work better than my current exit. I am now running it through the gauntlet of testing to see what it will produce. The next true proof for this function is in sim.

To be continued....

~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~ + ~

I think that is all I have for today.

For tomorrow:
  • Finish reading Building Winning Algorithmic Trading Systems
  • Keep running my Eurodollar strategy in sim
  • Test the SetExitOnClose in my sim account



~vmodus

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