Quote from Mike805:
It appears like you've spent a lot of time and effort in pursuing this endeavour, that said, you've mentioned some of your background and it may be causing you to not see the forest through the trees.
Lets step back a bit and take a 10,000 foot view of things.
(1) One good strategy does not a profitable operation make.
(2) Strategy diversification and portfolio risk management are what pay my bills (as well as of many whom I know).
(3) Don't sell yourself short on your math skills (and if they are not up to par, get educated).
(4) While math skills do make some difference in analyzing system performance and can help you not step on landmines, by and large it is creativity that always wins out in the end. I'll take creativity over analytical prowess anyday.
(5) More trades != better system.
(6) Unless you're in a HFT firm, limits and cancels are a headache in of themselves in real time. There is lower hanging fruit.
I trade a portfolio of futures 100% automated and 100% intraday. Hold times are 30 mins to 5 hours on average. All market orders, all simple concepts. I've been doing this a while I know some very adept automated traders, here's a rule of thumb:
For the ES specifically, $7k PnL on average per year per contract is a good number to hit. This is with 1 tick slippage and 5 RT commissions included. That number is actually tough to hit if one goes back to 1998 and averages out all the PnL yearly...
Regardless, the approach you're taking with 1 minute bar trading, limits, cancels, etc etc is a difficult one, unless you've got access to serious technology, clean tick data and a serious staff of programmers. There is much easier fruit to be had out there, and, there is much more money to be made through instrument and strategy diversification and longer holding times.
In general, one of the biggest mistakes I see in newbie thinking (this is not directed towards you, you're not a newbie), is the idea that one single instrument strategy that has some ridiculous profit factor and teeny DD's is the ultimate... IMO that's far from the truth. Its the other way around. Lots of mediocre, well managed, diversified strategies working together on a very large diverse portfolio will make one a very cushy paycheck...
Just my 2 cents.
Mike
OK.
Back.
1. No doubt, I totally agree. I have multiple models - most are 1 minute but I do have a couple 5 minute programs and then also another program that goes both ways (5 min as well - others hopefully off the ground soon enough). I guess that wasn't conveyed in this thread but this thread meandered into something other than what it was meant for. Mainly focused on ES - DAX - TOPIX - KOSPI
2. Agreed. Hopefully it will be benefiting me as well.
3. I know the terms and what they mean, but if you asked me off the top of my head how to calculate the Sharpe Ratio of one of my programs I would definitely not be able to do that. The odd thing is I have never once needed any maths that were any more advanced than high school. Realistically, more like 3-5th grade.
I am not sure what all these "quant" guys are doing - either something so magnificently above my level of thinking they just laugh with pity at this thread and move on or they are just good at studying textbooks while concocting the next linear regression model trading program. Most likely did well in AP Lit or Latin in High School as well. Probably both.
If this series of recent "HFT" pictures from that guy selling his trading platform and data feed (NxCore) through his picture book is actually legit, did you see that knife pattern?
If that was real, and IMO that is a big if, that is something like I would come up with and I would be disappointed as fuck if some "quant" getting paid $250,000/yr + bonus would have to resort to programming the "knife". Now I am probably sounding a bit jaded, I guess I am that asshole
4. IMO creativity is the precursor to the analytical process. But I would have to agree with exactly what you said. I honestly think some of the best ideas I have ever came up with have came from my fractal imagination while my eyes are closed if you can read between the lines.
5. I would have to maybe argue a different way. Lets say you have recently came up with a 15 minute candle "system" with recent data in the year 2010. You found this pattern that could have potentially traded 11 times this year. Are you going to attempt to trade this program in 2011? I know the answer is no, and I do not think you were going there - but yeah.
6. Yes, among other things, I was reading in another thread here I believe that IB was cracking down on some cancellation policy requirement or something...
Luckily I do not have to worry about these things. Or else I would most likely have 50 : 1 ++ ratio most days. Multiplied by a handful of programs. Hopefully we get that cancellation tax being propagated by 15% of this website's membership (for some reason) so I can just get it over with and move into my car. Luckily the seat folds down in the back so it's kinda like staying at a Comfort Inn if you have a really good imagination.
Your last paragraph has an assload of truth to it. But my research has shown if you are going to be executing these programs that I will be potentially (god help me) running that it is best practices to be continually refining your strategy and it is highly probable this strategy, once used, will never be used again. That was the real point to this thread, but it doesn't really seem like anyone is doing the same thing as I. If someone is they do not like to share. That's cool though, guess I'll have to smoke this bowl of low grade all to myself then. Even took out all the stems...
