Daily Archives: October 31, 2011

Twitter Updates for 2011-10-31

  • New blog post: Whats the easiest way to be able to take on client funds to trade legally in the UK or US? http://t.co/vLwpLfq4 #
  • New blog post: Quant opinion: What would you do IF You Have Developed A Very Profitable Trading System On Earth? http://t.co/vkPPAsKv #
  • New blog post: Quant opinion: Is an exchange like CME or Interbank a zero sum game between the traders involved? http://t.co/bpVIqRyL #
  • New blog post: Why popular methods of technical analysis fail to work but quant analytics or statistical analytics may http://t.co/OZRF8aG2 #
  • New blog post: Do you think that market follow some patterned trends for best quant analytics? http://t.co/gnEaqIt7 #
  • New blog post: Quant development: Is anyone successfully using Amibroker for live automated trading? http://t.co/xwANnqCE #
NOTE I now post my TRADING ALERTS into my personal FACEBOOK ACCOUNT and TWITTER. Don't worry as I don't post stupid cat videos or what I eat!

Twitter Updates for 2011-10-31

  • New blog post: Whats the easiest way to be able to take on client funds to trade legally in the UK or US? http://t.co/vLwpLfq4 #
  • New blog post: Quant opinion: What would you do IF You Have Developed A Very Profitable Trading System On Earth? http://t.co/vkPPAsKv #
  • New blog post: Quant opinion: Is an exchange like CME or Interbank a zero sum game between the traders involved? http://t.co/bpVIqRyL #
  • New blog post: Why popular methods of technical analysis fail to work but quant analytics or statistical analytics may http://t.co/OZRF8aG2 #
  • New blog post: Do you think that market follow some patterned trends for best quant analytics? http://t.co/gnEaqIt7 #
  • New blog post: Quant development: Is anyone successfully using Amibroker for live automated trading? http://t.co/xwANnqCE #
NOTE I now post my TRADING ALERTS into my personal FACEBOOK ACCOUNT and TWITTER. Don't worry as I don't post stupid cat videos or what I eat!

Scared of the markets? We got nice treats from stock picks for Oct 31, 2011 from Austraia, India, Switzerland, Brazil, Singapore, Korea

Scared of the markets? We got nice treats from stock picks for Oct 31, 2011 from Austraia, India, Switzerland, Brazil, Singapore, Korea

 

Here they are:

UTISUNDER.NS ,CTE.NS ,SAMBHAAV.NS ,TDX.AX ,ACU.AX ,NIO.AX ,UIS.SW ,SCR.SW ,GT.SW ,KLBN4.SA ,TMAR5.SA ,CPFE3.SA ,039850.KQ ,066430.KQ ,078140.KQ ,5DT.SI ,5AN.SI ,T16.SI ,

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NOTE I now post my TRADING ALERTS into my personal FACEBOOK ACCOUNT and TWITTER. Don't worry as I don't post stupid cat videos or what I eat!

Quant opinion: Business Opportunities and the Financial Services Industry in the Gulf Cooperation Council GCC Region

Quant opinion: Business Opportunities and the Financial Services Industry in the Gulf Cooperation Council GCC Region

The Gulf Cooperation Council (GCC) region brings together the oil-rich states of Saudi Arabia, Oman, Qatar, Kuwait, Bahrain and the United Arab Emirates (UAE). The GCC economies have been growing rapidly on the back of rising energy prices and economic diversification that includes some $700 billion worth of development projects either under way or in the pipeline. The potential for international financial services groups is vast, in areas ranging from project finance to fast-expanding mortgage, consumer finance and private banking markets. Rapid economic growth and commercial diversification within the GCC region offer valuable opportunities for international financial services groups. GCC markets are increasingly being opened up to foreign investment and ownership. With $700 billion worth of developments either under way or in the pipeline, the GCC is now the world’s largest project finance market. The investment spans leisure, residential, infrastructure and industrial developments as the GCC seeks to forge a stronger and more diversified economic future. The real estate boom in Dubai and other emirates of the UAE is being increasingly mirrored across the GCC region. This includes Saudi Arabia, where the scale of new and planned developments is expected to overtake Dubai in the next five years. While some naturally question whether the boom is sustainable, demand continues to outstrip supply in most real estate sectors for now. Expatriates in most GCC countries can now own property, which is helping to open up a new mass market in mortgages. Owning property can also provide the right of abode and, from this, the attraction of low taxation and the right to set up businesses in the country of residence. Consumer finance is expanding as a relatively young and fast-growing population increasingly embraces consumerism. Key growth sectors include credit cards and vehicle financing. Islamic financial services are growing faster than the sector as a whole.

 

NOTE I now post my TRADING ALERTS into my personal FACEBOOK ACCOUNT and TWITTER. Don't worry as I don't post stupid cat videos or what I eat!

Whats the easiest way to be able to take on client funds to trade legally in the UK or US?

Whats the easiest way to be able to take on client funds to trade legally in the UK or US?

I am an algotrader my strategy is making profit but I want to be able to take on client funds legally??? How can I do this? what is the next logically step to take for people in the position I am in?

Thank you very much for your reply, I have been stuck to speak to anybody with any real expertise in this area, when you say 40k regulatory capital, which regulation are you refering to? I have a few strats which make money using an interactive brokers account, I simply want a legal environment for me to trade and take on client accounts, my intial feelings are that I would need to be registerered by the FSA (as I am based in UK) however this seems to be hard to gain and very expensive to do? could you please offer me some more advice on the best way for me to be able to take on client accounts legaly?

Also from a business point of view, I feel there is a massive opportunitiy to create this ‘bridge’ or ‘next step’ to allow non professional algo traders the path towards taking on a bigger book to trade without as much capital to set up. Maybe a fund which contained all the regulation and allowed algo traders a place to trade and take on their own clients? would you agree this would be a good idea?? or are there other drawbacks I dont know about or limitations?

I look forward to your response,

==

 

40k regulatory capital, which regulation are you refering to?

The easiest answer is to seek professional advice. I did.

But if you want to DIY then you could google (and read)
“financial services and markets act 2000 filetype:pdf”

then google
“The Financial Services and Markets Act 2000 (Regulated Activities) Order 2001”

You can compose a list of activities your company will want. Then apply to the FSA for permission to do those activities.The FSA Handbook (www.fsa.gov.uk) provides more rules and the capital requirements. The activities/permissions you want, determine the minimum Capital Requirement of the company – €50k, €125k or €730k.

Of the list of activities in the Order [chapter titles], what activities do you think you need?
I have a good idea but best to leave as an exercise.

 

==
Very interesting, I believe Chapter XII Advising on Investments covers what we want to do, which is to trade FX and futures, although from looking at the FSA handbook im not sure what the minimum capital requirement of the company is? whether €50k, €125k or €730k. Could you offer me some advice here?

I notice your company is FSA registered to take on client accounts, so you know exactly how to do this, what would you say the total cost and time of gaining regulation would be roughly? When you said you took advice was this expensive too?

I look forward to your reply,

I have a few questions I would like to ask you about your company, do you have a private email that I could contact you on?

==

 

If you are based in the UK and you get clients to invest from the UK and you tell them to open an FX account using a Swiss brokerage firm (Dukascopy) and the trading algorithm is ran from India trading the Swiss account, am I legally allowed to offer people in the UK this service?? because the trading is being done outside the UK?? and the brokerage account is based in Swiss?? Whats the laws on this?? or should I look at creating an LLP in the USA as an offshore company?? im very stuck on the simplist way of trading client FX accounts without breaking laws, I hear there are loopholes such as you dont need to be regulated if you just trade friends and family accounts in the UK using a UK broker its only illegal if you conducting a way of business?? HELP please 🙂

 

 

NOTE I now post my TRADING ALERTS into my personal FACEBOOK ACCOUNT and TWITTER. Don't worry as I don't post stupid cat videos or what I eat!

Quant opinion: What would you do IF You Have Developed A Very Profitable Trading System On Earth?

Quant opinion: What would you do IF You Have Developed A Very Profitable Trading System On Earth?

Multiple Choices…
1) Keep it for yourself and make your own money.
2) Sell the system to big instituion for a fortune and retire.
3) Sell the system to big instituion for a fortune and or get a high ranking position.
4) Create your own organization or private groups to enjoy the fruits.
5) To fan it out to the public, get them armed against the manipulation of Bankers.
6) None of the above… You have your own idea in mind… Would you like to share your idea…

==

 

Cream it (make money) and teach it to my children.

 

==

This is an important question because the answer reveals a lot about your own psychology. My answer is:

(1) Trade it myself and share with children.
(2) Tell anyone interested the methods without keeping anything secret – perhaps publish online.

The reason for (2) is that as the turtles discovered, most humans are psychologically not capable of sticking to a good trading method for a long period of time. So even if you tell others, they will not use it and continue to run after the “latest new strategy” over and over again. Thus by sharing your strategy you will not “dilute” the strategy and make it ineffective, but instead find others like you who are capable of sticking to a winning strategy (minority) for a long period of time.

 

==

Fantasy time for Traders.

Of course, one would trade it for himself/herself but the more important question is what if you have made the system but you do not have sufficient money??? That is, how to get the funds for Trading: Banks/VC’s i do not know of anyone who lends to Individuals for Prop Trading.

 

It really depends on how long you think you have before others discover the same system. Ideally you’d get five years of verifiable consistent gains behind you, then it would be worth something.

 

a combinaiton of 1) Keep it for yourself and make your own money.
and 4) Create your own organization or private groups to enjoy the fruits

Keeping the truly optimal performance for myself.

 

“what if you have made the system but you do not have sufficient money?”

If the system is as described (VERY profitable), by definition that means it is a system with a very positive expectancy. That being the case, starting capital is not all that important due to compounding of gains.

 

1) for a while then 2) or 3) but you need money anyway even if it is very profitable how much can it earn?200% per year?if you have 5k after 5 years…
Do you prefer to have 500k and average investing skills or a stellar trading system and 5k?

 

==

Let me know if you would like to trade it yourself and are in need of funds to trade with. We specialize in funding strategies and allowing the trader to keep the IP that they have developed.

 

==

Post it here and forums, let our power combine!

 

==

Some of my strategies are so simple and makes money very clearly, there is no way I can reveal. My option strategy is just 2 lines. It never had loosing month. If I reveal this, it will definetely be copied and will loose edge.

 

==

I do agree that simple strategies make money most of the time and there are many such strategies. I also have a very simple one that has made money backtesting for 40 yr and 4yr forward testing up to now. It is called ReadySetGo by Alan Pryor: Longtermtrading.com – Yes I have announced it to the world and you can buy it an get the entire code. It is probably the best trend following system out there. Do I think other people will use it? No. Because it is not exciting or sexy enough, especially for this group. Yet it makes $50K per year based on 1 one contract for the past 40 yrs trading 20+ uncorrelated futures markets and keeps going.

 

==

Everyone that has a winning system….I will buy it for whatever profit it makes me in the first year plus a 50% bonus. Payment made once system proven. I have the contracts ready for you to sign.

 

==

To maximize the value, my recommendation is like

option1 (1 year) -> option4 (2 years) -> option2 (exit)

 

==

Great question. I go with option 4. It makes a lot of sense..and am already in the process of building that close user group…

 

=

Our choice has been option4. License the system to a limited number of Hedge Funds.

 

==

Dole out to the public and let the fear-greed cycle take its own course…

 

==

i will go with 1st for medium term
than i will switch it to no.4
next step woulb be no.5 and
finally i will go with no. 3….

 

==

First you tell me have you really developed such system?
Then only I apply my mind.

 

 

NOTE I now post my TRADING ALERTS into my personal FACEBOOK ACCOUNT and TWITTER. Don't worry as I don't post stupid cat videos or what I eat!

Quant opinion: Is an exchange like CME or Interbank a zero sum game between the traders involved?

Quant opinion: Is an exchange like CME or Interbank a zero sum game between the traders involved?

Lets say on the long run.

What about commissions?

 

==

With or without commissions, is the bulk of money held in open positions a zero sum game between the traders involved in the exchange on the long run?

 

What is the reason of your posting? Do you mean that CME acts like a market maker to traders? No, it doesn’t. But any market is a negative sum game, not zero sum, thanks to commissions paid to the exchange.

 

commissions and other fees aside, is the rest of the money in open positions a zero sum game between the participants on the long run?

In other words, someone has to lose money for someone else to profit, how true is this statement?

 

The reason for this post, I want take an opposite approach of researching losing patterns that are generated by systems be it human or program, for use as indicator in the trading system.

Therefore knowing to which degree trading is a zero sum is crucial to this idea.

 

Set aside commissions, any exchange-traded market is a zero sum game. For
OTC markets I am not that sure.

 

-=-

For OTC, it depends on the security. Bonds for instance are not zero sum as there is a coupon payment and theoretically one can hold the position to maturity and be returned invested principal by the issuer. Stocks/ETFs/Indexes also pay dividends which again is not zero sum though there is no end payout.

 

 

NOTE I now post my TRADING ALERTS into my personal FACEBOOK ACCOUNT and TWITTER. Don't worry as I don't post stupid cat videos or what I eat!

Why popular methods of technical analysis fail to work but quant analytics or statistical analytics may

Why popular methods of technical analysis fail to work but quant analytics  or statistical  analytics may

http://www.faunusanalytics.com/marketing/article/Why_popular_methods_of_technical_analysis_fail_to_work.pdf

 

how right you are. I agree 100% with all your findings and conclusions. I have reached the same conclusions years ago. The expected value of playing heads or tails is zero, no matter what time frame is used or time horizon considered. It has been known for centuries that the outcome of a 50/50 game is zero expected gains.

You conclusions could also be viewed with the added twist that there is no harm in using a random entry, or any other decision surrogate, since your expected profit will still remain zero; which is another form of saying your expected loss is also zero. No gain, No loss.

Appreciated reading your paper, great work.

Regards,

 

The naive and unduly complicated methods is ineffective. Statistical tests show it. Efficient methods such as log-regression, being built on 10 years of historical data on multiple instruments (4-50 trading instruments with similar behavior covered by the general universal model). In this case, statistical tests show a dependence. But even then, you can not expect low-risk, incredibly high returns. Must expect loss-making quarters or half-years, and long periods of low trading activity.

You can not limit yourself to a few trading instruments. Need all the time to look for other more predictability trading instruments. For example, last year, well predicted precious metals, and this year they are harder to predict.

The problem is that all this is difficult to explain to beginners, it is difficult to sell the analyst honestly showing all the risks. Our company makes a market analyst (forecasts, trading signals) and is often sees the naive expectations of clients.

 

I have read hundreds of those academic papers and usually agree with their conclusions as I agreed with yours. But somewhere you say: “The problem is that all this is difficult to explain to beginners”. I’ll pass on that one.

I’ve posted some remarkable charts on this thread with let’s say performance results somewhat higher than the Buy & Hold strategy. I’ve said many times that I do not predict prices, that I often use random entries to get in a position. But all that is not the point.

My methods are the execution of administrative procedures, investment policies that you set from the inception of a portfolio, nothing more. As in this is what we will do if this happens. And the major point I am making is that simply by re-investing the accumulating profits, instead of doing nothing with them, one can easily achieve an exponential Jensen ratio and increase his/her portfolio performance above the Buy & Hold by default due to administrative procedures. Oh, I do make a prediction using these methods and that is in 20 years from now, the markets will probably be higher than today.

I’ve just posted on my web page a more elaborate research note:
http://alphapowertrading.com/index.php/papers/90-on-optimal-portfolio-ii

I agree with you for the most you are saying in your paper but I have different opinion in some points. Some things I see in different way.

For example in your article (page 6) “Summing up the results”, “2.Simple technical Analysis tools, including popular indicators and instruments…prevent traders from making money” – I party agree, but for “Popular tools do not allow a trader to stand out from the crowd to get bigger piece of the trader’s pie.” I fully agree.

Regarding the role of the technical analysis in trading, before 1980s most researchers criticised it and concluded that is not able to produce as good results as the buy-hold strategy (Alexander, 1961; Jensen and Bennington, 1970; Fama, 1970). However, later studies have proven the opposite (Pruitt and White 1988, Bessembinder and Chan 1995). Trading rules/systems (using technical indicators) based on past data could create excess returns and prove that usefulness of technical analysis. Such conclusions had Brock, Lakonishok and Lebaron (1992), later Bessembinder and Chan (1995, 1998), Lo, Mamaysky and Wang (2000) and many others.

Another view is from psychological aspect as behavioural finance. The premise of behavioural finance is that conventional finance theory ignores how real people make decisions and that people make a difference (Constantinides, et al., 2003). While conventional finance presumes that investors are rational, behaviour finance starts with the assumption that they might not be. As a result, we can discover market anomalies such as mispricing (psychological bias could cause prices to deviate from their correct level) and take the advantage to apply proper strategies ( such as arbitrage) to make profit.

Generally, behavioural biases may be consistent with technical analysis (Bodie, et al., 2009, pp. 395). There are chart/price patterns in technical analysis that are repeated many times in the past depicting specific investors behaviours. For example, the process of price underreaction and overreaction to public information might become visible in the form of the technical analysis as abnormal (upwards or downwards) trends.

 

“technical analysis” vs “statistical analysis”

“Technical analysis” is pseudoscience (numerology). This is only a “good” selection of the conditions and facts.

“Statistical analysis” is a science. This is an exact description of the restrictions, the definition of hypotheses and their mathematical proof or disproof. Statistical analysis was successfully applied in many fields.

Let’s use a statistical analysis for the markets.

 

Here we are all to exchange ideas and say our opinion.

I did not say that Technical Analysis (TA) is science. I implied that TA is useful as assistant tool to make trading decisions. Lately, most academics agree with that.
We all know the debate between academics and practitioners regarding TA (art or science). Most say that TA is art not science, ok? Let’s say technical analysis is ‘Art’. I will present only the following:

John R. Kirby, seeking to clear-up the art vs. science debate, quoted highly regarded Technical Analyst Ralph Acampora: “‘Art’ means a skill acquired by experience, study,
or observation. ‘Science’ is a body of knowledge with its own axioms, rules, and language (Technically Speaking, 2005, January).”.

TA is not a standalone “art’ – it requires the help of statistics. Statistics give an indication of the strength of a trading system or set of trades at any point in time. Technical stock analysis and trading statistics are important to identify areas of your trading which require improvement and help to illustrate your trading characteristics. They inform you if you are on the right road to success.

Finally, the goal is to make profits with low risk in a consistency way. Every one has developed his own style (TA, statistics, data mining, AI, etc).

 

Statistics give an indication of the strength of a trading system or set of trades at any point in time.

Can you please give examples of TA articles, which assess the probability of non-randomness of the results of testing of the trading systems? I have not seen the TA where the notion of “probability” is not in the most naive form of the arithmetic mean.

 

There are pockets of non-randomness caused by trader effects and other events such as news events. These are what the pro discretionary trader seeks to exploit.

Standard statistic methods are far too crude a tool to apply to price action.

 

Consider the Brownian processes. Without statistical analysis, we find a lot of false “are pockets of non-randomness”.

 

The markets are not a true random brownian process. You need to learn about ‘trader effects’. A skilled trader can find an edge.

Many people have been down the statistical analysis road. It leads nowhere.

 

Models simplify reality and require assumptions and /or simplifications – so one model cannot capture all aspects of the real situation (world). Brownian motion, allthough it helps, is just one theory that attempts to explain stock market fluctuations, along with the random walk theory and Markov process.

If the stock market is truly random, as described by Brownian Motion, then the market is unpredictable and efficient. Efficient market is that it is impossible to ‘beat the market’ since all relevant information is already reflected in the market price.

 

I agree that the market does not Brownian process. Brownian process is an idealization, and all real processes different from Brownian process.

But, warning! First experiment. If you observe and analyze the time series is actually the ideal generated by the Brownian process (but you do not know it), you “find” many “patterns” But these patterns are false and not will be confirmed by new data.

In the second experiment, you’ll observe the nonideal Brownian process with a small deterministic components. But in this case, the randomly noise can hide the real pattern.

Market data is like that. The market is a composition of two processes – the strong randomly proccess and weak deterministic process. Without statistics, you’ll never be able to distinguish between false and true patterns. Technical Indicators result of systematic detection of false patterns.

 

 

NOTE I now post my TRADING ALERTS into my personal FACEBOOK ACCOUNT and TWITTER. Don't worry as I don't post stupid cat videos or what I eat!

Do we dare to do it for quant development? Put our minds together and set up a work group to create really a great trading system..?

Do we dare to do it for quant development? Put our minds together and set up a work group to create really a great trading system..?

We all have ideas and various experiences, and we all keep like our most precious treasure our performing findings.
So.. would we dare to do it?
We could set up a web work space in a form to be defined, and test all the ideas we all bring. at the end, all members of the group would receive the grail (well, if it happens to be one, that is…!)

I launch here a first few ideas:
1- we give ourselves a limited time to do it. say a few weeks
2- limiting the group members # in the hope of reaching a good group dynamic, and then closing the group
3- all comitting to keep the findings to ourselves; this to be as focused on possible on creating a rewarding system

These are just ideas,… feel free to amend, criticize, propose…!

Check out high probability trading set ups and strategies in video here –
http://www.chart-my-trade.com

 

Here is the problem. Years ago once a year a group of top top traders would meet in a home in Fort Lauderdale and share their trading discoveries and methods. When they met there was no competition as all were successful. I imagine that you have a major break though and your on this site. Are you going to share that? I think that at the least you have to be among equals to share this type of information. If your working for a hedge fund you could not do it. If your successful you would have to sit through a lot of that does not work ideas which you have long ago tested. It does not seem to be workable at this level.

 

This is a worthy goal but nearly impossible because everyone has different personalities when it comes to trading – some short term, some (like myself) very very long term. some arbitrage, some trend, some countertrend, some pivot point breakout, some X-cover, some futures, some Fx, some stocks..

 

Try this, fly down to Hyderabad in India, then rent a serviced office and hire a couple of good developers for few months, start from raw data and don’t use any existing indicator or trading advice, crunch mountains of historical data until you figure out the price patterns or become Hindu, until you get great results or at least learn something new, I bet it cost less than $15,000 to produce ‘holly grails’.

The point is: start a trading research firm, it is the answer for your question.

 

 

NOTE I now post my TRADING ALERTS into my personal FACEBOOK ACCOUNT and TWITTER. Don't worry as I don't post stupid cat videos or what I eat!

Not all order flows are the same….see which market’s Order Flow wins the ‘Most Likable’ award and understand why…

Not all order flows are the same….see which market’s Order Flow wins the ‘Most Likable’ award and understand why…

Order Flow  FX, Equities or Future | Who Wins Most Likeable?

algofutures.com

One thing that I have learned over the years is that there’s order flow, and then there’s ORDER FLOW. The distinction between the two comes from the fact that not all market’s Order Flows are created equally.  As there are such…

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do you really mean that CL reflexes real supply and demand for oil? Also, do you mean that, for example, hotspotfxi or Bloomberg transmit lagging data with holes? Come on, tell us about the fx dealer market with EBS and about that “transparent” order flow at CME.

 

 

NOTE I now post my TRADING ALERTS into my personal FACEBOOK ACCOUNT and TWITTER. Don't worry as I don't post stupid cat videos or what I eat!