Fully automated futures trading

[Elder]

Lag alone is therefore not sufficient to protect your system from multiple trades due to oscillation around a threshold level (4.5 in this example). Tricks like hysteresis could be of help to prevent trades occurring in such situations.

Fair Point, HobbyTrading. I wasn't arguing against the removal of noise from the system, I was merely trying to grasp the definition of Hysteresis, as this is the first time I have encountered it, and it appears to be an important concept. Imho smoothing does reduce turnover and therefore does reduce the risk described in your post. However semantically (and pedantically ) I note from the Wikipedia page:

"Hysteresis can be a dynamic lag between an input and an output that disappears if the input is varied more slowly; this is known as rate-dependent hysteresis. However, phenomena such as the magnetic hysteresis loops are mainly rate-independent, which makes a durable memory possible."

I guess everyone here is referring to the rate-independent version.

 

[HobbyTrading]

I guess everyone here is referring to the rate-independent version.

Yes, often implemented as a Schmitt-trigger as depicted on that Wikipedia page. The width of that hysteresis can either be a fixed value, or a percentage of the center value it surrounds.

 

[globalarbtrader]

If anyone is interested on how one would calculate the optimal buffer width, a former employee of mine wrote this paper: https://www.risk.net/risk-managemen...ptimal-trading-under-proportional-transaction

(for smaller traders transaction costs aren't especially proportional, but it's a good enough approximation)

GAT

 

[Same Lazy Element]

I was merely trying to grasp the definition of Hysteresis, as this is the first time I have encountered it, and it appears to be an important concept.

I would not zoom on it too much - there are other methods for reducing trading. I had a note on it from a while ago, will try to dig it up.

(for smaller traders transaction costs aren't especially proportional, but it's a good enough approximation)

For larger traders, costs are not proportional either, but probably quadratic once you start including the impact.

 

[globalarbtrader]

I would not zoom on it too much - there are other methods for reducing trading. I had a note on it from a while ago, will try to dig it up.


For larger traders, costs are not proportional either, but probably quadratic once you start including the impact.

True.

Actually thinking some more, in futures at least there is a fixed commission per contract, so for smaller futures traders it's okay to say costs are proportional (the spread is proportional, assuming you aren't big enough to cause impact).

It's only in stocks that smaller traders will tend to see proportional costs falling with order size.

GAT

 

[.sigma]

I don't think so, at least not with respect to positions (obviously exponential averaging is hysterisis with respect to prices by construction). Hystersis is state/ path dependent for positions, exponential averaging is not. If I started up a trading system cold tommorrow with exponential weighting but no buffering, it would want exactly the same position to be put on regardless of whether it had a position on already. But if I include buffering then the trade required will be different depending on the current position.

GAT

GAT you know you’re a genius right? Totally blown away by your knowledge consistently. Great stuff man!

 

[globalarbtrader]

GAT you know you’re a genius right? Totally blown away by your knowledge consistently. Great stuff man!

Kind words, but 'knowing stuff' and 'being a genius' aren't quite the same thing...

GAT

 

[.sigma]

Kind words, but 'knowing stuff' and 'being a genius' aren't quite the same thing...

GAT

I agree! But you can formulate ideas into profits, in very very sophisticated ways. You might not think that, but humility is a great virtue my friend! This thread is back to back classic

 

[Elder]

6 months in drawdown but finally hit new HWM. More or less one year anniversary since I have been running real money and ~12 mth performance is a fairly modest ~ +11%. I imagine many others have done better. I can't help but worry about the future performance on two counts: 1. quite of a lot of the recent pnl has come from NASDAQ and 2. I have just posted the HWM on a public forum .

 

[.sigma]

6 months in drawdown but finally hit new HWM. More or less one year anniversary since I have been running real money and ~12 mth performance is a fairly modest ~ +11%. I imagine many others have done better. I can't help but worry about the future performance on two counts: 1. quite of a lot of the recent pnl has come from NASDAQ and 2. I have just posted the HWM on a public forum .

why is the majority of PNL coming from NAZZDAK a problem?