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Using an automated day trader to generate income

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Re: Using an automated day trader to generate income

#51

Post by steveplace »

mattmaroon wrote: post #41
mixmax wrote: post #34

Earlier 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…

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.

Re: Using an automated day trader to generate income

#52

Post by steveplace »

mattmaroon wrote: post #6

If you thought something were profitable in a market, and it was easy enough to implement that any hedge fund could, why would you publish it? They'd just do it too until it was no longer profitable.

You'd think that would happen, but certain trade strategies (like MA crossovers) are not scalable. Way too much slippage.

There's other quant strategies that HF's use... like taking a bid out of a stock near support to trigger all the stop loss orders and then covering their shorts quickly.

Re: Using an automated day trader to generate income

#53

Post by steveplace »

ruby_roo wrote: post #17

Heh, so this has piqued my interest. I have absolutely no experience in online investing/day trading, although I'm pretty sure a lot of you are veterans. Any books you'd recommend to a programmer with day trading aspirations?

There's a ton of financial blogs that would help you get started, and those can be more valuable than books. The ones I read are on my blogroll at investingwithoptions.com

Read Van Tharp's Trade Your Way to Financial Freedom it's a must... teaches you that the entry is not important. It's the position sizing, risk management, and the exits.

Also: - Options as a strategic investment

- Mind over markets

Re: Using an automated day trader to generate income

#54

Post by steveplace »

mattmaroon wrote: post #46
ruby_roo wrote: post #17

Heh, so this has piqued my interest. I have absolutely no experience in online investing/day trading, although I'm pretty sure a lot of you are veterans. Any books you'd recommend to a programmer with day trading aspirations?

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.

The market is too close to efficient for you to recoup what you lose in brokerage fees and excess taxes.

No, it's not. Far from it. EMT is not practical in the short term.

Re: Using an automated day trader to generate income

#55

Post by olefoo »

apstuff wrote: post #43

boolean TraderAnxiety(boolean mktStatus) { if (mktStatus == FALLING) { Sell(); return true; } if (mktStatus == SURGING) { Buy(); return true; } if (mktStatus == FEAR) { Loathing(); return true; } if (mktStatus == OVERMYHEAD) { UseProfanity(); return true; } return true;

Your `boolean` has 4 values?

Most languages I am familiar with require booleans to be either TRUE or FALSE, although I have met a few where undefined or NULL are possible values.

Re: Using an automated day trader to generate income

#56

Post by steveplace »

fattyfatfat wrote: post #35
pjharrin wrote: post #19

Earlier quoted context omitted.

http://www.amazon.com/Technical-Analysis-Financial-Markets-C...

http://fattyfatfat.com/2008/10/automated-day-trader-most-tec... I still stand by my above claim that Tech Analysis (and especially LONG term trending) has no theoretical basis, except for the fact that everyone else believes in it.

Then you better not buy index funds. Those are basically trend-following systems over the long term.

And there is statistical data to back up that trend following does work.

Re: Using an automated day trader to generate income

#57

Post by steveplace »

iseff wrote: post #2

I've been thinking recently about how it would be cool to have a service which allowed you to try different trading algorithms. For instance, it would have a few algorithms built in, you could choose which you want and with what parameters and then it would monitor how it performs. Also available would be the ability to see how this algorithm would have performed in the past (to see how it worked in bad markets, etc)…

Historical forex data here: http://ratedata.gaincapital.com/

You can pull close data from Y! Finance.

Tradestation and metatrader work well for backtesting.

Re: Using an automated day trader to generate income

#58

Post by steveplace »

SwellJoe wrote: post #20

So, the obvious question for me is where can I buy stocks for $2.40 per trade? Any day trading successes I might manage would be eaten up by transaction costs at my current broker (where trades are $9.95, I think). I'd probably be a far more active trader at $2.40 (which may not be a good thing, but cutting costs is always good).

If you're not going to daytrade, go with zecco.

I use thinkorswim because I'm an options guy.

Re: Using an automated day trader to generate income

#59

Post by matt1 »

sdfx wrote: post #32
matt1 wrote: post #15

I 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…

I think the no-arbitrage principle comes into play as well: If there is an (easy) set of rules that you can follow to make money, then there are enought people to act according to these rules so that you can't win anything. Seriously, this simplistic view of the market is just a threat to your hard earned bucks. There are historical prices available at finance.google.com. Backtesting your strategy before playing arou…

Again, that assumes that the future can be predicted using past results. Even if you had an algorithm that seemed to predict the dips and peaks in the market, it would not be a good predictor of future performance.

I recommend Random Walk Down Wallstreet or Fooled by Randomness or, if you really want a brutal introduction to randomness, play and study the mathematics of poker.

Re: Using an automated day trader to generate income

#60

Post by steveplace »

olefoo wrote: post #55
apstuff wrote: post #43

boolean TraderAnxiety(boolean mktStatus) { if (mktStatus == FALLING) { Sell(); return true; } if (mktStatus == SURGING) { Buy(); return true; } if (mktStatus == FEAR) { Loathing(); return true; } if (mktStatus == OVERMYHEAD) { UseProfanity(); return true; } return true;

Your `boolean` has 4 values? Most languages I am familiar with require booleans to be either TRUE or FALSE, although I have met a few where undefined or NULL are possible values.

It returns true in all 4 cases.
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