How to Build an Automated Trading System

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I posted that indicator because that is the focus of my endeavor. I'd be happy right now with 1 or 2 X the ATR and then gradually improve. But I always like to find out the maximum achievable profit.

More could be made on micro trading on this market. I refer to a one lot trader like myself with slippage and commission.

Most people think that's a pipe dream. I no long do. If you feel it is, please unsubscribe to this thread iluvvol because you'll get increasingly frustrated, probably.

Anyway, I'll mention in my next post what seems to be working so far.

Wayne
 
Timing is everything. If you focus on the smart money alone, you will fail. Jack calls putting all the pieces together "holistic" trading.

Well, one of the BIGGEST pieces he states is timing the market. Timing, timing, timing.

I've been attempting to measure and adapt to the timing of the market automatically. It appears Jack personally does this simply through training his mind, experience, and neuroplasticity.

Those tools are useless to an ATS.

I'm using the "traversal" indicator above to measure the timing of the highs and lows as heartbeats of the market.

At the moment, I'm able to trade the exact highs and lows on that chart over about 40% of the time. using timing and smart money.

Interestingly, it seems the market "skips" a beat from time to time.

In other words, where I expect a turn based on the timing, it's missing. However, another turn appears next at the regularly scheduled time.

It's weird because I can "See" the timing on the chart but only approximate it by the computer so far.

Hmmm.

I think next I will turn the traversal indicator into a "heart monitor" indicator.

That is, I will flatten it so the lows and highs look like pulses on a heart monitor.

That'll make it easier to "SEE" the timing.

One other tidbit, it appears that what Jack calls dominant traversals take longer--or look like the actual heartbeat. He mentions that in his channels book, come to think of it.

The subordinate traversals seem more like the heartbeat retrace on the monitor.

The subdominant (or what does he call them) the L to R traversals are quicker.

Right now I measure and forecast them the same which seems to make the timing a little short on long traversals and a little long on the short traversals.

Hmmm. We'll see if it pans out.

Anyone else have any ideas or suggestions on how to measure and synchronize with market timing?

FYI, it's looking like I have to get "context" like Jack says by understanding if I'm on a dominant or subordinate traversal.

It does make sense that they take less time since they cover less price distance, right?

Folks, I'm just logging my thoughts here as an idea share. You must realize this isn't a tested or proven ATS.

Development is development.

Wayne



Sincerely,
Wayne
 
Here is a quote (21SEP08) about the middle of the process for creating ATS's by any means.

"If you have the analysis, design, and architecture skills for software development, then you need to leverage those to build your strategy."

There is a choice of what to analyze. That has been made by many people in the software business.

Personally, I have been through several dsciplines and in each case I followed a scientific approach and gradually turned to the pragmatic aspects often expressed as engineeering modelling and development.

Here is this thread the forex isbeing used and a Price Action model has emerged and now the analysis, design and architecture is being spun out of a software approach previously articulated.

A crossover has occured at the advanced beginner level where on one hand smart volume generated about a hundred pips (21 trades) and traverses (SCT) generated (in zig zag lingo) about 250 pips (46 trades).

I put up an NB (a Latin expression I am used to) to show the situation (dilemma for smart volume in my terms and logic of thought).

The answers to the questions of the NB are that smart volume (which by testing is one level faster than traverses) was showing up much less grequently than traverse when the logical ratio is 3:1 for the tape level compared to the traverse level.

What is the analysis on this failing? Zigzag software is very common and has many uses. Here it verified that the smart volume was non functional just as the annotated traverse trading at advanced beginner did.

The analysis of the forex that became the basis of the present product Is ststed to have more or less cut to the chase by focusing on non price indicators and using a "model" of the zigzag to checkout the design and architecture of the so far "How to build an ATS" the topic of the thread.

A beginner ATS could feed an advanced beginner ATS. ETC, ETC,

Any ATS uses a routine. There are many routines the most common and which is being used by Wayne is the OODA routine. A rotine which he fels will self correct the software operations to take into account the missed or different heart beats of....."the market". I am familiar with changing one's heat beat for various practice and exercise routines. Short or long term.

It is good to give consideration to effectiveness and efficiency when advancing the performance of an ATS.

Here at this point we are way past the backtesting of an assortment of testers and their "minions".

we have a smart volume at a levle of 100 pips and the zigzag at 250 pips and advanced beginer running above the zig zag and the smart volume ; all on forex using 100 tics as a price action orientation.

I will post two charts (Illustration 20 and 21) to show the MADA routine as an alternative in ATS analysis, design and architecture. This requires returning to an architecture orientation where "states" are involved in the work.

First the"knowledge illustration" (illustration 20). Records in the ATS provide the knowledge; think of knowledge as the factual languaged characterization of what is what. Records are created by using functions which process incoming data. Records are used as subsequent functions, look up tables, and values for go/no go comparisons.

Thoughout, there is a requirement to use binary vectors whose basis is founded in information theory where certainty and sufficiency are wholly addressed. No departures are ever permitted.

Secondly, there is a go/no go finite basis (five elements) for "participation" in trading. Computers participate as partners with the market. (so do mechanical traders at various levels using SCT). Here decisions and actions of MADA happen. The D's and A's are annotated for each level. Note that the current design of the "build an automated system" by the OP is somewhere between beginner and advanced beginer and it is using inputs from two as yet undiagrammed (time constraints) analysis, desing and architecture tchniques.

Illustrations 1 through 7 previously explained the why's how's and what's I used to get to the record producing configurations I used throughout.

Now, after many years here and before that on the web sites and through email before the web and in meetings for 30 years before emails, we (meaning the reader and me) get to mutually understand the differences in how algorithms may be used to make money. we are comparing CW with pool extraction on a logical, mathematical and intellectual basis. And on a peformance and "just what is possible basis".

This post and two illustrations make a large and global point.

Logic that is certainty based is the only way to extract the offer. Why is the true and non inductive. Here we are contrasting an inductive approach with a non inductive approach. (NB: I'm the non inductive one).

The market's operating point moves as a migration and not as "changes in heart beats". A system must be able to detect how migration works on all levels of sensitivity and with certainty at all times.

The detectors of this miagration are on the illustrations which were drawn from the text of the journals. Many many observers can quote chapter and verse of where this information was laid out, thoroughly developed and Q and A'ed over four years.

8, 9 and 10 are the foundation.

11 and 12 provide the operating space of price and volume.

13 and 14 allow the trader (ATS) "participate".

We see that the simplest (smart volume of the OP) makes 1.5 ATR in half a day. We see that the Advanced beginner makes more that 2 and 1/2 times the 1.5 times ATR in half a day.

Were the SCT to have been pursued as an ATS (it is not possible to use a CW orientation (induction orientation) to analyze, design and architect an algorithm that is non inductive), then we would have seen to point of this thread fomr my point of view.

That is this: a foundation must be built first, upon the foundation more can be done by building level by level and always completing a level before beginning another.

Smart money is not available except by going the smart money at the right place and the right time. The failure to understand this has been exhibited quite Well for a couple of days.

What takes an ATS to the right place are building blocks laid below the right place. What takes an ATS there at the right time is building blocks below the right place.

The heirarchy of locus could have been part of the design and acrchitecture; for a moment before it was discarded it appeared. Smart money is in a place and has terrific utility at the right time. when used at any othr place and time it is possible that what was there was just a decoy. What comes just before (in time) smart money, is the non inductive measure of WWT (WWT stands for What Wasn't That). In trading and especially on the DOM in any market anywhere in the world, there are games played simply because "tells" can be shown on the DOM. I spoke of four common games many times.

So it all comes down to a point. Binary vectors provide the non inductive process that enables a systematization on many levels (6 to8) where a "steer and focus" is done by a gating process that is gated under certainty by sufficiency.


<img src="http://www.elitetrader.com/vb/attachment.php?s=&postid=2082834" width=800>
 

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Jack,

You gotta read this!

First, I gave up on the silly "timing" thing I was working on. It was a fluke that only worked as a rare coincidence.

The real story is that I went through one of the neuroplastic moments where my brain just revolted from SCT and all that "babble" and then broke through to greater understanding.

I was feeling so frustrated that I reverted back to toying with my old contrarian-only strategy.

However, it looked very different! It looked silly and childish. I made a simple enhancement by adding "pace" and the timing of it DRASTICALLY improved and reduced the risk.

Then I could see all kinds of other things to be improved. In FACT, I dropped the whole contrarian mentality altogether!!!!! I now "feel" myself on the path to becoming a "holistic" trader.

Let me explain. Studying SCT seems to have radically changed how I see the markets.

Specifically, and most interestingly, it has become clear that a fundamental, almost religious, belief that I formerly held about life was holding me back from profits in trading.

What you ask? Simple, my entire life has been defined by contrarian decisions. It ordinarily gives me great pleasure to do things against the "norm" or the "trend". In all areas of my life, accomplishments, or failures, I have gone against the crowd.

Also, virtually all money I have made trading was in contrarian techniques. The only exception was when I was day trading--I traded the bounces away from mean--but it made me miserable.

In short, my old strategy was only playing the "subordinate" traverses leaving TONS of money on the table.

It's clear now that a person needs to play BOTH the subordinate and dominant traverses.

Furthermore, the need is clear for the tool you tout often, Jack, MLR (multiple linear regression) because now I could kick myself for the ridiculous notion I had of buying into down trends and selling into up trends.

It's really exciting to see all the potential in the markets now.

Jack, I concede the point. You were right. Traders, whether using an ATS or not get themselves psychologically "right" with the market. This is a different endeavor than BPA and BPR because our the intimate relationship people have with money.

Also, I'm convinced that manually taping and annotating a couple charts helped instill that belief, just as you explained.

I feel now it would be great to go out and actually make a little profit however small with real money using the dominant traverse of a trend even a little discretionary to burn it into my brain and belief system indelibly.

Apparently, over the last few days my brain was experiencing one of those "plateau"s in learning where it feels like it's stuck and can't progress at all. In fact, I felt like reading another one of Jack's posts was going to make me scream! Episodes like that seem to always come immediately before big breakthroughs!

It's easy now to see how some people get frustrated and give up in the attempt.

My guess is that I will have a variety of more almost painful experiences like this before achieving the ability to take "all the market offers."

However, this is yet another confirmation along my journey that Jack and Spyder have got it right, folks.

Wow.

Sincerely,
Wayne
 
Quote from greaterreturn:

I made a simple enhancement by adding "pace" and the timing of it DRASTICALLY improved and reduced the risk.
More...

How did you define pace?

-Au
 
Simple. I just took the current price and subtracted the price X time ago. What time you use depends on your "fractal" or time frame you're working on.

I'm using tick charts so I actually have to keep track of the ticks as of X time ago.

I'm at the office. I tried several and don't remember if I settled on 180 seconds, 240, or 300.

So you can experiment. I'm uncertain if this is exactly what Jack calls "pace". He mentioned "price over time", I think. But I usually think of this as "momentum".

I'm guessing he might use a fixed point in time like the beginning of the last traverse or something like that.

What I'm seeing though is that once you get the "hang" of it, you can use any reasonable indicator to basically make sure you only sell when the market is actually moving south, and vice versa for buying.

What a concept!! :)

Wayne
 
Tonight I'm going to experiment with MLR. I believe the "short" MLR line will give you the same information and maybe a little better since it has the angle to express the degree of movement.

It's a little tricky to SEE the mlr's though. That's why i just used price over time. You kind of have to turn the MLR's on and play through the data slowly to see their intelligence. Of course, programmatically you just use the angle of the line.

I use MLR's a lot but this is a new twist. It's really a clever idea to use 3 lengths to get the direction of the market on 3 fractals. That seems more expedient for an ATS than taping, IT, and LT lines. But maybe Jack will enlighten us on the need to use all three.

Anyway, if you want to "See" them it's a little more work. For example, I have to add a "replay" ability to the data in my ATS. Maybe you have software that does that.

Wayne
 
Pace is a volume characteristic.

As seen elsewhere in script and on platforms, the divisions of one pace from another is done through distributions of bar volume data.

In software terms, this is a maintained lookup table. Deciles usually are used in pairs except for the extremes. There are 1600 bars a month and in trms of statistics this is a good sample.

So far, Wayne, because of his Price action, orientation has construed pace to be price momentum as used by Price Action afficionados.

To display Pace graphically rays are used and pointed into the future. the add/delete of the data base used to form the look up table is commonly gated by repeated time events like days or wekks or less. A rainbow is a handy way for differentiating the mind and monitoring as a consequence.

I am just more or less an observer in the forum of "Automated Trading".

As an MTS at BTL, A trouble shooter at IBM as adjunct to the director of the Data System Division and as a multiple department head at the University City Science Center. working with teams of brilliant innovators and top scientists, I was used to very high level modeling, development and novel implementation on the cutting edge.

Any of you engaged in ATS analysis, design and implementation know it is a sophisitcated process largely related to proving in code and itertive refinement of code. It is never a solo operation and always has an administrative component that assures thoroughness and flawless turn arounds of implementation cycles.

Wayne is unfamiliar with SCT and so it is not the focus of "How to Build an Automatd Trading System.

The Pool Extraction Algorithm is a binary vector algorithm and, therefore, does not use the logic nor maths nor intellectual processes of CW which Wayne uses. Just as [XXX] screwed up the PVT backtest he did, it isnot possible to use CW methods to do the template or its applications. There is absolutely nothing wrond with pursuing a CW approach; the consequences are well known.

I feel, no matter what the sphere a person works in, it is a good idea to be scientific and to not use inductive processes.

Wayne insists on not using the null hypothesis and he insists on using induction. Thus anything he picks up and attempts to meld into an ATS, it is going to be inductively derived and it is going to have inherent problems.

I have felt for 50 years or so that in any modeling it is necessary to always work in zero probability applications. I call this certainty. I feel that if everything is binary, there is no probability built into the construct. Through an understanding of change of "state" where all possibilities are eliminated before the change occurs, I feel certainty is preserved. The logic involved is comprehensive. That is all cases are always on the table and as they are tested non inductively and eliminated before the change occurs; then THE change is in terms of WMCN (What Must Come Next).

I worked to help people build their minds using the principles of how the mind works to facilitate and support learning in ET and elsewhere. For me, teaching is a myth, so working wth learners and supporting them, I wrecked the ETS testing system vis a vis the SAT's and eliminated then as considerations for entering college by moving learners the the extreme tails of the 6 sigma curve.

A lot of people go through testing at various ages and discover the tests aren't comprehensive. You don't have to debrief. Having intellectual freedom is nice and it has its obligations.

Supply and demand for me became the world's markets and the world's problems. I felt obliged to do as much as I could do by enabling as many people as possible.

It is really neat to see failures, of others for whatever reason. By parsing down and taking the meat off the bones, it becomes clear how consequences of decisions turn out. I put them on ignore when they finally shut down mentally.

Say, if a person is smart, why can't he decide learn how to be rich since being rich is enabling?

If a person finds out how his mind works, why doesn't he learn how to grow or build his mind?

Both fear and greed prevent becoming rich or intellectually rewarded. Having to be right suppresses mostly everything.

Here we got to see how doing something (building an ATS) to make money nudged aside learning how the mind works and learning how to be rich in order to build a helper (an ATS that really makes money).

The three levels were introduced for design and trading reasons. Advanced expert enables a trade to carve the turns to the tic at about 5 times the market capacity.

Thinking along the lines that shortcuts may be taken as simply an example of not being thorough and going from non inductive to inductive. Why set up one's self for failure, if failure is not a rquirement?

As for SCT, the syllabus was presented (All of 2007) to provide the knowledge AND experience (drill after drill month after month.) Assessing markets was a crayola 101 doing zig zags 50 times to get the offer straight.

The Iterative Refinement, during 2008, advanced understanding through daily experience with the markets. It proved to many that paying it forward was a great way to learn more. Q and A prevailed.

This transference automated a lot of minds. I reflect most on the example of Spydertrader. He is THE study of excellence of character and personal caring manifest.
 
Quote from greaterreturn:

Tonight I'm going to experiment with MLR. I believe the "short" MLR line will give you the same information and maybe a little better since it has the angle to express the degree of movement.

do search on "pinwheel". You may have to go back to before ET. Ship MLR if possible.

It's a little tricky to SEE the mlr's though. That's why i just used price over time. You kind of have to turn the MLR's on and play through the data slowly to see their intelligence. Of course, programmatically you just use the angle of the line.

You may want to consider P and V as an alternative. Having both independent variables associated with an opportunity a good idea, maybe

I use MLR's a lot but this is a new twist. It's really a clever idea to use 3 lengths to get the direction of the market on 3 fractals. That seems more expedient for an ATS than taping, IT, and LT lines. But maybe Jack will enlighten us on the need to use all three.

Search "foundation" and "building blocks". search "states". As you have seen your "work" is settling between Beginner (coarse level) and Advanced beginner (middle level). After these three (foundation, coarse and middle levels) are five more levels of building blocks See illustrations provided a while back).

Again the key word on this was "pinwheel". the ratios are there as are the angular velocities considerations (leading indicators of price)

Anyway, if you want to "See" them it's a little more work. For example, I have to add a "replay" ability to the data in my ATS. Maybe you have software that does that.

A lot of people use the "replay" on their trading platforms. I posted a display for you to see that does the replay and it is controllable in several ways. So far you have not seen the ES as yet. ES is what SCT forums and threads address since the ES makes anyone richer faster. The richer faster theme has been mentioned. When you do 50 minutes of ES with 20 contracts and make 40,000 dollars, you can add contracts (30 more) in order to make 100,000 dollars in that 50 minute circumstance on the next day when it occurs. People use replay on their platforms in the evening and on weekends to build their minds. What would it be like for you to see the ES for the first time? Think about it. Everyone saw the markets who wished for those 50 minutes. Everyone who wished traded the mumber of contracts they wished during that 50 minutes. It began with a reversal and ended with a rversal.

Wayne
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