Ask HN: Automate Stock Trading?

Check out omnitrader.Com as a potential platform for building your algorithms. Whilst there also check their product myomnivest. If you want to go big-time as I have, check into their Nirvana club. Not cheap but their auto trading algorithms are extremely sophisticated.

> Don't get discouraged by the negative comments.

No, of course not. Jump in feet first with all that you've got and to hell with common sense.

> It's completely possible to make a profit (with low risk) without resorting to HFT.

Yes it is. For a while at least.

> I'd recommend you read Quantitative Trading by EP Chan for a great overview of the basic methods and some example implementations.

Reading is always good, second that.

> Disclaimer: I've done exactly this successfully for >2yrs now.

I know gamblers that have been on winning streaks too. Unfortunately that's not how the story ends, especially not for novice gamblers.

It's nice you have found a way to consistently beat the market and I really hope that you're outperforming the lowly index funds but without more data 'successfully' is awfully un-specific.

I made some money in the stockmarket too, but I'm not going to dress is up as intelligence, I'd rather admit that it was dumb luck.

I've worked in the electronic trading aka hft market now almost 7 years. The big boys are optimizing their trades down to the nanoseconds, they are spending big money on bleeding edge network technologies, colocating their servers inside exchanges, etc.

If you expect to compete with them on AWS save yourself the loss and just stop right there. However, if your strategy is more or less buy and hold for weeks / months then this doesn't sound entirely unreasonable. From my experience, simply getting into this industry as a serious player is roughly a 10-12 million investment, and that is starting very very small in only a few exchanges.

I agree with the fact that it's very unlikely that I can develop a mechanical system that would beat algorithmic trading. The good news is that I don't have to. That's why I'm a discretionary swing trader. In my personal case, trading is about learning how to fish. Learning a non computer skill that I can use for the rest of my life.

Even if it sounds cruel. With enough time and hard work, you can train yourself to detect the pigs getting slaughtered by the professional traders and take a bite of the action. That's what swing trading is all about.

That being said, it's far from easy. It requires a lot of hard work and determination. Reading books is a good start. The book "Trading Your Way to Financial Freedom" by Dr. Van K. Tharp is required for any modern day trader. The most important lesson from the book is probably that you have to always go into a trade knowing how much you are willing to loose on that trade. Using a stop and respecting it should be deeply engraved into your DNA.

But reading books is not enough. Getting a proper trading education is important. The average trading course will cost you anywhere from $2,000 to $5,000. With so many get-rich-quick schemes on the Internet is hard to find a serious an respected trading education program. They are out there. A good place to start would be Trader Planet. They have a list of the Top Trading Schools.

Why pay so much for a trading course? Because in the long term it will save you time and money. In the book "How I made $2,000,000 in the Stock Market" by Nicolas Darvas. The author spent many years of failure paying tuition to the markets until he found his way. Many people read this book and get fascinated by the big number. The fascinating part about the book is that in the 1940s and 1950s this guy created his own form of pseudo technical analysis. That system is what made him the $2,000,000. He spent a lot of time an money developing the system and eventually worked out for him. Keep in mind that Moving Averages started to get used in trading in the 1960s (If I'm not mistaken).

The moral of the story is that spending $2,000 or $3,000 in advance for a proper trading education will save you a lot of time and money.

People with little or no trading experience should not be developing mechanical systems and use them to risk real money. Wanna do it for educational purposes, sure go ahead, but don't risk any money. That shouldn't stop you from diving into the markets though. Once the market bug bites you there's no turning back. You just have to do it the old fashion way. In my case, by reading charts. As a software developer I think technical analysis is the only way to study the markets because that's how my brain is wired.

Even though backtesting is only of limited use, you should try your algorithms on fresh (you haven't previously used them) time periods and see what types of returns you can get. When I did this with my algos I was playing with, even though it seemed positive, when I accounted for the cost of the trades and the cost of the data (near-real time market data is damn expensive), I wouldn't come out much ahead of a simple buy-hold index fund approach.

Invest the minimum amount you can in this project to learn that it isn't a great idea.