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Algorithmic Trading: The Play-at-Home Version

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

#81

Post by ericjang »

infinite8s wrote: post #52
ericjang wrote: post #51

Earlier quoted context omitted.

Sorry, it was not my intention to suggest that trading is not productive, or that it's truly a zero-sum game. You probably know this already, but I'll provide some more context for the interested: In reality, two parties can walk away from a trade believing (in the moment) that they got the better deal. Otherwise, they wouldn't be trading in the first place. This results because people have different utility function…

Are there prop shops with books that small?

yeah, the person mentioned in the article trades a $200K pot with 3 others.

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

#83

Post by matiu »

dasil003 wrote: post #69
exelius wrote: post #25

Earlier quoted context omitted.

Yeah, most people don't realize that finance is a zero-sum game. That leads to arms races which over time remove the lion's share of the profit (companies will spend money on a better solution to a problem until such time as a better solution costs more than the value of the opportunity). I expect this to replicate itself on the low-end as well.

That's why the winning move is not to bet your own money, but instead to convince some whales to pay you fees to invest their money. From that perspective good algos are really just a marketing cost.

This is true.

As a fund owner, you know the magic formula: If your fund customers win, you win, if they loose, they loose.

It's a good position to be in.

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

#86

Post by gnaritas »

e15ctr0n wrote: post #48
lukebuehler wrote: post #36

It absolutely can be done. I know a handful of people who are doing well, or have spun a small hedge fund out of their DIY trading system. Having said that, it's hard. Most people simply don't have the bandwidth to do it properly. Parsing daily Yahoo prices and having a R script or two somewhere will absolutely not put you in the "I do successful algo trading" camp. Or running TradeStation with a handful of pair stra…

> Or running TradeStation with a handful of pair strategies or whatever. You can now buy trading strategies from their TradingApp Store. Supposedly, they've been written by professional algorithmic traders. https://www.tradestation.com/trading-technology/tradestation... https://tradestation.tradingappstore.com/search/all/Rating

No one sells a profitable algo in an app store, those are worthless other than as samples of how to buy and sell and read indicators.

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

#87

Post by gnaritas »

rbinv wrote: post #57
noname123 wrote: post #26

Interesting article but for a different take on a statistical approach to the market, curious if any peeps on HN are into volatility trading? From what I understand a lot of the "DIY vendors" cater to the equity crowd, meaning people who build their models on technical indicators (MACD, RSI, advancers/decliners ratio, Fibonacci golden ratio retracement, MA); you build your model of some combined signals, back-test it…

If all those TastyTrade strategies work, why isn't it being automated and backed by significant funding? Serious question.

Because significant funding requires significant liquidity and strategies that work for an individual trader can exploit being small to find opportunities too small for big money to bother chasing. Small players can enter and exit trades instantly with little slippage, big players move the market and have to play a very different game to open large positions.

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

#88

Post by gnaritas »

jeffreyrogers wrote: post #66
sokoloff wrote: post #38

If your starting stake is $10K (as in the story), you're wildly better off taking any job, even programming on elance/odesk than working on algorithmic trading...

Yeah, that seemed bizarre to me. You'd need to have a huge edge (extremely unlikely) to make money after fees with only $10k. Plus you're very limited in what you can actually trade with that little capital. For example, many options contracts trade for more than $10k.

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.

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

#89

Post by gnaritas »

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.

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

#90

Post by gnaritas »

chollida1 wrote: post #9

Here's the problem with trying to create your own trading system. How do you back test it to know that it works. If you back test over the past 5 years then you are only testing your model against a huge bull market. If you back test over the past 20 years then I'm not sure it helps much as the market of 20 years ago didn't really have any of the major market drives of today's markets, HFT's, huge numbers of hedge fu…

Back testing can't tell you something works, you're merely curve fitting no matter how careful you're trying to be; the role of back testing is making sure your algo trades when you expect it to. You need to forward test to see if it really works.
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