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Algorithmic Trading: The Play-at-Home Version

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Re: Algorithmic Trading: The Play-at-Home Version

#111

Post by gnaritas »

sokoloff wrote: post #102
gnaritas wrote: post #88

Earlier quoted context omitted.

10k is plenty, you're forgetting leverage; equities I think is generally around 3x, futures usually offer around 10x leverage, forex in U.S. 50x, forex outside of the US, 200x plus.

Calculate out what the projected hourly rate might be, after discounting the gains on a broad-based index fund. If you can get 30% annually instead of 10%, that extra 20% on $10K would be $2000. If you worked just 200 hours in a year (seems a low estimate), that's a $10/hr "job" and you have a non-trivial risk of a substantial drawdown during the year that could put you near out of "business" (as happened in the arti…

What it calculates per hour as a job has nothing to do with anything; you said 10k wasn't enough to overcome fees, that's absurd, 10k is plenty to invested and get a healthy return from and far better than 30% annually, hell I made 35% last month and I didn't work an hour for it. Beat the market is a meaningless scare tactic used by those that don't understand being small has enormous advantages over being large and "the market" returns are what large institutions struggle to beat, small traders destroy the market constantly because being small is easier. Returns decrease as capital increases so it doesn't scale up.

Re: Algorithmic Trading: The Play-at-Home Version

#112

Post by sokoloff »

gnaritas wrote: post #111
sokoloff wrote: post #102

Earlier quoted context omitted.

Calculate out what the projected hourly rate might be, after discounting the gains on a broad-based index fund. If you can get 30% annually instead of 10%, that extra 20% on $10K would be $2000. If you worked just 200 hours in a year (seems a low estimate), that's a $10/hr "job" and you have a non-trivial risk of a substantial drawdown during the year that could put you near out of "business" (as happened in the arti…

What it calculates per hour as a job has nothing to do with anything; you said 10k wasn't enough to overcome fees, that's absurd, 10k is plenty to invested and get a healthy return from and far better than 30% annually, hell I made 35% last month and I didn't work an hour for it. Beat the market is a meaningless scare tactic used by those that don't understand being small has enormous advantages over being large and…

> What it calculates per hour as a job has nothing to do with anything; you said 10k wasn't enough to overcome fees, that's absurd

I agree that is absurd, but I said no such thing.

I don't think it's a sensible use of time, but of course you can beat just the fees.

Re: Algorithmic Trading: The Play-at-Home Version

#113

Post by dllthomas »

gnaritas wrote: post #89
jbob2000 wrote: post #5

So... anyone want to share some of these algorithms for predicting stock prices?

You don't have to predict the market to trade, you need only follow the market and ride the waves carefully. If the market is going up, buy, going down, sell, you're betting that it'll continue in that direction. More than a few people are rich off strategies as simple as buy when price breaks a 20 day high and sell when price breaks a 20 day low.

"More than a few people are rich off strategies as simple as buy when price breaks a 20 day high and sell when price breaks a 20 day low."

More than a few people are broke off such strategies, too.

While momentum strategies manifestly can work out, there is no guarantee that the "momentum" is actually present. As my econ prof put it, "The market isn't going; it went."

Re: Algorithmic Trading: The Play-at-Home Version

#114

Post by gnaritas »

dllthomas wrote: post #113
gnaritas wrote: post #89

Earlier quoted context omitted.

You don't have to predict the market to trade, you need only follow the market and ride the waves carefully. If the market is going up, buy, going down, sell, you're betting that it'll continue in that direction. More than a few people are rich off strategies as simple as buy when price breaks a 20 day high and sell when price breaks a 20 day low.

"More than a few people are rich off strategies as simple as buy when price breaks a 20 day high and sell when price breaks a 20 day low." More than a few people are broke off such strategies, too. While momentum strategies manifestly can work out, there is no guarantee that the "momentum" is actually present. As my econ prof put it, "The market isn't going; it went."

> More than a few people are broke off such strategies, too.

Of course they are, it takes more than an entry strategy.

> While momentum strategies manifestly can work out, there is no guarantee that the "momentum" is actually present.

There doesn't need to be. Price moves up, down, or sideways, if it doesn't go up/down as expected, get out and look for another opportunity or wait for the market to move, it will move.

Re: Algorithmic Trading: The Play-at-Home Version

#115

Post by gnaritas »

sokoloff wrote: post #112
gnaritas wrote: post #111

Earlier quoted context omitted.

What it calculates per hour as a job has nothing to do with anything; you said 10k wasn't enough to overcome fees, that's absurd, 10k is plenty to invested and get a healthy return from and far better than 30% annually, hell I made 35% last month and I didn't work an hour for it. Beat the market is a meaningless scare tactic used by those that don't understand being small has enormous advantages over being large and…

> What it calculates per hour as a job has nothing to do with anything; you said 10k wasn't enough to overcome fees, that's absurd I agree that is absurd, but I said no such thing. I don't think it's a sensible use of time, but of course you can beat just the fees.

You said

> You'd need to have a huge edge (extremely unlikely) to make money after fees with only $10k.

No you don't. 10k is plenty to make money, equities aren't the only market and paying the spread is trivial. Beyond that you're overestimating the time it takes; what do I care how many CPU cycles my computer spends watching the market? For a programmer, algo trading is trivially easy and a fun hobby so that time isn't work anyway and it's only a few hundred lines of code to work up a strategy, it's not exactly a big investment of time.

Re: Algorithmic Trading: The Play-at-Home Version

#116

Post by sokoloff »

gnaritas wrote: post #115
sokoloff wrote: post #112

Earlier quoted context omitted.

> What it calculates per hour as a job has nothing to do with anything; you said 10k wasn't enough to overcome fees, that's absurd I agree that is absurd, but I said no such thing. I don't think it's a sensible use of time, but of course you can beat just the fees.

You said > You'd need to have a huge edge (extremely unlikely) to make money after fees with only $10k. No you don't. 10k is plenty to make money, equities aren't the only market and paying the spread is trivial. Beyond that you're overestimating the time it takes; what do I care how many CPU cycles my computer spends watching the market? For a programmer, algo trading is trivially easy and a fun hobby so that time i…

No, I didn't say that. jeffreyrogers said that.

I said you were better off taking a side job and I still believe that to be true from an economic point of view.

Re: Algorithmic Trading: The Play-at-Home Version

#117

Post by gnaritas »

sokoloff wrote: post #116
gnaritas wrote: post #115

Earlier quoted context omitted.

You said > You'd need to have a huge edge (extremely unlikely) to make money after fees with only $10k. No you don't. 10k is plenty to make money, equities aren't the only market and paying the spread is trivial. Beyond that you're overestimating the time it takes; what do I care how many CPU cycles my computer spends watching the market? For a programmer, algo trading is trivially easy and a fun hobby so that time i…

No, I didn't say that. jeffreyrogers said that. I said you were better off taking a side job and I still believe that to be true from an economic point of view.

My bad on the mistaken identity.

Side jobs require my time, robots don't, they aren't comparable. I'm better off working no side job and letting a robot earn money on the side because that's simply better even if the bot earns less than I would on a side job. Selling labor is not economically preferable to free money.

Re: Algorithmic Trading: The Play-at-Home Version

#118

Post by dllthomas »

gnaritas wrote: post #114
dllthomas wrote: post #113

Earlier quoted context omitted.

"More than a few people are rich off strategies as simple as buy when price breaks a 20 day high and sell when price breaks a 20 day low." More than a few people are broke off such strategies, too. While momentum strategies manifestly can work out, there is no guarantee that the "momentum" is actually present. As my econ prof put it, "The market isn't going; it went."

> More than a few people are broke off such strategies, too. Of course they are, it takes more than an entry strategy. > While momentum strategies manifestly can work out, there is no guarantee that the "momentum" is actually present. There doesn't need to be. Price moves up, down, or sideways, if it doesn't go up/down as expected, get out and look for another opportunity or wait for the market to move, it will move.

"Of course they are, it takes more than an entry strategy."

If all that is is their "entry strategy" then the strategy they are using is more complicated, which runs counter to your earlier assertion.

"There doesn't need to be. Price moves up, down, or sideways, if it doesn't go up/down as expected, get out and look for another opportunity or wait for the market to move, it will move."

It will move. But it needs to move in your favor more than against you, or you're losing money. There's no particular reason to expect that to be persistently the case.

Re: Algorithmic Trading: The Play-at-Home Version

#119

Post by gnaritas »

dllthomas wrote: post #118
gnaritas wrote: post #114

Earlier quoted context omitted.

> More than a few people are broke off such strategies, too. Of course they are, it takes more than an entry strategy. > While momentum strategies manifestly can work out, there is no guarantee that the "momentum" is actually present. There doesn't need to be. Price moves up, down, or sideways, if it doesn't go up/down as expected, get out and look for another opportunity or wait for the market to move, it will move.

"Of course they are, it takes more than an entry strategy." If all that is is their "entry strategy" then the strategy they are using is more complicated, which runs counter to your earlier assertion. "There doesn't need to be. Price moves up, down, or sideways, if it doesn't go up/down as expected, get out and look for another opportunity or wait for the market to move, it will move." It will move. But it needs to m…

> If all that is is their "entry strategy" then the strategy they are using is more complicated, which runs counter to your earlier assertion.

Not really, you need to have a position size strategy as well as an exit strategy, all are fairly simple and only a few lines of code. Given a bankroll, how much do you bet on any one trade (2% is trader standard, or if you're really aggressive half kelly), and given an exit strategy, i.e. a stop if you're wrong and an exit if you're right, just compute how much to trade based on the amount you're willing to risk on the trade to the stop position.

So with a 10k roll, you place trades that will lose $200 bucks if you're wrong and you let them ride until trend change hopefully netting $600 or more by the time it's over, perhaps lots more depending on how long the trend runs. Once that trade is safe, i.e. you're risk off, you start looking for another one and you build up your position size without ever risking more than your initial risk.

> It will move. But it needs to move in your favor more than against you, or you're losing money. There's no particular reason to expect that to be persistently the case.

Sure there is, markets aren't random, they trend persistently for longer than they should if they were actually random. The EURUSD was on a 6 month long downtrend this last year; that is not a random occurrence, that is a result of long term economic trends. If you're selling breaks of a running low, you'd have been shorting that all the way down; you need only adjust for volatility so you don't get knocked out on normal sized retracements and ride the trend down. You have to size your stops to adjust for normal volatility and allow the trend to carry you to a win and you have to tune your entry so you're already near an extreme against the trend so your odds are better, you can't enter blindly, but it doesn't have to be dead on accurate if your stops are wide enough. But wider stops require more capital to profit because you have to stay in the market longer to see your profit point hit if you're keeping a favorable risk to reward.

When the market isn't trending, don't trade it, you'll lose your ass in random price movements.

Re: Algorithmic Trading: The Play-at-Home Version

#120

Post by lingben »

tunesmith wrote: post #70

I've always been confused why so much of algorithmic trading centers on technical indicators. What about fundamentals? Wouldn't it be easier to cobble together a system that checks for healthy companies that are low in their PEG ratio historical range, and then buy-and-hold? There are super-boring companies with reliable earnings history out there, with stock prices that go up and down throughout the year. So you'd b…

There are firms doing it but you need a lot more data inputs and they have to be sanitized (extremely high quality data):

http://www.bloomberg.com/news/articles/2015-08-11/acadian-qu...

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