Fully automated futures trading

[HobbyTrading]

Regarding the other mini-contracts, do they have enough liquidity to be able to comfortably roll them and to not loose too much on the spread? Also, I'd need to get historical data for them somewhere, rerun backtests, prepopulate all the roll periods for the new contracts (I have automatic rolls which rely of prepopulated roll-schedule for each contract for the next 80-100 years) - quite a lot of work.. I just want to finally sit, relax and watch the thing do everything by itself

For M6E and MES I usually roll them over a few days before they expire. At those times is the bid/ask spread usually only one tick. If you want to roll over weeks in advance of the expiry date you might indeed face larger slippage. The commission on these smaller contracts is lower (at IB) than their larger brothers. The benefit of the smaller contract is that you can more precisely follow the forecast signal, resulting in less "rounding errors".
For historical data can you use these instruments, or their larger brothers 6E and ES. Any price difference between the pairs (M6E, 6E) and (MES, ES) is immediately corrected by arbitrage in the market.

 

[HobbyTrading]

I was planning to add more capital next year and these instruments ['EUROSTX', 'WHEAT', 'JPY','VIX', 'LEANHOG' ,'KOSPI','BTP','KR10'], which should give me pretty-wide coverage of different things, and then I'll continue to add more capital and migrate more instruments from paper-system (where I have 31 instrument @350kUSD) to the prod one..

I'm tracking all of these, except VIX and BTP, as well, plus some other instruments. I felt that my capital was not large enough to have positions in these instruments. So I have been on a hunt for smaller sized contracts. This made me discover DJ600 as substitute for EUROSTX, plus some other equity futures. And I'm using some other forex futures as JPY is rather large: CAD, AUD, NZD often have lower value volatility.

 

[Elder]

Although both are considered an "energy instrument" is it my impression that they behave rather differently. Of course is CL more often influenced by global politics, and macro-economics, than NG.
See here a chart of both. The blue line (left hand scale) is the forecast value. The red line (right hand scale) is the value volatility per contract in USD. During the last 3 years had CL a value volatility between about 350 and 2k USD per contract. NG is currently relatively low, at about 300 USD, and can fluctuate to about 800~1k USD per contract. So there are times where CL is smaller than NG, but most often (at least during the last 3 years) had NG a smaller value volatility than CL. The forecasts also show a different behavior during the last 3 years. Eyeballing it does not show a high correlation between these two.
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You are right. NG and WTI are actually very different markets for a number of reasons. Not least because NG supply is landlocked via domestic pipelines (despite LNG terminals) whereas WTI is fungible globally. Plus the demand for NG comes from very different sources that that for WTI. You wouldn't therefore expect them to be correlated and in fact my system shows the correlation of returns between them in the last 52 weeks was ~ 14%. However, this doesn't mean you can't swap one for the other if you are limited to one energy market.

 

[Kernfusion]

Although both are considered an "energy instrument" is it my impression that they behave rather differently. Of course is CL more often influenced by global politics, and macro-economics, than NG.
See here a chart of both. The blue line (left hand scale) is the forecast value. The red line (right hand scale) is the value volatility per contract in USD. During the last 3 years had CL a value volatility between about 350 and 2k USD per contract. NG is currently relatively low, at about 300 USD, and can fluctuate to about 800~1k USD per contract. So there are times where CL is smaller than NG, but most often (at least during the last 3 years) had NG a smaller value volatility than CL. The forecasts also show a different behavior during the last 3 years. Eyeballing it does not show a high correlation between these two.
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Yep, the rule-of-thumb CL\NG correlation from the Rob's first book is only 0.25, still formally they're both energy..
For the other point, I think that's in part why I choose CL - because crude is sort of more prominent instrument. Not sure why it makes it better to trade apart from being able to say to someone "oh, yes, crude, I'm currently short 2 contracts" So yeah, completely irrational reasoning., and the rational thing to do in the absence of any other evidences is to trade an energy instrument which allows more granular positions - NG..

 

[Same Lazy Element]

For the other point, I think that's in part why I choose CL - because crude is sort of more prominent instrument. Not sure why it makes it better to trade apart from being able to say to someone "oh, yes, crude, I'm currently short 2 contracts"

If anything, something being very prominent and liquid means that it's pretty efficient and not worth trading. IMHO, of course.

 

[HobbyTrading]

Yep, the rule-of-thumb CL\NG correlation from the Rob's first book is only 0.25, still formally they're both energy..
For the other point, I think that's in part why I choose CL - because crude is sort of more prominent instrument. Not sure why it makes it better to trade apart from being able to say to someone "oh, yes, crude, I'm currently short 2 contracts" So yeah, completely irrational reasoning., and the rational thing to do in the absence of any other evidences is to trade an energy instrument which allows more granular positions - NG..

My account is not large enough to hold a position in both. So I made some software to evaluate the value volatility of the energy instruments which I'm tracking. The instruments are then ranked in order of value volatility. The one with the lowest volatility is considered first for a position. Only if this one will have a zero position size, will the next instrument be considered. And so on.
I do this approach for several asset classes, so that the system gravitates towards using the instruments with the lowest value volatility in each asset class. In most asset classes is there not much variation in ranking, but for example in grains (ZC, ZS, ZW) and meats (HE, LE) does the ranking change every now and then. In equity futures I see changes recently due to the corona virus: the volatility of Asian equity indexes has gone up. Last year there were not many changes in that ranking.

 

[Kernfusion]

My account is not large enough to hold a position in both. So I made some software to evaluate the value volatility of the energy instruments which I'm tracking. The instruments are then ranked in order of value volatility. The one with the lowest volatility is considered first for a position. Only if this one will have a zero position size, will the next instrument be considered. And so on.
I do this approach for several asset classes, so that the system gravitates towards using the instruments with the lowest value volatility in each asset class. In most asset classes is there not much variation in ranking, but for example in grains (ZC, ZS, ZW) and meats (HE, LE) does the ranking change every now and then. In equity futures I see changes recently due to the corona virus: the volatility of Asian equity indexes has gone up. Last year there were not many changes in that ranking.

does it make your system path-depended then? I.e. do you also consider whether you currently have positions in the more-volatile instrument ? So for example the system currently wants to trade LE, say buy 2 contracts because it's less value-volatile, but you're already long 1 contract HE, what the system will do? (sell HE buy LE - seems more trading costs., or will do nothing until HE closes (crosses zero) naturally ?)

 

[HobbyTrading]

does it make your system path-depended then? I.e. do you also consider whether you currently have positions in the more-volatile instrument ? So for example the system currently wants to trade LE, say buy 2 contracts because it's less value-volatile, but you're already long 1 contract HE, what the system will do? (sell HE buy LE - seems more trading costs., or will do nothing until HE closes (crosses zero) naturally ?)

That was indeed a difficult choice to make. In the end I decided to not actively close the currently open position in order to open a new position. I decided that I allow the currently open position to remain open as long as the system wants to keep it. At the same time is opening a position in the instrument with smaller value volatility allowed. If I were to delay this I would miss a portion of the movement of this instrument, and thus potentially miss profit. The result is that temporarily I have two open positions instead of one and thus a higher value at risk in my account. My experience thus far is that in reality such a situation does not remain for a very long time.

 

[traider]

Does anyone remember if we estimate forecast scalar for a ema rule for all instruments or for each individual instrument? I was thinking if there was a way to make the ema rules more consistent across multiple instrument such as using percentage returns.

 

[Kernfusion]

Does anyone remember if we estimate forecast scalar for a ema rule for all instruments or for each individual instrument? I was thinking if there was a way to make the ema rules more consistent across multiple instrument such as using percentage returns.

Just checked, my table with instrument settings has 4 columns for different EWMAC permutations, so I can set different scalars for different instruments, but in fact the values are the same for all instruments for the same permutation (e.g. EWMA_8_32 is 5.3 and EWMA_16_64=3.75 for all instruments )., Actually looks like I took these values from Table 49 of "Systematic trading"