About to go live and........ apprehensive

I hear what you're saying. I should check further back to find possible max drawdown. What's encouraging is that despite the crazy market this year with low volatility early in the year and high late and all the up and down the system return stays fairly steady. A couple of the parts did much better when the vix shot up and my intention is to put a volatility rule on those.

I may be jumping in before every little thing is ironed out, but if I wait till I've done that I'll never get trading!

Thanks for the advice brain.




Quote from braincell:

If you have a truckload, no, a boatload of statistics, it makes it easier.

For an intraday system with only 1 trade per day, you'd probably need about 14 years to get statistical relevance. Then, your backtesting needs to be almost perfect with pessimistic assumptions (slippage, spread). Then you need to create a graph which will distribute the drawdowns in $ terms and in % terms during the entire period. That way you have something that should look like a normal or log normal distribution of drawdowns. Same thing for profit and loss, distribution graphs are important (and simplier to interpret than monte carlo sometimes). So when you go live you pay close attention to where your "barrage" of trades is hitting "the ground". If it's somewhere within the estimated area of the drawdown and pnl (again in $ terms and in % terms - it's important to have both because those distribution can be VERY different) then that means that your "guns" are calibrated well enough and you can feel safe. The other thing is that if you have a boatload of data you can establish statistics such as "what is the % chance that 3 loosing trades of X magnitude will happen in a row". If the % chance calculated statistically is getting too low for too long, you should be worried. If not, it might be that your first 3 trades are loosing and you panic, thinking that the system isn't working. But if you did those stats right, you might see that the chances are "pretty high" for that to happen, such as 5%. 3 trades are far less than the number of total trades in your backtest, so 5% is high. Then you can feel safe. So yeah, in short, it's all about statistics.
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Quote from braincell:

For an intraday system with only 1 trade per day, you'd probably need about 14 years to get statistical relevance
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:confused: Maybe you can explain the math on that...
 
Quote from 377OHMS:

Are you capable of the brutal honesty needed regarding fills, slippage, dropouts and other execution vagaries in your backtesting?

You've backtested with one year of data? Do you think that is sufficient?

You don't mention risk management. Are you risking a fixed percentage of capital per trade or is it dynamic? Are you accounting for serial correlation of your returns, that is, are you randomly sampling with sufficient lag to achieve reasonable independence?

You mention "beautiful equity curve" but you do not mention drawdown or rigorous application of accepted statistical treatment. Are you calculating Sharpe and the other measures?

Your apprehension might be justified.
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Also important is to test for bull and bear. And different types of your market. Test ES, DOW and NQ, Russell 1000, Russell 2000 Russell 3000, Russell Microcap, FTSE, NIKKEI, EUroStoxx, Emerging makrets etc.
 
Quote from 377OHMS:

Are you capable of the brutal honesty needed regarding fills, slippage, dropouts and other execution vagaries in your backtesting?

You've backtested with one year of data? Do you think that is sufficient?

You don't mention risk management. Are you risking a fixed percentage of capital per trade or is it dynamic? Are you accounting for serial correlation of your returns, that is, are you randomly sampling with sufficient lag to achieve reasonable independence?

You mention "beautiful equity curve" but you do not mention drawdown or rigorous application of accepted statistical treatment. Are you calculating Sharpe and the other measures?

Your apprehension might be justified.
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One year might not be enough but I'm pretty sure that within the last year I've seen every kind of intraday motion.

It's a dynamic amount per trade with either a fixed stop loss or none at all. Returns are actually better with none, but for comfort I'll use a fixed stop. You lost me with "serial correlation" The strategy report in Tradestation is pretty thorough and has max drawdown and profit factor and stuff like that.

I expect I'll be doing modifications and adjustments as I go along. I'm pretty confident that at least I won't lose (much) money.

Thanks 377 !
 
Quote from rosy2:

nobody does that. Not even the best HFT firms. you have to have a human watching the bots and infrastructure to make sure nothing hits the fan :cool:
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I'm only one or two trades per day. Backtesting shows better returns with no stop loss. Worst case is I'm long and there's a black swan event crash and my stop is not sent because at the same time my infrastructure goes down. I feel that's unlikely. It's just as likely I'll be short. I'm always flat eod.

Thanks.
 
Quote from 2steps:

Here is my question:

If an automated system can easily make money, wouldn't big banks and hedge funds and mutual funds spend money on developing automated systems?

If they have developd automated systems that are making money, who are the ones who lose money?

If 95% of the market participants lose money, that must mean 95% of the automated systems lose money.
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Large banks invested a lot in this space over 2009-2010, as I read tens or even hundreds of millions just to get in the door in some cases, but this looks like overinvestment now. By most indications, the space looks more crowded and competitive than ever. Just look at spreads, and consider that most HFT activity is market making/liquidity providing.

The "95% failure" numbers tossed around ET typically refer to "home day traders" or "prop shop traders" (as opposed to large bank prop or "legit" hedge fund traders). It seems likely to me that there is indeed a 95+% failure amongst such traders, but these traders account for a small minority of both the number of trades and of the amount of capital involved.
 
Quote from 2steps:

Here is my question:

If an automated system can easily make money, wouldn't big banks and hedge funds and mutual funds spend money on developing automated systems?

If they have developd automated systems that are making money, who are the ones who lose money?

If 95% of the market participants lose money, that must mean 95% of the automated systems lose money.
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They do.

"Investment in trading algorithms research (a mathematical rule set for futures trading entry, exit, and stop loss points often calculated and executed by computer) is phenomenal. Investment banking firm Goldman Sachs devotes more of its resources, tens of millions annually, to developing trading algorithms than it does on trade desk staffing.[13] Trading algorithms may be as exotic as biology theorems like neutral network applied to financial market trading by Gang Dong of Rutgers University,[14] or completely based on current market time/price analysis."


The losers are those that don't win. One could also say some just don't win as much. They lose winnings. One of the big winners is Renaissance Technology

"For more than twenty years, Simons' Renaissance Technologies hedge fund, which trades in markets around the world, has employed complex mathematical models to analyze and execute trades, many of them automated. Renaissance uses computer-based models to predict price changes in easily-traded financial instruments. These models are based on analyzing as much data as can be gathered, then looking for non-random movements to make predictions.[7]
Renaissance employs some with non-financial backgrounds, including mathematicians, physicists, astrophysicists and statisticians. About a third of the 275 employees at the East Setauket office have Ph.Ds.[7]"

Sorry but your last statement is not logical. It's only so if you assume that auto systems have no advantage. The evidence is that they do.
 
Quote from futurecurrents:

Actually I'm pretty freakin scared.
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Set the stop loss on each trade at no more than 2% of TLNW and walk away.--Just an idea:)
 
Quote from futurecurrents:

Actually I'm pretty freakin scared. After years of trading and watching the markets I've now spent the last few months developing some strategies on Tradestation. I coded my ideas in and they look really good. They work long and short and the equity curve is beautiful. It's based on last year. It's an intraday system and it's about one trade per day usually a few hours long. It's trading the Q's simply because it's what I always watched. I figure if it works there I can always switch to the futures later but for right now it's where my comfort level is. It seems too good to be true but whichever way I look at it, it looks good. Worst case is slippage may reduce returns, 20% tops but the curve should still be nice. Of course past performance is no guarantee.....but.

My plan is to initially watch it at home but eventually I want to be able to leave it so I can do my usual work. Even though I'm a lowly tradesman, I enjoy getting out and meeting people and doing my mechanical things. Besides, it actually pays the bills.

I'm going to start slow with low BP and ramp up if it proves out.

I just bought a new laptop today that will be dedicated to the trading. That was a huge purchase for me...psychologically.

Part of the reason I'm so freakin nervous is that I've been down this road before....and it didn't pan out. I didn't lose and in fact made some money daytrading stocks, but it was stressful, and interfered with my real job so I gave it up. It was not automated and was totally different than what I'll be doing now. I went from dreams of big yachts, to buying a dinghy. Really. Nice dinghy though. I have this feeling that if this doesn't work out, then that's it, nothing is going to work for me. That may not be rational but...

Anyhow, not sure why I'm writing this and boring y'all. I guess I'm being self-indulgent. I'm just so wound-up about this. I need to vent. Perhaps some of you have been here before. Can this really work? Maybe some issues I should look out for? I'm getting a UPS and intend to monitor while away via team-viewer on my DroidX.

I guess worse comes to worst I still have my dinghy. Sanity? Who needs it?
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One thing that is absolutely necessary -- run a forward test (could be simulated or on a small account), and check for a few months while still running your back tests. If your forward tests agree with your back test (to within a narrow percentage), then you should have more confidence. A huge problem with back tests is often the slippage model is woefully inadequate and your clock skew affects performance sometimes this could be so bad that your forward test will bear little to no resemblance to your back test. You need to check each and every trade that occurs in the back test and forward test, and make sure they happen exactly at the same time, and you get approximately the same price.
 
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