Tag Archives: Automate

2015 will be the year of the algorithm: 226 reasons that will make you a better quant or indie automate trader

2015 will be the year of the algorithm: 226 reasons that will make you a better quant or indie automate trader

I an Excel spredsheet for you to  have an based on the type of algorithms or other development types I have for you to learn about.

academy-short

TOTALS
basic algo 6
backtesting 1
algo 5
arbitage 4
misc 1
execution 5
risk 2
portfolio 4
volatility 5
Matlab 83
technical analysis 3
benchmark 2
r 62
software development 43
226

All these algos and othe activities are part of this.

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Links mentioned in video:

https://quantlabs.net/blog/2014/12/quant-algo-event-quant-fund-top-performer-for-2014-hedge-funds-now-scared-shtless-according-to-zerohedge/

https://quantlabs.net/blog/2014/12/2015-will-be-the-year-of-the-algorithm-226-reasons-that-will-make-you-a-better-quant-or-indie-automate-trader/

 

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Video Demo showing Kelly Criterion for money management in all your automated trading system needs

Video Demo showing  Kelly Criterion for money management in all your automated trading system needs

This basic money management technique as explained at this link

http://www.investopedia.com/articles/trading/04/091504.asp

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European stock view with liquidity shortfall is risk so you cannot automate trade with Yahoo Finance as your source

European stock view with liquidity shortfall is risk so you cannot automate trade with Yahoo Finance as your source

It may be more wise to switch the data source to a reliable one like IQFeed with extra costs. At this point as my video explains, it is only worth pursuing US, UK, and maybe Germany from a live automated trading point of view with Yahoo Finance as the data source. I am not sayin Europe is bad, you just need a good data source which can provide European option data and EPS guidance projections.

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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!

How to apply psychology of trading when you put your positions on? CRITICAL reason to automate while retail traders WILL always lose money

How to apply psychology of trading when you put your positions on? CRITICAL reason to automate while retail traders WILL always lose money

Sorry if there are any typos here. Note that there is a video below as well

To succeed at life and risk management, you need to trade in a non human way. OTW automate your trades!!

Use average true range (ATR) to apply stop loss between a long and short. You set stop loss a 1:3 ratio as a soft target for the life a trade. You analyze the volatility when to apply the stop loss as part of the soft target. You are applying risk management and look at the reward over the risk. You can the calculate your capital deployment and strategize the situation when trade becomes winning or losing.

1. Set up risk reward on your new spread position.

2. There are various scenarios that need to be applied in certain outcomes.

You need to set hard stop losses and soft targets. This is done using ATR. The stop loss needs to be wide enough on the spread to profit over the trading horizon you choose. They also need to be NOT wide enough killed on discipline. No rule book applies here. You need to look at historical volatility of the time horizon you choose.

From there, you should be able to work out a sensible stop loss. It is over the time period you choose. As said, you choose a soft target on a 1:3 ratio of your stop loss. If you have a market price of $100, stop loss of $90 (exit trade to trade out automatically) the stop loss is 10%. This will also become your hard target but this is incorrect as you could keep trading for extra profit if that hard target is reached. Stop losses will guarantee your down side, if you set a soft target you are not guaranteeing your upside. You are taking on more risk but could even be adding more that position.

During your spread trade, you want to know the history of the spread. You would even want to see how the long and the short may perform against the ISM PMI as a comparative benchmark. You also would want to calculate monthly volatility. With a long and short, you will intend to cancel out the volatility to hedge out market and sector risk. With implied volatility calculate, you will isolate if both long and short are in the same sector. As a result, you remove market and sector volatility. With no news sentiment with no market impact, you could find your long may move up 1% vs the short may move up 1.5% which cancels out the price movement and volatility on a normal day. If the market goes up + or – 1%, the long and short should move in the same direction which means you will cancel the volatility.

Get the OHLC of each asset for 10 months historical, you will see an volatility over this period of potentially 1-3 months for the trade horizon. Calculate the 9 monthly ATRs each. You can then get the average of those for the 10th month. This will be applied from a rolling ATR of each 9 months. You can use this 10th month average ATR to calculate your disciplined stop loss. If you reach the target, you could be knocked out of the market if the stop loss is reached, but you are still applying discipline on the trade. You could apply positive price action and positive technical analysis here as well if all checks out with previous rules mentioned. You could apply a sensible stop loss in the range of each calculated long 10th month ATR and short 10 month ATR.

 

So if you current spread is 4%, you calculate your stop loss (10%) ratio with the current spread could =4*.10=0.4. Your new stop loss target could be =4-0.4=-3.6. Using a 3:1 target, that would become 3*3.6=.108.Your new soft target price will be 4+0.108=4.108. You will be able to see in a historical price chart that it has hit that price before which means it is realistic. If you use a long term trend line, you may see the current price may hit your soft target price. On another historical price chart, it would be recommended to draw different colored lines to show the soft target price and stop loss. You will visually be able to see the risk/reward play . One line would show you would be knocked out if the stop loss is reached. It is critical for the TRUE spread to work, you get stopped out of BOTH long and short not either. You trade both on at the same time, and you stop both at the same time. You are putting automatic stop losses on single positions. For most brokerage, you cannot apply the ratio of each spread. Again, do not apply stop losses on single positions for either long or short. They both need to be applied at the same time on the entry and exits. If done manually, you may need to cross check both your spread sheet on these as well as check your broker trading account to ensure these spreadsare within the correct soft targets. Or you could automate this process!! If these soft targets are reached, you may need to trade out manually if no automation is applied.

IMPORTANT FOR RETAIL TRADERS:

This enables you now to trade like a non human which is a long term failure for most retail traders. You will lose money otherwise over the long run. If you are losing on a trade, you need to follow the above process! You will always have winners in your portfolio so don’t worry if some of these will move against you. This will set you apart from the bad traders since you will have a proper framework, you do the correct thing with the losers and winners. If you do the opposite to be human, you will lose money over the long run by seeking more risk when a trade goes against you or with you, you are trading out at the proper target levels you establish with the process listed above. This process is the opposite of human which means long term profit. We don’t worry about trades that go wrong. This is why automated trading is critical to remove all the manual processes trade above. Stick with the habits of above, you WILL make money in the long run.

 

REASONS TO SET SOFT TARGETS and HARD STOP LOSSES THANKS TO AUTOMATED TRADING

If current spread is 4, $10k deployed for long and another $10k deployed for short. If your long out performs your short by 25% in 3 months, you may not want to trade out. You can run the position or apply more capital (or even margin), you could add to the wining trade. If there is $20K in the position, you could use the soft target with the above example. Your new stop loss could be 90% of the soft target where you roll the stop loss ratio. You want your new entry price to be below the new stop loss price. On a rolling basis (only generated automatically), your average price is comfortably under your stop loss. You are now getting free trades which means your stop loss will be above the average price. Your winning trde becomes a free situation. Your stop loss is above the average price which means if you are stopped out, you are still profiting. Even if the trade goes against you, you will still profit no matter what. Don’t do the opposite by trading out of the soft target and watch it go up during a rally. Humans could do that inadvertently when the market is presenting you a winner.

As result, you need to ensure your stop loss is wide enough to profit over the time horizon you choose. FOr mid and large cap situations on all major US and European indices, the stop loss ratio will be between 7-12%. This when you analyze your ATR over 3 month time horizon. The soft targets of 1:3 will be between 21-36%. As a result, you need to understand these parameters in future positions you will take. This will help you understand the risk/rewards on your positions and to play within those scenarios. Remember you still need to add the proper spread trading idea and screen process before applying the above.

If you use this process, you will get rid of the losing trades and constantly add new winning trades by following the right idea generation and screening process. If automated, you will never notice the guilt in getting rid of the losers. Over time you will be add more positive and circumventing the larger losses.

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How to automate your trading strategies? Help and webinars coming soon and secheduled!

 

How to automate your trading strategies? Help and webinars coming soon and secheduled!

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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!

Are you a sucker who will lose to some prop shop or day trading desk? Learn how to automate

HI there

Are you a sucker who will lose to some prop shop or day trading desk? Learn how to automate your quant strategies or financial models

https://quantlabs.net/blog/2013/09/are-you-a-sucker-who-will-lose-to-some-prop-shop-or-day-trading-desk-learn-how-to-automate-your-quant-strategies-or-financial-models/

This was queued up by a discussion of someone who wants to invest into a ‘prop shop’. This came up with meeting with the local prop shop as described below. It amazes me there are literally fools, idiots, or even suckers who fall for this. One lady lost $40k within a week. Maybe she deserved it because the markets don’t care about your money. Why do you think I am after an automating your trading strategy with what I am building? Wanna be a sucker? Go for it!

Or join me on my march to an automated trading system with source code. I am hoping to release this bad boy real soon. Lots of workshops are being planned for my QuantLabs.net Premium Members.

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Membership benefits listed here.

Thanks hoping for you to have a very profitable trading day

Bryan

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Are you a sucker who will lose to some prop shop or day trading desk? Learn how to automate your quant strategies or financial models

Are you a sucker who will lose to some prop shop or day trading desk? Learn how to automate your quant strategies or financial models

This was queued up by a discussion of someone who wants to invest into a ‘prop shop’. This came up with meeting with the local prop shop as described below. It amazes me there are literally fools, idiots, or even suckers who fall for this. One lady lost $40k within a week. Maybe she deserved it because the markets don’t care about your money. Why do you think I am after an automating your trading strategy with what I am building. Wanna be a sucker? Go for it!

Join my FREE newsletter how I plan to automate my trading models for profit

 

I respond with -->
Its a simple setup, well trading rooms are in general, this setup is something I pictured you doing actually?

They can take in 12 traders and sounds like most are green traders, they really provide nothing proprietary, 
just give basic trading education and hold the green guys hand till he gets going.

--> I figured it was this setup so it nothing special. Hey, I could automate each trader with a different strategy that could make them successful.

  xxx.com This is his site that he referenced as not operating on his business card.  They only trade equities at his Prop Trading Room, yet this is forex, they show who they use on this web page.  But to be honest I discussed automated trading with them and they were not really aware of what took place yet his forex website indicates automated trading.

---> I think they live in the 1800s so maybe not a good fit for you

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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!

Automate stock trading systems portfolio based on fundamental criteria?

Automate stock trading systems portfolio based on fundamental criterias?Looking to automate a portfolio of systems that would be based purelly on proprietary fundamental ratios but lack the knowhow, curentlly with IB.
Would really appreciate your inputs on my search for the above, the path would be something like:getting the fundamental datas(balance sheet, cash flow statements and income statements individual inputs) on a daily or weeklly basis, EOD is good enough, then to calculate the universe of sp500 stocks and spit out the resulting symbols that match the criterias then to rank the ones by another proprietary formula based on prop fundamental ratios and to send the market(or limit) orders to the IB broker , the stocks would be held untill in the ranking apears another candidate and would drop the old and get the new one(s)
As mentioned above it would have to be a portfolio of systems based on different criterias and rankings so it would also have to allocate capital for each system equally but some systems would hold more stocks than others.
Is it possible? How?
==I like the algorithms, actually I prefer technical criterias, but anyway if I understand , you want to create a fundamental system in order to know how to balance the portfolio ?, is Yes, you can start to searching databases like www.smartmoney.com, wich have a tool called “Map of market”, take a look,it uses a easy way to show the performance of different enterprises. There are enterprises like CMA(www.cma.com.br) with some kind of this fundamentals tool but specifically for the Brazil markets.
I am going to search my database of this Tools , I will let you know.
–Thank you but not familiar with either of the services you recommended, or how they could help to my goal. Will be waiting for your inputs.
–At least you are asking SOME of the right questions.
Specific advice would depend on your education and background. Didn’t see any listed education on your profile.
Start by getting a degree in accounting and economics (to understand the mechanics of business and finance). Then, develop an expertise doing analysis (qualitative and quantitative). Then, develop an understanding of IT development and systems principles. Then you will be in a position to START developing a computer based stock screening and trading system.
In addition to the formal educational background, it would help if you could log about 30-40 years work experience in analysis (accounting and IT development).
Finally, steal good ideas from those that have succeeded and written books about how they did it. Usually, you should be able to get at least one good idea from each book read.
==I already have the algorithms that are based purely on fundamentals and their rudimentary backtests, the rules are value based and the result of empirical studies done by people a lot smarter than me, you stated correctly that I lack IT knowhow, why would someone post these questions knowing the solution… The backtests are a bit too good to believe and would try to do a forward test of it to check its validity, the automation would take out human error so that the results would concur out of sample, or not. I never stated i’m educated and never will, that is my way of keeping the mind opened to new ideas and possibilities, altho my post may sound over enthusiastic, it is for the simple fact that I enjoy finding it’s rules. Please post your inputs on the matter and spare no leniency, I enjoy challenges and you would keep me where I want to be, deciphering.
==
I’m trying to be helpful with my suggestions.
The process of making money in the stock market is (and has to be) knowledge based. One uses knowledge to narrow the scope of risk assumed with an investment and within that scope to develop a reliable estimate of risk being assumed.
Accounting (and Economics) is the language of business. Mathematics (and Philosophy) is the language of science.
Your instincts about doing a value based analysis are good. After all, if value was irrelevant then what would be the point of trying to guess or rely on earnings and other financial measures. Graham and Dodd (written in the 30s originally) is the bible of the value movement although G&D valuation has been updated with significant new twists first proposed in the late 80s.
Obviously, Black Schoeles developed the standard for valuing options. They got the Nobel prize (in Economics) for their theory. Black Schoeles is still the basic standard but it has been significantly modified. About 7 years ago I did a critique of Black Schoeles to a local Atlanta options trading group. I found the operational details of their model deficient but their overall theory was sound.
A stock’s technical (price/volume) characteristics were first (to the best of my knowledge) broadly summarized by Edwards and Magee in 1966. They didn’t so much invent anything new. Their book just comprehensively brought together a variety of tech analysis methods and gave those methods (and their use) some structure (such as the concepts of support and resistance and trends).
This G&D “chart based” approach has been supplemented by a number of authors who focused more broadly on the underlying principles of technical analysis. “Charting” while still interesting and marginally useful (and its associated methods such as propounded by the MTA out of New York) has essentially been found lacking as a comprehensive technical approach. Now if you want to understand technical aspects of trading you need to have a solid mathematical and econometric background.
It should not be a shock that you need to understand the principles of IT development and systems IF you plan on using computers in your quest for making (rather than losing) money in the trading process.
THERE IS NO SUBSTITUTE in IT for experience ON TOP OF A SOLID education in this subject matter.
Obviously, nobody in their right mind would try to profitably trade in today’s market without using a computer. That would be equivalent to trying to hand write (and/or copy) the Wikipedia website (in toto) with a pencil and paper.
Why is Economics critical? Have you noticed that the same company with basically the same earnings (presumed value) will have a widely fluctuating price DEPENDING on the state of the Economy. Understanding the Economy (it’s operations and principles upon which those operations are built) is the province of Economics. In the final analysis, you care about price if you are trading stocks.
Finally, why philosophy? What aspects of philosophy?
Start with Logic (as a branch of philosophy) and the general practice of deductive reasoning. All mathematical proofs USE Logic principles and methods in their proofs. Epistemology (as another branch of philosophy) is the study of what is Truth. No matter how precise your logical process is it always helps to have that reasoning process based soundly on Truth. Ethics (another branch) is the study of what is right or correct behavior. These qualitative considerations are a critical foundation upon which sounds quantitative measures are built.
I could have added Political Science (the study of power) and Psychology (the study of the mind – mostly human). Both provide useful insights. Engineering (numerous branches) also provide us with mature and useful TOOLS to use in the process of trading.
Finally, one needs experience USING all these academic tools.
==
I and a friend have been working on deveoping similar strategies. We are using two approaches at the moment. Fidelity Wealth Lab Pro and Excel Spread sheets to strip data off of primarily the Yahoo financial web sites. Wealth Lab is a c# and .Net based programmable strategy that can use any available data from the web. If you are not a high level programmer you can begin using their coding rules that include a large number of fundamental indicators. For example my friend programmed a strategy that buys when the Ben Graham fundamental criteria are met and sells when any of those criteria are violated. I have written several excel spreadsheets that analyze the quarterly and yearly financial reports for each company in a stock symbol set and output the results to a table that can be sorted on any of the columns. Both of these approaches, it would seem would help you attain your goal.

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Tomorrow is Java day to fix our application to automate technical indicators RSI, MACD, and best stock performance alerts

Tomorrow is Java day to fix our application to automate technical indicators RSI, MACD, and best stock performance alerts

This will be fully automated after my modifications for what is needed. This could take quite a while as some are major changes. I tried looking for people but no one was up for the task of these fairly complex tasks. Also, there will be two fully dedicated servers running this app which generates all our reports which are from Matlab.  It is fully scalable as well as our application can support dozens of exchanges we watch IN REAL TIME. This will enable our premium service (FREE FOR NOW) to be that, PREMIUM. It will also give us more than enough reason to charge premium monthly bucks for it as well. It will be coming soon but I will report the progress on it as well.

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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!

BPM Partners Whitepaper The Strategic Need to Automate The Last Mile of Finance

BPM Partners Whitepaper The Strategic Need to Automate The Last Mile of Finance

Download this paper written by BPM partners to see how the ‘last mile’ has become a very complex and challenging process for companies and their CFO’s and the strategic need to automate the controls around these processes.
In March 2011, BPM Partners released a white paper outlining the complexities of the Last Mile and the strategic need to automate and enhance controls around these processes. Download this white paper to learn about the business challenges and risks in existing manual ‘last mile’ processes dependent on different version spreadsheets, word processing files and unsecured emails and the benefits and the value of automating ‘last mile’ processes – including enhancing internal controls, reducing risks, streamlining the entire reporting process.

Check it out here: http://bit.ly/IBMEurope
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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!