Automated trading with statistical scalping algorithms

[fullautotrading]

I wish to start a new demo of automated scalping algorithms (of a new build of my app).
I will be using a clean paper trading account from IB (see picture attached). I will be showing pictures of all orders.

Below is a brief description of the general approach, I will be using.

[Feel free to jump in with your thoughts and questions. In case one wishes to replicate this live in
his own account let me know: I might make it run in your IB gateway too (only capitalized traders pls),
so you can follow the action more closely.]

== Strategy general features ==

1. Full automatic scalping in multiple "layers" (see below for explanation)
2. Instruments: CL, ES and perhaps BRR (it's big, but just to give it a try)

A "layer" is defined as a logical scalping unit defined on 1 instrument.
We can activate multiple layers on the same instrument (or on multiple instruments)
(a concept similar to Photoshop layers).

4. Position constraints: each layer will be limited to a maximum of MaxPOS contracts, where, for instance, MaxPOS = 5.


== Strategy goal ==

The scalping strategy on each layer is optimized looking at the following goal:
maximization of the ratio PNL / |MaxDD|² (while trying to keep a good frequency).


== Performance assessment ==

The strategy is a heuristic procedure selected to perform in a statistical "good" way
in the space of all possible sample paths of a wide family of stochastic processes.
Optimality properties are obviously referred to the entire sample space.
1 single realization may deviate as much as it likes, especially in the short term, but is expected
to reflect the general properties of the strategy as the number of trades increases, due to the law of large numbers.

Possible additional drift contango decay which may (and do) interfere, are dealt with by possible position constraints (long or short only, depending on the situation: we will see this later.)

Let's see if we can break the account

 

[qlai]

Good luck! Is your strategy using passive or aggressive orders on entries? Is it realistic to start with 1M account for scalping?

 

[traider]

What happened to your other exciting adventures. It's been a while since you embarked on something stunning

 

[fullautotrading]

Good luck! Is your strategy using passive or aggressive orders on entries? Is it realistic to start with 1M account for scalping?

Thanks for asking 1M seems fine. It depends on the instruments one uses. About aggressive, nah It's more like a spider patiently weaving its web

 

[fullautotrading]

What happened to your other exciting adventures. It's been a while since you embarked on something stunning

Yes, thank you! so many things going on: let's keep busy and healthy until we are alive

 

[SunTrader]

Define: logical scalping unit.

Thanks

 

[fullautotrading]

Thank you for the question SunTrader. I will explain what I have in mind with an example.

Imagine that you hire a number of traders and tell each of them to trade, for instance, CL in your account.

Each trader will only see the result of his own activity, and work according to his own trading "logic"', whatever it may be.

On the other hand, you, as the owner of the account, will see the combined activity of all these traders.

Imagine, for instance, there are just 2 of them Possibly the first one has taken a long position, while the second one is short. So each trader (our "scalping unit") is still following his own logic and he thinks he is holding a position. However, if we look at the account the position is flat.

So the word "logic" here is referring to the fact that what happens on a layer does not represent entirely what is happening in the account: it's a separate logic entity.

I hope this is more clear let me know if still fuzzy.

 

[guest_trader_1]

Thank you for the question SunTrader. I will explain what I have in mind with an example.

Imagine that you hire a number of traders and tell each of them to trade, for instance, CL in your account.

Each trader will only see the result of his own activity, and work according to his own trading "logic"', whatever it may be.

On the other hand, you, as the owner of the account, will see the combined activity of all these traders.

Imagine, for instance, there are just 2 of them Possibly the first one has taken a long position, while the second one is short. So each trader (our "scalping unit") is still following his own logic and he thinks he is holding a position. However, if we look at the account the position is flat.

So the word "logic" here is referring to the fact that what happens on a layer does not represent entirely what is happening in the account: it's a separate logic entity.

I hope this is more clear let me know if still fuzzy.

If you trade both sides of the book on one instrument IB will realise your net position, resulting on those trades to cancel each other. Have you considered that in your algo?

 

[fullautotrading]

If you trade both sides of the book on one instrument IB will realise your net position, resulting on those trades to cancel each other. Have you considered that in your algo?

Yes thank you angrytrader, that is exactly what one wants. If one "logic unit" is N contracts long and another one is N contracts short, in the "real" account you have a position equal to 0. You understood that well.
The two (or more) layers still add up algebraically, whatever PNL they produce.

 

[SimpleMeLike]

I wish to start a new demo of automated scalping algorithms (of a new build of my app).
I will be using a clean paper trading account from IB (see picture attached). I will be showing pictures of all orders.

Below is a brief description of the general approach, I will be using.

[Feel free to jump in with your thoughts and questions. In case one wishes to replicate this live in
his own account let me know: I might make it run in your IB gateway too (only capitalized traders pls),
so you can follow the action more closely.]

== Strategy general features ==

1. Full automatic scalping in multiple "layers" (see below for explanation)
2. Instruments: CL, ES and perhaps BRR (it's big, but just to give it a try)

A "layer" is defined as a logical scalping unit defined on 1 instrument.
We can activate multiple layers on the same instrument (or on multiple instruments)
(a concept similar to Photoshop layers).

4. Position constraints: each layer will be limited to a maximum of MaxPOS contracts, where, for instance, MaxPOS = 5.


== Strategy goal ==

The scalping strategy on each layer is optimized looking at the following goal:
maximization of the ratio PNL / |MaxDD|² (while trying to keep a good frequency).


== Performance assessment ==

The strategy is a heuristic procedure selected to perform in a statistical "good" way
in the space of all possible sample paths of a wide family of stochastic processes.
Optimality properties are obviously referred to the entire sample space.
1 single realization may deviate as much as it likes, especially in the short term, but is expected
to reflect the general properties of the strategy as the number of trades increases, due to the law of large numbers.

Possible additional drift contango decay which may (and do) interfere, are dealt with by possible position constraints (long or short only, depending on the situation: we will see this later.)


View attachment 272540

Let's see if we can break the account

Good morning ,

I love it and thanks for sharing. Let us know the outcome. Let break the account.

All we can do as traders is , Try our best.

Thanks