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Ask HN: Automate Stock Trading?

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Re: Ask HN: Automate Stock Trading?

#31

Post by bussiere »

nikhilsaraf9 wrote: post #23
bussiere wrote: post #3

I'am working on this. Only using python , ipython rethinkdb and postgresql. We are working on a event driven fund to find pattern, but we still need human at the end (the program found pattern and we try to find why and if they are reproductible). Good luck :)

That's very interesting. I'm trying to integrate the concept of "special events" like earnings or dividends or announcements into the mix. Although that isn't the driving force for what I'm trying to do. I'd be interested to learn how it works out for you guys.

we are event driven here, our program help us to find regular pattern drive by event as annual press conference (we buy before and sell just before) , fda approval for biotech, black friday for amazon , or cultural event (chinese new year).

You have annoucement, but don't forget the regular one.

We are still working on this (we are around 2% per month) but i'am open to share.

Visibly i'am not the only one to do this : http://www.reddit.com/r/stocks/comments/2v7fvk/anyone_make_l...

Mail me if you want to discuss or share

bussiere AT gmail.com

regards

Re: Ask HN: Automate Stock Trading?

#32

Post by lmgtfy »

exelius wrote: post #28

This is a bad idea. The "simplistic human investing" you're talking about probably accounts for 0.01% of trades. The vast majority of trading these days is algorithmic, and the HFT guys will eat you for lunch. What you won't see in back testing is how the market reacts to your strategy. The market isn't something that stays static: your activity changes things in subtle ways, and I guarantee there are people smarter…

This. From OP's blurb it's pretty obvious he's very new to this and most likely hasn't traded much stocks even using the "simplistic human investing" approach. If you're planning on using this exercise to help "mature" your understanding of how you should start tracking/investing stocks then this could be a rewarding effort. If, however, you're planning on jumping straight in to build this to "actually" trade stocks I'm afraid you'll be in a world of hurt before you even know it. If you're serious about the journey, then the choice of programming language or DB is a long long way down the road; start from the basics and work your way up from there.

Re: Ask HN: Automate Stock Trading?

#33

Post by lmgtfy »

nikhilsaraf9 wrote: post #29
brc wrote: post #22

I once set down this path but stopped. Your big problem is that the future market doesn't look like the past market. There is a statistical error inherent in excessively curve fitting past data. You could develop a system which says you'll return 25% per year and then lose 100% in he he first six months. So don't fall into that trap of excessively back testing. What you should be spending time is your money allocatio…

Thanks for the advice. I will definitely err on the side of caution and not get caught up with the backtesting and over fitting. Allocating resources (funds) will probably play an important role to manage risk in the system. At the end of the day, I'm trying to answer the question: can you make money in the stock market with a low-touch (eventually no-touch) approach with the help of advanced software and analytics.…

>> At the end of the day, I'm trying to answer the question: can you make money in the stock market with a low-touch (eventually no-touch) approach with the help of advanced software and analytics

The answer to this has been a resounding "hell yes" for decades across IB/HFT/AlgoTrading shops. The only thing this exercise achieves is whether "you" personally can make money with a low-touch approach using software.

Re: Ask HN: Automate Stock Trading?

#34

Post by nikhilsaraf9 »

balazsdavid987 wrote: post #11

Just a word of caution: the profitability of stock trading, regardless of the timeframe (high-frequency, daytrade, week long positions), heavily depends on access to information. So even if you build a system that mathematically is better than those built by a team of physicists at large financial institutions, it may easily under-perform the market due to its limited access to data.

Yes. That is a massive handicap that the system will have (it's not going to be co-located and probably won't have access to early information, etc). I'm wondering whether it's possible to develop a system that accommodates these deficiencies while still ending up on top.

Re: Ask HN: Automate Stock Trading?

#35

Post by Spitfire777 »

I used to do it with bitcoin, but not to get rich, just for curiosity.

The most algorithms is just chart reading, playing around with periods, standard deviations etc. You can achieve something really quickly, but it only works if the market jumps up and down within a short time period and stays on the same level if watching a bigger time frame. What if the market drops by 90% suddenly because some bank decided to do something stupid?

The next time I won't work on HFT, but more of risk reduction and long-term investments: - Markowitz diversification model - Multi-Market trading, trade on market differences

Another interesting approach would be to exploit trading algorithms, since 99.9% of all trades are algo trades.

What you theoretically could do is use popular trading algorithms, develop a tool to monitor their decisions, adjust decisions weights and see how a simulated market performs on comparion to the real market. Now that you have something like a "slave" market and can go on to the next step and calculate scenarios e.g. 5min ahead and can 99.9% predict where the market will be in 5min.

Re: Ask HN: Automate Stock Trading?

#37

Post by smoyer »

I started doing this after reading one of the Motley Fools' investment books (Rule Breakers - Rule Makers) ... fortunately I never asked it to trade real money. A few years later and MF has completely disavowed the techniques in that book (and I would have lost whatever I put it).

Now I just throw darts ... unless you can get some insider knowledge like the big boys, you'll never be the early mover.

Re: Ask HN: Automate Stock Trading?

#38

Post by raverbashing »

The only thing you're going to automate is the emptying of your account.

> I'm planning to host this on AWS and use a combination of Python and R.

Yeah, great idea. NOT. Unless you're doing something like tens of trades per day, or less.

Re: Ask HN: Automate Stock Trading?

#40

Post by rl3 »

brc wrote: post #22

I once set down this path but stopped. Your big problem is that the future market doesn't look like the past market. There is a statistical error inherent in excessively curve fitting past data. You could develop a system which says you'll return 25% per year and then lose 100% in he he first six months. So don't fall into that trap of excessively back testing. What you should be spending time is your money allocatio…

This is spot on.

Like the parent commenter, I was also on the same path and stopped. Despite diving into the topic for over a year, I came to the sobering realization that I had insufficient starting capital to properly manage risk.

Standard commission fees will eat you for breakfast trying to exercise a 1% (position) risk model on an insufficient amount of capital. Things like Robinhood[0] unfortunately didn't exist back then.

As far as books, Trade Your Way To Financial Freedom cannot be praised enough. Though I usually refrain from mentioning it because the title has this get-rich-quick vibe, it's nothing of the sort. Van Tharp was (and for all I know, still may be) the world's premier trading psychologist. The book drives home the concept of risk management in automated trading systems like no other, especially remarkable considering when it was written.

The Market Wizards books, at least the first two, are pretty much required reading.

The only book I might add to the list would be Reminiscences of a Stock Operator[1]. While admittedly I didn't find it as useful as the other books, it's still a good read and widely considered to be the seminal book on trading.

[0] https://www.robinhood.com/

[1] http://www.amazon.com/Reminiscences-Stock-Operator-Edwin-Lef...

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