Frosty's trading bot goes live part 2

Hey folks

A couple of more comments.

First I think Austin's a little over the top with his posts suggesting that retail traders do not have access to the same technology as the pros. Thats not the limiting factor.

I know several good professionals who use Excel to model markets. I was taught to characterize markets using Excel myself. Its not that hard. What does limit retail traders is lack of education, and lack of experience.

In my opinion, a person with a first year background in statistics, the ability to use a spreadsheet, and some familiarity with a basic programming language could develop a decent system or system(s) eventually. What it really takes is motivation and the willingness to work at it.

My experience...I worked at it for about 4 years, 3 hours a night, every night, weekends...Look its not one of those "I walked to school in the snow stories.." Thats what it took me..Maybe I was slow or stupid, but thats what it cost me in human effort.

Hey if any of you REALLY want it bad enough, don't let the size of the mountain stop you. Pick a place to start and go at it one step at a time...Look at it this way...The time is going to go by no matter what you do right?

Good luck
Steve
 
A question for Frosty - Have you considered using other inputs in addition to price/volume time series ?

In particular have you considered order book and time and sales data ?

I have my own pet theory that it is very difficult if not impossible to design automated systems of enduring quality for trading stock index futures using only OHLCV price/volume series as the base data. Of course this could be complete nonsense.

Also have you calculated correlation between your equity curve and the VIX ? If so does it show anything interesting ?
 
<i>"First I think Austin's a little over the top with his posts suggesting that retail traders do not have access to the same technology as the pros. Thats not the limiting factor.

I know several good professionals who use Excel to model markets. I was taught to characterize markets using Excel myself. Its not that hard. What does limit retail traders is lack of education, and lack of experience."</i>

Agreed. As noted before, a small percentage of traders have ability and skills to write system bots using any software tools. The vast majority of aspiring traders who sit down with Excel SS, TradeStation or any similar chart-system software are not even remotely armed for success. That is due to lack of skillset first & foremost.

Secondly, the false perception exists that computer software is a wonder tool that can overcome market knowledge and education. People think they can skip the natural learning curve by relying on retail-level software to unlock the secrets of trading success.

There are so many catches, glitches and traps between price theory and actual execution of trades opened & closed that we could spend ten more pages here discussing just that aspect alone.

Guys have posted experiences in P&L 2007 thread where errant Excel orders were filled in live trading, orders big enough to destroy their account if left unchecked and not caught in time. Liquidity, slippage and partial fills (on winners only) versus tested results are often the difference between demo success and real-time struggle or failure.

I agree that it takes <b>years</b> of study and massive amounts of time and effort to learn the system game's many nuances. It is no easier or less costly to learn system writing = trading than discretionary trading. Programming skills alone are the initial first three steps on a ten-mile hike over rough terrain.

Bot trading is possible, for sure. I'd be very surprised if the percentage of retail traders who build and operate profitable bots exceeds the success rate of discretionary traders.

I do know at least two mechanical system writers who sell complete, finished mechancial systems offered public who do not personally trade at all. A bit of searching online will show websites that offer a variety of mechanical systems & packages for sale (along with custom bot-writing) where the builder publicly states they do not actually trade. Interesting.
 
Quote from austinp:

Is it any wonder the big firms hire pure quants and equip them with million-dollar plus software to operate? Whom amongst us are capable of playing in their auto-bot sandbox?
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Some good discussion here, I'd like to focus on the above statement because its something that I've come back to again and again in my tiny quest to carve out my piece of the pie - is there any hope for a lowly retail ATS trader to compete against the big boys?

My thought is that one advantage retailer bot trades have is that some strategies that can be used by them would be useless to large firms because they do not scale to the level that a large firm requires.

Meaning if you spend millions on developing a system then you need to trade large size to recoup your development cost and that kind of trade size limits the type of strategies you can employ (because you can end up moving the market with your entries and exits).

A retail ATS bot does not face that issue as long as they stick to trading liquid products during RTH.
 
Quote from TSGannGalt:

Conclusion is, he should have tested his system considering all the potential slippage.
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I don't know why we keep coming back to this point again and again.

Frosty already said that backtesting over the same period as the live forward testing gave the same results (except for some anomaly over the last 2 days where the trades didnt match up- different problem).

If he did not consider slippage correctly in backtesting then backtesting results would not have matched live forward testing results. That is not what happened.

Slippage or any other problem attributed to incorrect backtesting simulation is not the problem.
 
If the bot is still running, I guess the bot should of made $50-$200 today based on the market condition.

If Frost still had the bot running on the sim account, can you please tell me how close is my guess. Thanks!
 
This is one of those black swan type of scenerio. The bot is fine as long as there is little or no volatility so it can hang on to losers and wait for it to turn profitable. Once the market ran thru some levels and doesnt come back, the bot just freezes and hang on to losers (at least in a deep hole before it reverses the posistion). Of course the results will look better without stops during backtesting because you have half a year of data to make back the money lost in those 1-2 outlier. In reality, you might want to sacrafice some profit and use stops just to make sure you wont lose more than x amount in any day.
 
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