Day Trading Systems

All:

Thanks for the comments. I enjoy reading everyone's opinions on this topic. I have personally developed many custom trading systems for end-of-day stock data, but would like to narrow my focus on the potentially more effective day trading techniques using index futures, which is what I'm now trading. Someone recommended Ensign, which I do have, along with the eSignal feed. I'm personally struggling with Ensign, in that I find it buggy and fairly difficult to use. MetaStock is much more polished, in my opinion. But the lack of ability to execute intra-price bar stops is frustrating. Is this a big deal for day trading system development? It's definitely a big deal for end-of-day system development.

When I have more time, I will post my list of system types and some that I've investigated from and eod standpoint. Perhaps we can build a database of system types, then approaches for implementation.

As for books, the following are in my collection and are related (on some level) to system development:
- Trading Systems & Methods - Kaufman - probably the single best resource on the topic that I own. A very complete academic-like reference.
- Trading Systems That Work - Stridsman - Not as much detail as Kaufman, but gives the specifics required as a developer and runs through the entire process. Puts perspective on the process of system development.
- New Thinking in Technical Analysis - not for system development itself, but offers some good general insight on various technical analysis approaches that I have found helpful. Especially interesting in Tom DeMark's chapter.
- Getting Started in Technical Analysis - Schwager - some good overview (on a basic level) of system development leaning on the technicals.
- Technical Analysis from A to Z - just a generic reference of various technical indicators and their application - offers little more than the included reference material for MetaStock.

StockCharts.com is another resource with a good deal of documentation of various technical indicators. In addition, clearstation.com offers similar content, with a stronger focus on momentum and trends.

Keep the feedback coming all - it's very useful!

TAHOE
 
Suggestions:

Don't spend much time looking for a particular methodology (system), most work under certain circumstance (even Don Brights). Focus on execution, stock selection (screener) and walking forward Optimization
 
Originally posted by gaijin
sometimes it how often screen blink,sometimes it tone of the voice CNBC commentators, sometimes it what people talk about in chat rooms ...
More...

If you can trade off the tone of a CNBC commentator's voice, then more power to you, but I can't. I can attest to the fact that there are mechanical systems that work. By that, I mean they are very profitable, not that they are 100% accurate. As we all know, there is no holy grail, and what works for some won't work for others. Its a blend of technique and trader comfort with the system. tntneo said it best, every profitable trader uses a system, whether its implemented by a computer or not. Systems also don't have to be 100% mechanical...many times I will override my normal stop because of some external factor that the system may not catch quickly enough. But the bulk of it is mechanical, I just trade better with the emotional aspects removed.

The only way the "game" would be over as Don said, was if someone had a perfect system that was always right...then its just a matter of time before they win all the money. But to say there is no mechanical system with good returns is just speaking from ignorance or denial. I have met many traders who couldn't develop a mechanical method and were better using a discretionary approach, for them it is the best way, but not the only way.

Fortunately, its these differences of opinion that make a market. (And keep my sytems profitable).

Tahoe, since you have profitable EOD systems, try modifying them for intraday use. Many good systems I've seen work well in multiple time frames, you just have to adjust your risk parameters and make sure the smaller average trade fits your profit objectives and cost structure.

Kirk
 
Originally posted by Don Bright
Putting is stops is foolish, because you cannot account for block trades and ST's and the like.
More...

Don, you keep mentioning that stops are foolish (I realize you are using mental stops), however, unless you are trading in lower vol underlyings or do enough size to stand out, placing a stop order vs. using a mental one (assuming you could instantaneously execute) will yield the same or better results for most people.

Now take the eminis for example. Being an electronic exchange my stops won't matter and in fact hurt me if I use mental stops because it is a FIFO exchange.

Also, I believe in using stop orders for profit taking. I want my stops to get hit. Perhaps you could provide some examples of where stops will hurt, except perhaps the very obvious example of showing a lot of size.
 
to all... don't get me wrong.
I think it is good to be suspicious about system trading. It is very difficult to do (build a system). In fact, unless you are already a good trader you should not look at system trading imo. It seems counter intuitive. However think about it this way :
system trading which works, is about coding/writing what a human being is doing to make money.
if you have no such human being at hand, you will likely waste a lot of time without any good results to show for it.
I might argue that it is better way to learn than just loosing your money for months, but well, that's another story.
So I have much respect for traders not wanting to give into system trading. they have a chance not to look for the holy grail. that's fine.
However, they should also consider what system trading is really about, which I explained above. And then realize it is as valuable as their effort to trade.

Don has a good point about the exits. It is actually the harder part of system trading imo. well of any trading of course. it can also be fully automated but it is very hard to do it well.
Thanks Robert to point out this very good example of automated trading which works, and 'WarEagle' Kirk to point out the difficulty to build systems. Believe me it is not a shortcut to being a good trader. It does force you to be organized, use good methods and disciple which all aren't bad !

tntneo
 
Originally posted by WarEagle



The only way the "game" would be over as Don said, was if someone had a perfect system that was always right...then its just a matter of time before they win all the money. But to say there is no mechanical system with good returns is just speaking from ignorance or denial. I have met many traders who couldn't develop a mechanical method and were better using a discretionary approach, for them it is the best way, but not the only way.



Kirk
More...

I'd beg to differ on this part. Not that the above argument is that important but I'd like to express my opinion. If a trader had a magic system and constantly took money, would you be a specialist or market maker on the floor that would constantly gave away your money all day long.

If I have to take the other side of a trade that I knew was going to make someone else money I would take it only at a price that would guarantee me a profit and them a loss. Hence a winning system becomes a losing system.





I have a friend who trades Soybean options in the cbot pit. A few months ago they had a huge rally and none of the other market makers wanted to sell calls anymore. He soon was the only seller in the pit. Because he had no competition he fixed his price so far away from the market it was basically printing money.
 
Don, you keep mentioning that stops are foolish (I realize you are using mental stops), however, unless you are trading in lower vol underlyings or do enough size to stand out, placing a stop order vs. using a mental one (assuming you could instantaneously execute) will yield the same or better results for most people.
Now take the eminis for example. Being an electronic exchange my stops won't matter and in fact hurt me if I use mental stops because it is a FIFO exchange.
Also, I believe in using stop orders for profit taking. I want my stops to get hit.
Perhaps you could provide some examples of where stops will hurt, except perhaps the very obvious example of showing a lot of size.

OK, the main reason for not using stops for exits is that you are limiting your profit potential on some pre-determined amount of gain (and "trailing or leading" stops do the same thing).

It comes back to this: If trading is your job, your profession, and your passion, then you are vigilant in your monitoring of market conditions. You go in when it looks right, out when it looks right, you don't know ahead of time when all the basic data will converge. Sometimes the best trade of the day will be a losing trade, and what sense would it make to program losing trades ahead of time? We have traders who use stops for entering trades, but rarely for exiting.

As far as trading futures off-floor (I still don't recommend that), I think it is even more important to be aware of what is going on overall in the marketplace, second by second,than it is to put in orders based on prior movements (even the "numbers" pivots and all of that). On the other side, it does make sense to me to be aware of what the floor traders are using for program triggers and buy/sell programs from the outside firms. I hate to trade without my "squawk box" from the CME floor.

" A little of this, a little of that" as far as an overall strategy is concerned ...and "practice, practice, and practice some more"..

I think I will post this note on the "strategies post" just to make it seen by more people. Good Luck, and thanks for intelligent comments.
 
take the "Bright side" - he he he, :D
I have spent over 20 years in computing and at least 5 of it
as a full time trader/broker for stock and commodities.
While it's a noble effort to try something which does not exist
(otherwise we would not have space programmes) - you guys
should give Don a little credit about knowing about trading and the human factor. Aside from effective bionics (robotics) whose costs itself would negate it's trading usefulness, you currently have no technology off the shelf to do a program like that. Current programs are basket trading versus indices, baskets against other baskets but simply put NO DT program !!! Not for a
while.....
We are in fact quite a while away from it. 'Data' (in startrek could do it). Build me a 'Data' and I will find you capital.
 
Robert,

I don't disagree with you. I was just taking it to the extreme. Certainly, if everyone knew that one person had a 100% accurate method, they would never take the opposite side of the trade and the game effectively ends. If I had such a system, I would do my best to hide the fact for as long as possible through anonymous means until I had made so much money I wouldn't care if everyone knew. Of course, then the CIA would capture me and disect my brain thinking I was really an alien....but I digress.:)

Fun topic everyone.

Kirk
 
Originally posted by Don Bright
OK, the main reason for not using stops for exits is that you are limiting your profit potential on some pre-determined amount of gain (and "trailing or leading" stops do the same thing).

It comes back to this: If trading is your job, your profession, and your passion, then you are vigilant in your monitoring of market conditions. You go in when it looks right, out when it looks right, you don't know ahead of time when all the basic data will converge. Sometimes the best trade of the day will be a losing trade, and what sense would it make to program losing trades ahead of time?
More...

This sounds very discretionary to me, but that also seems to be your (successful) method of trading. If this is such the case, and you utilize information that cannot be programmed into a system, such as the feel of the squawk box, how your brain interprets many related variables (general market movement, sector leaders, etc.), then you are correct in that stops would not work in this type of trading methodology.

It looks like we're heading down the debate of mechanical systems-based approach to trading the markets vs. a discretionary one. The discretionary approach is much more difficult to teach others over a web forum. You basically need to either sit next to the person, or possibly try to learn via trading chat room, ala UT, if you believe in those. A lot of purported educators with a discretionary method charge thousands for their teachings. It is also very difficult for new traders to test their methodologies using a discretionary system. At least with mechanical systems you can backtest to at least get a statistical reference, of course then you have to deal with the discipline & MM involved in real-time trading.

Perhaps a new thread is in order...
 
You must log in or register to reply here.
Back
Top