http://www.socialresearchmethods.net/kb/dedind.php
when you look closer at it there might be not much difference between the two.
Automated Trading - FAQs
- Thread starter Alpha Trader
- Start date
http://www.socialresearchmethods.net/kb/dedind.php
when you look closer at it there might be not much difference between the two.
The difference is quite simple.There are two methods of cognition:
1.descending;
2.ascending.
1.When you go in your research from knowledge to logic.It calls Deduction.You accept smth.,from the,call it Higher source, if you wish,and then you go on with the axioms and available tools.
2.When you go in your research from senses to logic.It calls Induction.You see(sense) smth,and make conclusions by using a simple logic without refering to the Source.
Both meet at the generalization (hypothesis, theory) stage an this is where it becomes comical sometimes
There is no generalization in the first method.You just have to accept it or you`ll be asked to search elsewhere.Usually how goes.The only problem might be - the Source.The source can be fake.The pedigree and tradition is what is the most important.But what you`ll see,are 75% of rednecks from the basements.
Complicated, Jack will sort it out
Good morning to all,
I came back to this post and it seems like it's taken a life of it's own. It's great that there is such a healthy discussion about automated trading, but I think the last few pages could do with a thread of it's own. It would be kind enough for someone to start a new thread to discuss the complexities of setting algos, so as to keep the integrity of this thread.
Below are the original questions to understanding the basics of automated trading:
Thanks in advance,
Alpha.
1) If I were to learn a single language (C++, Python, R etc), which one would it be.
2) Can I get away with leaning only one language or is it a necessity to know others? If it is the later, can you please elaborate what the differences are and what each can do. Also what are the advantages of one over the other.
3) How long does it take to learn a language to the capacity of being able to create your own algos with little/no outside help.
4) How complicated can you make your algos? I know you can do simple stuff such as saying go long on the break of the previous bars high, if the volume is over x and 10MA is over 30MA.
However, can you get really complex and say enter long on the break of the previous high if the last 4 bars prior to that have a body that is 80% of the total and the volume is at least 50% above average of the last 30 trading days and that the last 3 bars on a lower time frame closed higher than the open and the break to the new high is higher than over the last 8 trading days and MA are so and so, with the MACD being so and so etc etc.
5) If I decided that I wanted to put most of my time into creating algo strategies rather than writing code, how expensive is it to hire someone.
6) I'm assuming that in hiring someone, they would have a decent understanding in chart reading. If that is so, what is to say that they can not take my work elsewhere once the strategy is tried and tested and proves to be successful.
7) I am a discretionary trader and even though I have my strategies and trading plans detailed, I will sometimes forgo a trade/setup if I notice the smallest of things that may skew the probability. Surely, this kind of detail is not worth coding for, purely based on the law of diminishing return. If I were to give an analogy based on manual trading and automated trading, would the following analogy be acceptable:
"Going from Point A to Point B, a manual (stick shift) car would get you there faster (higher profits) and safer (tighter risk management) as you have a more defined control of the car as opposed to an automatic, which will none the less get you there, but a little slower and a little safer (i.e. money can still be made, but less).
8) I am assuming that the purpose of automation is either to be able to diversify your trading, be able to take more setups than humanly possible or purely because you want to get away from the monitor. If the reason is getting away, does that not pose a threat to a trader as with time the sharpness/finesse/edge is eroded.
9) If a particular algo is written, does it get confined to one stock/instrument or can it set up so it is continually searching for the criteria over 3000 pre-determined stocks.
10) Will the rise of algorithmic trading be the death of discretionary trading (just like it was for the floor traders), or will discretionary trading always have it's own place. If you feel that automated trading will get rid of the discretionary function, how so? Please feel free to speculate on this as ideas that seem impossible today, may very well be implementable tomorrow.
This is an interesting documentary on the changes brought about by the rise of computer trading, if it takes your interest:
11) Are high probability algos scalable? Will the algo produce the same results when trading 10,000 shares as opposed to 100 shares.
12) What is the average longevity of a particular strategy? Sometimes I hear that a particular strategy worked amazingly well for 18 months and than it stops making money. Does this happen to all strategies or are some more exposed to getting "expired" than others?
Also, what are the contributing factors that lead to a healthy strategy losing it's effectiveness over time?
I came back to this post and it seems like it's taken a life of it's own. It's great that there is such a healthy discussion about automated trading, but I think the last few pages could do with a thread of it's own. It would be kind enough for someone to start a new thread to discuss the complexities of setting algos, so as to keep the integrity of this thread.
Below are the original questions to understanding the basics of automated trading:
Thanks in advance,
Alpha.
1) If I were to learn a single language (C++, Python, R etc), which one would it be.
2) Can I get away with leaning only one language or is it a necessity to know others? If it is the later, can you please elaborate what the differences are and what each can do. Also what are the advantages of one over the other.
3) How long does it take to learn a language to the capacity of being able to create your own algos with little/no outside help.
4) How complicated can you make your algos? I know you can do simple stuff such as saying go long on the break of the previous bars high, if the volume is over x and 10MA is over 30MA.
However, can you get really complex and say enter long on the break of the previous high if the last 4 bars prior to that have a body that is 80% of the total and the volume is at least 50% above average of the last 30 trading days and that the last 3 bars on a lower time frame closed higher than the open and the break to the new high is higher than over the last 8 trading days and MA are so and so, with the MACD being so and so etc etc.
5) If I decided that I wanted to put most of my time into creating algo strategies rather than writing code, how expensive is it to hire someone.
6) I'm assuming that in hiring someone, they would have a decent understanding in chart reading. If that is so, what is to say that they can not take my work elsewhere once the strategy is tried and tested and proves to be successful.
7) I am a discretionary trader and even though I have my strategies and trading plans detailed, I will sometimes forgo a trade/setup if I notice the smallest of things that may skew the probability. Surely, this kind of detail is not worth coding for, purely based on the law of diminishing return. If I were to give an analogy based on manual trading and automated trading, would the following analogy be acceptable:
"Going from Point A to Point B, a manual (stick shift) car would get you there faster (higher profits) and safer (tighter risk management) as you have a more defined control of the car as opposed to an automatic, which will none the less get you there, but a little slower and a little safer (i.e. money can still be made, but less).
8) I am assuming that the purpose of automation is either to be able to diversify your trading, be able to take more setups than humanly possible or purely because you want to get away from the monitor. If the reason is getting away, does that not pose a threat to a trader as with time the sharpness/finesse/edge is eroded.
9) If a particular algo is written, does it get confined to one stock/instrument or can it set up so it is continually searching for the criteria over 3000 pre-determined stocks.
10) Will the rise of algorithmic trading be the death of discretionary trading (just like it was for the floor traders), or will discretionary trading always have it's own place. If you feel that automated trading will get rid of the discretionary function, how so? Please feel free to speculate on this as ideas that seem impossible today, may very well be implementable tomorrow.
This is an interesting documentary on the changes brought about by the rise of computer trading, if it takes your interest:
11) Are high probability algos scalable? Will the algo produce the same results when trading 10,000 shares as opposed to 100 shares.
12) What is the average longevity of a particular strategy? Sometimes I hear that a particular strategy worked amazingly well for 18 months and than it stops making money. Does this happen to all strategies or are some more exposed to getting "expired" than others?
Also, what are the contributing factors that lead to a healthy strategy losing it's effectiveness over time?
Yes. Deduce your HS for the market system of operation to yield a complete paradigm plus the PM.
Historically, this work was implied by Dodd/Granville concurrently with the advent of DOW Theory.
The history of trading is like the history of the sciences. All have a smooth progression. For trading, the last 400 years are most significant. About 100 significant events took place. The PC has had little effect on trading principals or theory.
Thanks for articulating your orientation. You have a view that is commonly accepted. Your view contributes a great deal towards stabilizing markets.
Historically, in the sciences, your view precedes what happens in a field before the field becomes more and more systematic.
In trading the control of markets lies with the minority. Your view is the view of the majority (ET is a good example; review the nature of the FAQ's in this thread.).
An ATS begins with the paradigm, proceeds to incorporate degrees of freedom using logic; and concludes by having a complete, certain system of operation of the market.
Look briefly at a bar representing the independent variable. It is express simply in terms of the parametric measure. Scientifically, a person can easily move to a RDBMS that is complete and precise in describing the system of operation of the market at all points in time for making timely decisions and taking timely actions.
As time passes, the majority make learning decisions that build their inference to a point where the consequences are irreversible. Thus correct perception of the operation of the market is never possible for them. Examine the means of business operation of the FI to "see" that trading is not the focus. The focus is earning fees and commissions.
Thank you @jack hershey for re-quoting the post.
I understand that you may have a vast experience in this field. If possible, can you have a go at the questions posed. I'm sure it will bring a wealth of good answers for someone that is just getting their feet wet in the world of algo trading.
Much appreciated.
QUOTE from the OP
"Good morning to all,
I came back to this post and it seems like it's taken a life of it's own. It's great that there is such a healthy discussion about automated trading, but I think the last few pages could do with a thread of it's own. It would be kind enough for someone to start a new thread to discuss the complexities of setting algos, so as to keep the integrity of this thread.
Below are the original questions to understanding the basics of automated trading:
Thanks in advance," unquote.
I do not agree with you that the list of Q's is going to yield the "BASICS of automated trading. So I will answer your questions to illustrate what you might want to do the get on some kind of track going in the correct direction. Your current direction is to set up a betting system to play the markets.
1. SQL because it is compatible with the granularity of market data and allows a finite math approach. Also it is the most broadly used of all the languages.
2. You can get away with using one language. To complete tables in SQL you can use Access to make the loading go more quickly.
3. with regard to SQL there are many books. Purchase three or so and read in parallel. Use "Sams Teach Yourself SQL in 24 Hours as the main book. Do all the exercises at the end of each hour. You will find what an hour is right off. To do the learning you have to choose one of the many implementations of SQL. Use two computers so you can do two of them in parallel.
4. this is an unfortunate question. Anyone who answered it is on the wrong track. To make money in markets you have to obey the market and always take the market's offer. You may notice that traders who are rich and making a high money velocity are making money all the time. they do not BET. This Q is a "better's" question.
you are learning a coding language to monitor and analyze the "system of operation of the markets".
5. getting help is dirt cheap. Avail yourself to an academic "work/study" program of a nearby high school, jr college, or voc tech. also you could get a team of interns from those places. (this week there was a feature on interning in one of the leding financial publications. google it; no salaries are involved; the student's resume gets a boost fr hiring after graduation) I have used as many as 200 students on larger projects (ASU was college)
6. coding involves data. the data of the market is OHLC and V for BASICS. Adding information is a task where degrees of freedom are involved (about 70). The combinations and permutations of all patterns are put in tables. Finite math limits things to a small number. you are betting oriented to a setup. you want to predict. The reality is that bar by bar monitoring and analysis gets the betting off the table and replaces it with certainty.
All the information about markets is public knowledge. Your betting information is stealable and for certain will be stolen. As seen in later questions, you make the betting null by an error.
7. This question introduces why your automating will never come to fruition. A ATS's must be complete in order to work. complete means complete in describing the system of operation of the market and complete in having a non discretionary rule set for trading to take the market's offer. Betting is not related to the market's offer. A taking is something based upon certain evidence.
replace your car example with going from a to b by either betting or by using certainty. Chose the certainty route.
8. Automating is done to compound profits by reapplying profits to markets. Markets are limited by their CAPACITY. therefore the highest money velocity markets reach capacity quite soon and funds have to be swept to higher capacity lower yield markets. there are three basic markets: leveraged commodities; stock short term position trading and IT stock sector rotation. The trading cycles are, respectively: intraday, inter-day (position trading) and monthly.
Quality of instruments is the acceptance measure.
Monitoring is not a requirement since the trading platform allows for compounding and EOD settlements. Weekly sweeping is done after hours to transfer capital.
9. instrument selection is done by using fundamentals to have an eligible universe. All of this is done automatically using excel spread sheets. this is used after hours, weekly for both of the inter day software applications for trading. Instruments are plugged into the accounts that use the trading software. There is no point in using stock instruments for intraday trading since there is no competitive leverage available.
You basically have this question backwards. you sort with one click 15,000 stocks to get a list for a universe. within the universe you have a hot list. the exit is done to make money available for better opportunity. trading to make money for you, at this point, is a totally foreign setting. when a stock is being held, the software program is processing the data from the market in a TECHNICAL manner.
10 Betting has always been a poor methodology. trading is a combination of fundamentals and technology where there is no noise, no anomalies nor any flaws. certainty is the result. 70 degrees of freedom are funneled down to a certainty with great precision and accuracy. SQL has 6 command sets that allow tabular fixed information to be selected compared and records made bar by bar as the market proceeds to supply information. You always "know you know" at every moment. therefore, in the Present, decisions are made and timely action occurs.
in the years when Dow theory was invented it became possible to "know you know"; this eliminated discretionary trading at that time. The PC was invented at some point later. Then people began to think that data could be processed. All that was done was to put the data into the "system of operation of the market". this automated "knowing that you know".
Attaching a software to the system of operation of the market, just transferred commands to an account platform. What you do is use your betting system and attach it to a trading platform.
11. I use a certainty based algo since 100% probability is the proper limit for applications. I have posted prints of stock trades at market capacity. The capacity for position trading stocks is 100,000 shares. The net on the best trade I posted was 17 points per share To enter the trade took 20 partial fills and the exit required 31 partial fills over a 4 hour period. One of the rules is to trade blocks similar to the blocks on the T&S and secondly to never exceed 10% of the cumulative volume of the day.
12. My position trading strategy has been in use for 57 years. All my other strategies has worked since their inception. you question is dealing with a myth you seem to believe. the reason most strategies act like what you describe is that they are incomplete. your questions show that you are going to have an incomplete strategy as well. As you collect and believe myths you disable your mind's ability to merge your unconscious and conscious perceptions while you sleep. this incomplete inference that results gradually takes you to an irreversible point where there is no hope of building a complete spectrum of inference.
13. There are none.
"Good morning to all,
I came back to this post and it seems like it's taken a life of it's own. It's great that there is such a healthy discussion about automated trading, but I think the last few pages could do with a thread of it's own. It would be kind enough for someone to start a new thread to discuss the complexities of setting algos, so as to keep the integrity of this thread.
Below are the original questions to understanding the basics of automated trading:
Thanks in advance," unquote.
I do not agree with you that the list of Q's is going to yield the "BASICS of automated trading. So I will answer your questions to illustrate what you might want to do the get on some kind of track going in the correct direction. Your current direction is to set up a betting system to play the markets.
1. SQL because it is compatible with the granularity of market data and allows a finite math approach. Also it is the most broadly used of all the languages.
2. You can get away with using one language. To complete tables in SQL you can use Access to make the loading go more quickly.
3. with regard to SQL there are many books. Purchase three or so and read in parallel. Use "Sams Teach Yourself SQL in 24 Hours as the main book. Do all the exercises at the end of each hour. You will find what an hour is right off. To do the learning you have to choose one of the many implementations of SQL. Use two computers so you can do two of them in parallel.
4. this is an unfortunate question. Anyone who answered it is on the wrong track. To make money in markets you have to obey the market and always take the market's offer. You may notice that traders who are rich and making a high money velocity are making money all the time. they do not BET. This Q is a "better's" question.
you are learning a coding language to monitor and analyze the "system of operation of the markets".
5. getting help is dirt cheap. Avail yourself to an academic "work/study" program of a nearby high school, jr college, or voc tech. also you could get a team of interns from those places. (this week there was a feature on interning in one of the leding financial publications. google it; no salaries are involved; the student's resume gets a boost fr hiring after graduation) I have used as many as 200 students on larger projects (ASU was college)
6. coding involves data. the data of the market is OHLC and V for BASICS. Adding information is a task where degrees of freedom are involved (about 70). The combinations and permutations of all patterns are put in tables. Finite math limits things to a small number. you are betting oriented to a setup. you want to predict. The reality is that bar by bar monitoring and analysis gets the betting off the table and replaces it with certainty.
All the information about markets is public knowledge. Your betting information is stealable and for certain will be stolen. As seen in later questions, you make the betting null by an error.
7. This question introduces why your automating will never come to fruition. A ATS's must be complete in order to work. complete means complete in describing the system of operation of the market and complete in having a non discretionary rule set for trading to take the market's offer. Betting is not related to the market's offer. A taking is something based upon certain evidence.
replace your car example with going from a to b by either betting or by using certainty. Chose the certainty route.
8. Automating is done to compound profits by reapplying profits to markets. Markets are limited by their CAPACITY. therefore the highest money velocity markets reach capacity quite soon and funds have to be swept to higher capacity lower yield markets. there are three basic markets: leveraged commodities; stock short term position trading and IT stock sector rotation. The trading cycles are, respectively: intraday, inter-day (position trading) and monthly.
Quality of instruments is the acceptance measure.
Monitoring is not a requirement since the trading platform allows for compounding and EOD settlements. Weekly sweeping is done after hours to transfer capital.
9. instrument selection is done by using fundamentals to have an eligible universe. All of this is done automatically using excel spread sheets. this is used after hours, weekly for both of the inter day software applications for trading. Instruments are plugged into the accounts that use the trading software. There is no point in using stock instruments for intraday trading since there is no competitive leverage available.
You basically have this question backwards. you sort with one click 15,000 stocks to get a list for a universe. within the universe you have a hot list. the exit is done to make money available for better opportunity. trading to make money for you, at this point, is a totally foreign setting. when a stock is being held, the software program is processing the data from the market in a TECHNICAL manner.
10 Betting has always been a poor methodology. trading is a combination of fundamentals and technology where there is no noise, no anomalies nor any flaws. certainty is the result. 70 degrees of freedom are funneled down to a certainty with great precision and accuracy. SQL has 6 command sets that allow tabular fixed information to be selected compared and records made bar by bar as the market proceeds to supply information. You always "know you know" at every moment. therefore, in the Present, decisions are made and timely action occurs.
in the years when Dow theory was invented it became possible to "know you know"; this eliminated discretionary trading at that time. The PC was invented at some point later. Then people began to think that data could be processed. All that was done was to put the data into the "system of operation of the market". this automated "knowing that you know".
Attaching a software to the system of operation of the market, just transferred commands to an account platform. What you do is use your betting system and attach it to a trading platform.
11. I use a certainty based algo since 100% probability is the proper limit for applications. I have posted prints of stock trades at market capacity. The capacity for position trading stocks is 100,000 shares. The net on the best trade I posted was 17 points per share To enter the trade took 20 partial fills and the exit required 31 partial fills over a 4 hour period. One of the rules is to trade blocks similar to the blocks on the T&S and secondly to never exceed 10% of the cumulative volume of the day.
12. My position trading strategy has been in use for 57 years. All my other strategies has worked since their inception. you question is dealing with a myth you seem to believe. the reason most strategies act like what you describe is that they are incomplete. your questions show that you are going to have an incomplete strategy as well. As you collect and believe myths you disable your mind's ability to merge your unconscious and conscious perceptions while you sleep. this incomplete inference that results gradually takes you to an irreversible point where there is no hope of building a complete spectrum of inference.
13. There are none.
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