Tag Archives: auto trading system

More tips on data market feeds and how to start building an algo auto trading system

Here is a conversation on reddit.com which pretty well inspired me tostart thinking about blending my knowledge of technology and financial investment. This was pretty inspiring where an indie software engineer launched his own business. He is now clearing millions. Source is http://www.reddit.com/r/IAmA/comments/9s9d7/iama_100_automated_independent_retail_trader_i/

whatswith_this 1 point2 points3 points 6 months ago[+] (3 children)

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bolln 1 point2 points3 points 6 months ago[+] (1 child)

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locktight 0 points1 point2 points 6 months ago[+] (5 children)

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slaughters 0 points1 point2 points 6 months ago* [+] (1 child)

slaughters 0 points1 point2 points 6 months ago* [-]

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I’m a mathematician/statistician who has some finance experience, and thinking hard about this route. A couple cost questions for you if you feel like it:

(1) At what volume and approximate capital do the commissions get small enough that 2 cents/trade is profitable? eg. IB looks to charge a $1 commission per order minimum. I guess you mean 2 cents/share?

(2) How much does the colo run and at what point in your trajectory did you start using it? Did you start with local machines only?

(3) What do you think the minimum cost outlays on data feeds, colo, etc to not get killed on speed are?

Thanks!

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mejalx [S] 0 points1 point2 points 6 months ago[+] (0 children)

mejalx [S] 0 points1 point2 points 6 months ago[-]

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  1. Checkout the unbundled commission structures.
  2. I started colo’ing within the first few weeks of running as I needed full redundancy.
  3. You can get away with under a grand per month.

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cookiecaper 0 points1 point2 points 6 months ago* [+] (1 child)

cookiecaper 0 points1 point2 points 6 months ago* [-]

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Do you ever do normal and/or longer-term trades separate from the automatic model just because you want to own stock in something?

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mejalx [S] 0 points1 point2 points 6 months ago* [+] (0 children)

mejalx [S] 0 points1 point2 points 6 months ago* [-]

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Yes, I occasionally do trade manually, but it’s totally separate from my main business. I have a couple of speculative trades I put on every month which usually end up as swing trades or short position trades.

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cookiecaper 0 points1 point2 points 6 months ago[+] (1 child)

cookiecaper 0 points1 point2 points 6 months ago[-]

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Thanks for this AMA, it’s been interesting.

I’ve been developing software for a long time. This sounds like something I should do because I have a large portion of the skillset needed. However, I have no formal mathematics training. How necessary is that? Are your models formalized?

Thanks again. : )

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mejalx [S] 0 points1 point2 points 6 months ago[+] (0 children)

mejalx [S] 0 points1 point2 points 6 months ago[-]

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I utilize a variety of robust mathematical methods, so an understanding of statistics I would say has been a good part of my success.

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nash3q 0 points1 point2 points 6 months ago[+] (3 children)

nash3q 0 points1 point2 points 6 months ago[-]

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is there any way to play the game “for fun” or “practice” without much capital? i don’t know anything about real markets since my training is in continuous time macro (solving PDE/ODEs, dynamic programming, etc). however, i’d like to learn the real thing in my spare time. i’m ok with control theory and machine learning. i build models and algos for a living and take stem classes in my spare time. i’d like to test my ability using the “best” metric in life – money.

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mejalx [S] 0 points1 point2 points 6 months ago[+] (2 children)

mejalx [S] 0 points1 point2 points 6 months ago[-]

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You could subscribe to a real-time market feed and just simulate your trading. Alternatively a couple of brokers offer paper trading accounts.

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nash3q 0 points1 point2 points 6 months ago[+] (1 child)

nash3q 0 points1 point2 points 6 months ago[-]

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are either of these pay to play or free?

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mejalx [S] 0 points1 point2 points 6 months ago[+] (0 children)

mejalx [S] 0 points1 point2 points 6 months ago[-]

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There’s various simulators you can get for free. A real-time paper trading account requires you to only open an account with a broker, IB for example has an account minimum of $10k.

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wharmass 0 points1 point2 points 6 months ago[+] (1 child)

wharmass 0 points1 point2 points 6 months ago[-]

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I’m a high school senior applying to college, and I’m interested in doing something similar to your current situation.

What do you recommend majoring in? Computer Science, Finance?

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mejalx [S] 0 points1 point2 points 6 months ago[+] (0 children)

mejalx [S] 0 points1 point2 points 6 months ago[-]

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CS, engineering, or one of the sciences

HOW DO YOU START A PROFITABLE TRADING BUSINESS? Read more NOW >>>

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!

Pros and cons of auto trading system? Will be it be illegal?

Here is a conversation on reddit.com which pretty well inspired me tostart thinking about blending my knowledge of technology and financial investment. This was pretty inspiring where an indie software engineer launched his own business. He is now clearing millions. Source is http://www.reddit.com/r/IAmA/comments/9s9d7/iama_100_automated_independent_retail_trader_i/

whatswith_this 1 point2 points3 points 6 months ago[+] (3 children)

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bolln 1 point2 points3 points 6 months ago[+] (1 child)

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locktight 0 points1 point2 points 6 months ago[+] (5 children)

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Not relevant. Notice i put easy in ‘quotes’. The value of the dollar is the PRODUCTION that backs it. Spending your time gambling to acquire mountains of dollars just for that sake alone, is VALUELESS. If everyone did that the dollar would be worth ZERO.

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arcandor 2 points3 points4 points 6 months ago[+] (5 children)

arcandor 2 points3 points4 points 6 months ago[-]

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what are ‘people’? imaginary?

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cartooncorpse -1 points0 points1 point 6 months ago* [+] (4 children)

cartooncorpse -1 points0 points1 point 6 months ago* [-]

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People who are people only by the thinnest of technical margins. Of little or no or less value. to the greater good.

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LuxuryProblems 0 points1 point2 points 6 months ago* [+] (13 children)

LuxuryProblems 0 points1 point2 points 6 months ago* [-]

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I’m a bit suspicious of trading, let me tell you why. I’d be grateful for your opinion. This needs a bit of background though:

You know in roulette, you can bet on red or black and after each loss, double your bet. After each win, you’re ahead the initial sum you bet (Martingale betting system). This strategy works as long as you have enough bankroll to double down each time. But now and then, you’ll have such a long string of losses that you lose everything. Moreover, the mathematical expectation for each bet doesn’t change, so since roulette has one or two zeros, over a long time you will lose regardless of the system.

But for a long time, this system gives you the illusion that you are winning and that you have mastered roulette, until it suddenly wipes you out. You have exchanged a single slightly-less-than-50 / slightly-more-than-50 bet for a win-a-little-for-a-long-time / lose-a-lot bet.

Back to trading: A lot of trading advice focuses on managing your bankroll, setting stop losses to prevent too large losses in one go, etc. So my worry is that the underlying expectation has not changed, just that instead of betting big in one go, you make a lot of small bets, but that there could well be a time where a long series of small bets can go against you and still wipe you out.

This would mean that any skill a trader thinks he has is just an illusion, and that trading is still a losing strategy over long times.

Would be grateful for your opinion on this.

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[deleted] 0 points1 point2 points 6 months ago[+] (0 children)

[deleted] 0 points1 point2 points 6 months ago[-]

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When working on system trading, you backtest your strategy against a large sample of data to see exactly what sort of statistical expectancy you can have. It’s like gambling, but you have the odds with you.

To avoid curve fitting, you also run out of sample data, monte carlo sims, etc.

If you’re a discretionary trader, the system you’ve developed should help to provide exactly what sort of R-expectancy you’re looking at. Check out Van Tharp’s work for more detail.

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strangeelement -1 points0 points1 point 6 months ago[+] (2 children)

strangeelement -1 points0 points1 point 6 months ago[-]

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So no reflexion on how absurd this strategy is? Not a word about how it basically defeats the entire purpose of the financial system, which is supposed to channel investments in companies that in turn generate value by using it in productive means? It’s smaller scale high-volume trading that’s “all the rage” on Wall Street and will eventually cause another huge bust in the world financial system.

There is no actual value in this. It’s complete hot air, making money on moving money around without any actual purpose.

In a few years doing this will be completely illegal. All it does is siphon money away from its purpose and into a completely pointless system of moving numbers around just because it’s possible to leech a fraction of it at every turn.

All the betting, shorting and high volume trading will eventually become illegal as well. It’s nothing but a huge gambling system where counting cards is permitted and that manufactures imaginary wealth for some until it crashes for everyone. That’s what a crash is: resetting all the imaginary numbers closer to what they actually are.

Investment is supposed to be a very simple game: some have money, some need money to generate actual value, intermediary is necessary between the two to perform the transaction, investment generates value over time by being put into productive use. Anything else is unnecessary and counterproductive.

But of course it’s easy to defend that it’s neither unethical, nor illegal. True. It’s simply pure waste.

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scottythesmell 3 points4 points5 points 6 months ago* [+] (1 child)

scottythesmell 3 points4 points5 points 6 months ago* [-]

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It’s not waste, traders are providing an extremely valuable service. They are creating liquidity. Liquidity is the grease that allows our economy to function.

Q: Why do you start a business? A: To make money

Q: How do you make money (real money?) A: You sell your business

Q: Why would anyone buy part of your business? A: Because they think it will make them money.

Q: How A: By increasing in value

Q: How does ‘value’ increase? A: Market perception.

Q: Surely that bears no resemblance to ‘real’ value? A: There is no such thing as ‘real’ value; something is worth what you can get for it. A large collection of informed people by and large do a reasonable job of determining fair price. Of course occasionally they fuck it up, any non linear dynamic system has the potential to do unpredictable things, but I challenge you to design a better system.

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strangeelement -1 points0 points1 point 6 months ago[+] (0 children)

strangeelement -1 points0 points1 point 6 months ago[-]

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I did not say traders do not provide a valuable service. I said traders who engage in short term betting strategies like high-volume trading and other schemes are destroying the very purpose of the financial system and stock markets. It’s especially bad when most traders do just that, as is the case recently.

These strategies have nothing to do with providing companies with money. Companies raise money from the initial sale of shares. Any trading after the initial sale serves as confidence in the company’s ability to generate revenue and should normally be held to gain dividends. At least that was the case until traders got creative and invented ways to artificially create perceived value and generate revenue off transaction volume.

And a company does make money by selling itself. That’s nonsense. A company makes money by creating products and services and selling them. That’s the only reason any company would have value in the first place. Alternatively a company can raise money to expand or improve its activities, but that does not raise the company’s values. It’s the resulting revenues created by investment in productive means that increase value.

Market perception is just that, perception. Real value is actuarial calculation of the company’s assets and revenue-generating means. The dot-com bust should provide enough understanding of the difference between perception and actual value and that perception can be completely off track until it all comes crashing down.

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HOW DO YOU START A PROFITABLE TRADING BUSINESS? Read more NOW >>>

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!