Chabah on Automated Trading

[Chabah]

Quote from LT701:

not hijacking anything

just pointing out something i saw, something relevant. his desire for the market to deliver what he wants, on a specified timetable

that was one of livermores best statements, ever

OK I see where this is going. While I have desires outside the market, my timetable for taking money from my trading account is 2 years at the minimum - likely much longer. I am starting small (more on that later) and will need to build my account for quite some time. My outside income is more than enough to handle my year-to-year needs - trading is intended to become an extra income stream, but not until my account is in the $200,000-$300,000 area.

I do appreciate the concerns. Like I said my background is in poker - there is plenty of risk of ruin in that game.

Chabah

 

[fickletrader]

It is interesting that your elitetrader campaign begins on the day that online gambling is pretty much going to get a lot more difficult. Care to comment?

 

[Chabah]

Quote from fickletrader:

It is interesting that your elitetrader campaign begins on the day that online gambling is pretty much going to get a lot more difficult. Care to comment?

It is not directly related - I have been preparing to switch to trading for a couple months. The key aspect for me is the "automated" aspect, not the legality. Potential illegality for poker is certainly a long term risk to that career path, though.

Aaron Brown's discussion of online gaming and potential tax implications in The Poker Face of Wall Street is actually much scarier, anyway.

Chabah

 

[ImamicPH]

Quote from fickletrader:

It is interesting that your elitetrader campaign begins on the day that online gambling is pretty much going to get a lot more difficult. Care to comment?

Hopefully this is only a coincidence. He can save the gambling for after he makes it big.

As for LT: I guess I misunderstood what he was saying: It's okay to have timetable to get underway. It hurts to a have a timetable to make a profit.

 

[Raul641]

Chabah, how do you plan to run TradeStation on a Mac? Their web site seems to say it is Windows-only. Will you be using Parallels, CodeWeavers' CrossOver, or some other product/system?

I'm a Mac user myself, and I have noticed that there does not seem to be a whole lot of high-quality trading software available for the Mac, unfortunately. The standard response is, "Well, if you want to trade, you have to use Windows."

LinnSoft makes Investor/RT for the Mac, but the Byzantine user interface and database management system, which completely ignores all standard modern GUI guidelines (I have to hold Option and click "Apply" to delete something? WTF?), is putting me off.

Most of the other Mac charting packages I've seen can't compare to Investor/RT in terms of features, though. (Most don't even offer logarithmic scaling, for example.)

I have considered using an emulator to run Windows software on my Mac, and I'm curious as to how you are doing it, and what kind of performance you are getting.

Cheers,
Raul

 

[Chabah]

Quote from Raul641:

Chabah, how do you plan to run TradeStation on a Mac? Their web site seems to say it is Windows-only. Will you be using Parallels, CodeWeavers' CrossOver, or some other product/system?

Cheers,
Raul

TradeStation is the plan, using either Parallels or BootCamp. I have a new iMac that should be able to handle the load. I will post what I actually end up using and how it compares to a straight Windows installation.

I think the next version of OSX will have Parallels' functionality built in. I will need to install TradeStation before that, though.

Thanks,

Chabah

 

[Chabah]

Rules:

The following rules are in effect for all trades without exception. These rules are not to be violated under any circumstances.

1. All positions shall be covered by a Stop Loss order. A Stop is never pulled nor moved away from the stock price – it can only be moved closer to the stock price.
2. No trade may exceed 1% risk, and the starting target risk level is .3% of the account balance. The target will eventually be raised to .5%, .75%, and 1%.
3. No trade may exceed 50% of the account buying power (including margin) in total size. Paired trades and other multi-stock trades are considered a single trade.
4. Trading activity will be halted for review on any day that losses exceed 3% of the account value. This represents 10 straight maximum (1R) losses at the starting risk level. This cap will be raised to 5% when the target risk level is raised to .5%.

System Overview

The system consists of the tools and rules used to govern trading, providing a framework for specific trading strategies. The key elements of the system are:

Research
Entry
Unwinding
Review

Research represents the effort to determine which products provide the best opportunity for trading success. The outputs from Research are used for Entry.

Entry is the decision to open a position combined with the execution of the order.

Unwinding is the process of closing an open position.

Review consists of keeping a trading journal and periodically reviewing trading results and system performance.
_________________________

I will be expanding on the four major areas in future posts. Please feel free to comment on the general organization - I am open to ideas and this is very much a living design.

Chabah

 

[elit]

Chabah, This sounds interesting! Good luck to you! I too am planning my automated system, I will follow your progress with interest!

I hope to have a running system to demo test (forward test) by the end of this year and "go live" when I feel comfortable with it.

I think it sounds like you have a good plan! Hope it turns out successful!

Best regards,
Elit

 

[ImamicPH]

One percent is really smalllllllllllllllll

 

[Chabah]

Quote from ImamicPH:

One percent is really smalllllllllllllllll

I got the approximate 1% from Van Tharp. Once I have a system with a proven expectancy I can use the Kelly Criterion (http://globalgrowthinvestor.com/144/how-much-of-my-total-trading-account-should-i-risk-risk-part-iv/) if I want to get more aggressive, but I don't think that will be necessary. With tight stops 1% risk can create a very large position size (more on this soon).

If you read arcary's mega-thread you'll see he worked up a very strong system risking .6%.

Chabah