Automated trading with statistical scalping algorithms

[fullautotrading]

Today some more hectic activity with CL. I started also a new CL layer (long / short). And a couple of call options layers (short only). SI did not do much. The total number of fills has raised to 143 (from 108).

CL FUT 202202 NYMEX 1000 Light Sweet Crude Oil [ CLG2, 256019290, mult: 1000]

this is the new ("clone") layer:

SI FUT 20220127 NYMEX 5000 NYMEX Silver Index [ SIF2, 405978963, mult: 5000]

instruments and pnl:

PNL trajectory

I am thinking of activating a layer on NG, which seems rich enough of fluctuations.

 

[fullautotrading]

I hope you've had nice holidays. Time to come back to our little test.

I have activated a few more layers including the "scary" BRR (BRR FUT 202203 CMECRYPTO 5 CME CF Bitcoin Reference Rate [ BTCH2, 517004249, mult: 5]) on friday.

Currently, we are in a drawdown (about -40K), mostly due to BRR and some of the CL layers. On the good side, Silver (currently in 2 layers), which was in DD before the holidays has become finally positive.

Let's take a look in particular at some layers starting with the current largest drawdown (BRR):

BRR FUT 202203 CMECRYPTO 5 CME CF Bitcoin Reference Rate [ BTCH2, 517004249, mult: 5]

we are almost 55K under the water with BRR. This was not totally unexpected, due to the monster size of this instrument. Anyway, I was just too curious and could not help trying it.

On a more positive note, instead, SIlver, has finally recovered the DD and I have also activated another layer:

SI FUT 202203 NYMEX 5000 NYMEX Silver Index [SIH2, 419743912, mult: 5000]

About NG, since it was doing well I have opened more layers. So now we have 4 of them:

NG FUT 202203 NYMEX 10000 Henry Hub Natural Gas [NGH2, 139213999, mult: 10000]

of which, one still negative:

I have also started 2 layers for EUR, which actually featured the most suitable, so far, price curve for scalping:

EUR FUT 202203 GLOBEX 125000 European Monetary Union Euro [6EH2, 269459887, mult: 125000]

looks almost like an oscilloscope signal .

About CL (crude oil), we have both positive and negative layers (7 in total). And we will see them later, as this post has reached the image limit

Later, we will also discuss how to possibly operate with instruments that have some "drift" built-in (such as options, or ultrashort ETFs, etc.), and therefore not really suitable for this kind of scalping action.

 

[fullautotrading]

I am going now to quit this test by admitting its failure for various reasons, which may be useful to list so that they can be avoided in our future tests.

In fact, especially BRR has reached now a large DD (over 100K) also due to the inability of the scalping engine to proceed further as the current margin requirements (considering also our large number of other layers active) are too high to open new positions on this and the other, too many, instruments and multiple layers.
Also, the DD alone on BRR would discourage most traders. So there is no point in proceeding further if we want to keep it "real".

So let's summarize the main problems one needs to avoid and some suggestions:

- Use smaller instruments (use of BRR, and too many instruments, in this case, was fatal). In particular, for instance, the suggestion by Collagen to use the micro futures (MCL, MES, MGC, MNQ, ...) could be a wise one.

- Limit the position for each layer (for instance, max 1-3 contracts) [this is a strategy user parameter]

- Open a new layer only after a sufficiently large move (e.g. 5-10% depending on the instrument).

In the next test, which I will start on another thread (possibly next week, if I have time), I will show a slightly different approach (unilateral scalping on drifting instruments and options) to using the trading engine, so that it can be used also in cases where we are very risk-averse and do not have huge capital. Clearly, it will require more patience and will be much less entertaining than this higher freq scalping. But it can suit better more patient traders, with relatively smaller capital, who prefer a smaller but steady profit over the long term.