So this guy wants to automate trading with $3.5k? You need at least $25k with a cushion otherwise you can't day trade.
Using an automated day trader to generate income
71–80 of 98 posts
Re: Using an automated day trader to generate income
#72http://en.wikipedia.org/wiki/Fixed_income seems lot simpler strategy
Re: Using an automated day trader to generate income
#73Earlier quoted context omitted.
using past performance to estimate future performance simply does not work This is not always true. I had a theory a few years ago that went like this: The price of a stock is a direct function of the perceived price of the company multiplied by a risk factor: The more risk the less the stock is worth. On the day the yearly report is publicised for a company the risk is big just before the publication because nobody…
The problem is that the market is dynamic and chaotic. Measuring past data doesn't give you much indication of how much your algorithm would have made, even in hindsight, because every buy and sell you would have executed would have changed the market and the future. Even relatively small orders can have big ripple effects, especially if they just happen to trigger standing limit orders. Genuinely measuring the marke…
the first rule of trading is that you join the market not try to alter it.
Re: Using an automated day trader to generate income
#74I have no idea what that guy is talking about with double moving averages and what not, but I'd bet that a few simple IF/THEN statements could have produced similar results over the same period of time. Say it hand done well, would you go an invest a few thousand dollars using the IF/THEN algorithm? On a similar note, say this guy did lose his $3500. Do you think you'd be reading this post on how to automate day trad…
using past performance to estimate future performance simply does not work This is not always true. I had a theory a few years ago that went like this: The price of a stock is a direct function of the perceived price of the company multiplied by a risk factor: The more risk the less the stock is worth. On the day the yearly report is publicised for a company the risk is big just before the publication because nobody…
this is really interesting to me -- i spent a lot of time examining implied and actual volatility with regards to option pricing right before an earnings report. the short and skinny is that (as makes sense) volatility rises right before earnings are released and falls right afterwards. if you know that volatility is going to rise, you could easily plug the rest of the numbers into the black-scholes model and find undervalued options. they weren't always there, but at times, you could find options that would lose less in value due to time decay than they would gain due to the increased volatility with enough volume to not start making the market -- a great arbitrage opportunity.
unfortunately, i didn't have as much time in college to study this as i would have liked, and all of the good volatility data seems to be hidden behind a pay wall (bloomberg stations!)
one thing is for sure: even though the market approximates efficiency, there are still arbitrage opportunities to be found in the right places.
Re: Using an automated day trader to generate income
#75Earlier quoted context omitted.
Yeah, don't daytrade. It's a sucker's game. The market is too close to efficient for you to recoup what you lose in brokerage fees and excess taxes. Fund your IRA to the max, and if you're 20+ years from retirement buy all ETFs with low expense rations. If you're closer to retirement, buy fewer stocks and more t-bills, etc.
Its hardly a suckers game if you know what you are doing. I know prop traders that make huge bank essentially daytrading on the forex and others. Sure, its highly controlled gambling, but you of all people should realize that its not a losing game for everyone. If anything, its just a suckers game for small timers -- like all other gambling.
Any sufficiently volatile form of gambling has big winners. That doesn't mean it's +EV. The markets (especially forex, from what I hear) are such that even if it were impossible to outperform the broader indexes, you could very well know multiple people who did so over a period of years or even decades.
See Fooled by Randomness for a more detailed explanation.
Re: Using an automated day trader to generate income
#76Earlier quoted context omitted.
The problem is that the market is dynamic and chaotic. Measuring past data doesn't give you much indication of how much your algorithm would have made, even in hindsight, because every buy and sell you would have executed would have changed the market and the future. Even relatively small orders can have big ripple effects, especially if they just happen to trigger standing limit orders. Genuinely measuring the marke…
Ideally, yes. In practice, no. Trading a couple lots of /es futures will not do much to the market. More like pissing in the ocean. In illiquid markets you can move price, but not the stuff that you would want to blackbox anyways.
It can. If someone has a large limit order and your small order hits their trigger price, whereas the next person might have done the opposite and moved away from it, you could have caused a huge change in the direction of the market. Or the same is true of a cascading series of smaller limit orders, etc.
And since making money is presumably based on volume, if you did small trades, you'd end up doing a lot of them to make it worth your while. But in almost all forms of betting, it's better to make fewer, better wagers.
Re: Using an automated day trader to generate income
#77Earlier quoted context omitted.
The problem is that the market is dynamic and chaotic. Measuring past data doesn't give you much indication of how much your algorithm would have made, even in hindsight, because every buy and sell you would have executed would have changed the market and the future. Even relatively small orders can have big ripple effects, especially if they just happen to trigger standing limit orders. Genuinely measuring the marke…
Yes, in that respect it's like physics - by measuring you are altering the experiment. The volume on the day the reports came out was quite heavy, but if you had bought a substantial amount of stock it would certainly alter the market as you say. The point is that I'm pretty certain there are holes that will allow you to look at historic data and make statistically good buys - but you have to look where noone else is…
There's so much money to be made in the stock market (most of the money on Earth) and so many people searching for that data with so much resources (including math PhDs by the hundreds, some of whom I know) that looking somewhere nobody else is is virtually impossible. You're much better off focusing on your career and buying ETFs.
And thanks!
Re: Using an automated day trader to generate income
#78Earlier quoted context omitted.
What's the merit to publishing a successful algorithm? Or using a previously published algorithm that any hedge fund manager or resourceful individual can find and implement trivially.
A better question is how do you know your algorithm is successful? If it predicts correctly 10 days in a row, have you got a winner? It's like those guys that advertise by saying "We outperformed the market by 6.2% on average the last four years." Put enough monkeys in front of a trading terminal and you're going to have some that outperform the market by 6.2%; doesn't mean you should invest your money with them.
You can't. You can only know your algorithm was successful. The market is changing, so even if you could prove, given variance and sample size, that your algorithm was +EV and not merely lucky, you would only be proving that it was +Ev and not merely lucky. Not that it will be in the future.
Re: Using an automated day trader to generate income
#79Re: Using an automated day trader to generate income
#80Like many hackers, I often pondered the idea. The closest I got was automated trading in a stock market game run by the company I was working for. I never got round to programming a sophisticated strategy, so basically it was just "sell and buy random new stock if price has risen or fallen more than x%", where I think x was something like 15%. Even with that the algorithm was in the middle of the field (with 10000 participants), but it still lost a little money. As it was 2001, losing money was to be expected, I guess.